Statement of Cash Flows | Test Bank – Updated Format 11th - Financial Accounting 11e | Test Bank with Answer Key by John Hoggett by John Hoggett, Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield. DOCX document preview.
View Product website:
https://selldocx.com/docx/statement-of-cash-flows-test-bank-updated-format-11th-1108
Testbank
to accompany
Accounting
11th edition
by
Hoggett et al.
© John Wiley & Sons Australia, Ltd 2020
Chapter 18: Statement of cash flows
Multiple-choice questions
1. Information about an entity's cash inflows and cash outflows is provided in the:
a. statement of profit or loss and other comprehensive income.
b. statement of changes in equity.
c. statement of cash flows.
d. statement of financial position.
General Feedback:
Learning objective 18.1: explain the reasons for preparing a statement of cash flows.
2. The primary purpose of a statement of cash flows is to provide information about an entity's:
a. cash inflows and cash outflows.
b. operating activities.
c. gross profit.
d. long-term financial position.
General Feedback:
Learning objective 18.1: explain the reasons for preparing a statement of cash flows.
3. The accounting standard dealing with the statement of cash flows is:
a. IAS 1/AASB 1001.
b. IAS/19/AASB 1019.
c. IAS 18/AASB 118.
d. IAS 7/AASB 107.
4. When an annual statement of cash flows is prepared the sum of the three major components add up to:
a. the change in the cash at bank account balance over the year.
b. the ending working capital.
c. profit for the period.
d. the ending cash at bank account balance.
General Feedback:
Learning objective 18.2: describe the general format of the statement of cash flows.
5. The 'bottom line' in the statement of financial performance is profit. The 'bottom line' in the statement of cash flows is:
a. net increase (decrease) in the cash balance over the period.
b. cash flow from operations.
c. net cash at the beginning of the year.
d. net cash at the end of the year.
General Feedback:
Learning objective 18.2: describe the general format of the statement of cash flows.
6. Which of the following is not a requirement of IAS 7/AASB 107?
a. Provision of comparative figures for the previous year as well as current year figures.
b. Reporting of gross cash flows rather than net flows.
c. A reconciliation of the net increase or decrease in cash held with the cash items
d. Provision of a note reconciling gross profit with cash paid for cost of sales.
General Feedback:
Learning objective 18.2: describe the general format of the statement of cash flows.
7. IAS 7/AASB 107 requires which of the following items to be disclosed in the note to the statement of cash flows?
I. Details of cash flows from the acquisition and disposal of subsidiaries.
II. A reconciliation of net cash from operating activities with profit after income tax.
III. A reconciliation of cash and cash equivalents with the items reported in the statement of financial position.
a. I, II and III
b. I and II only
c. I only
d. II and III only
General Feedback:
Learning objective 18.2: describe the general format of the statement of cash flows.
8. In IAS 7/AASB 107, is/are short-term, highly liquid investments that are readily convertible into known amounts of cash and are subject to an insignificant risk of change in value.
a. cash equivalents.
b. bills of exchange.
c. accounts receivable.
d. cash.
General Feedback:
Learning objective 18.3: define the concept of cash in accordance with IAS 7/AASB 107 Statement of Cash Flows
9. Which statement concerning the concept of cash adopted by IAS 7/AASB 107 is incorrect?
a. As a general rule, liquid investments with a term of three month or less, with insignificant risk of changes in value, fall within the definition of cash or cash equivalents.
b. Accounts receivable are generally included in the definition of cash and cash equivalents.
c. Depending on the conditions that apply, a bank overdraft may be treated as a financing activity.
d. Transfers between items included in the definition of cash and cash equivalents are not reported in the statement of cash flows.
General Feedback:
Learning objective 18.3: define the concept of cash in accordance with IAS 7/AASB 107 Statement of Cash Flows
10. Which of the following is a classification used in the statement of cash flows?
a. Borrowing activities
b. Selling activities
c. Administrative activities
d. Operating activities
General Feedback:
Learning objective 18.4: classify cash inflows and cash outflows into operating, investing and financing activities.
11. Which of the following would be classified as investing activities on a statement of cash flows?
I. Purchase of a computer
II. Issue of debentures
III. Sale of land
IV. Payment of dividends
a. I and III only
b. I, II, III and IV
c. I and II only
d. II and IV only
General Feedback:
Learning objective 18.4: classify cash inflows and cash outflows into operating, investing and financing activities.
12. How would the purchase of government bonds by a sporting club be reported in the statement of cash flows?
a. Investing inflow
b. Financing inflow
c. Financing outflow
d. Investing outflow
General Feedback:
Learning objective 18.4: classify cash inflows and cash outflows into operating, investing and financing activities.
13. Which of the following is not classified as a financing activity by IAS 7/AASB 107?
a. The sale of shares that have been held as an investment.
b. Repayment of borrowings.
c. The issue of shares by a company to raise capital.
d. Dividends paid to shareholders.
General Feedback:
Learning objective 18.4: classify cash inflows and cash outflows into operating, investing and financing activities.
14. IAS 7/AASB 107 defines activities that relate to changes in the size and composition of the financial structure of an entity as:
a. financing activities.
b. equity activities.
c. investing activities.
d. borrowing activities.
General Feedback:
Learning objective 18.4: classify cash inflows and cash outflows into operating, investing and financing activities.
15. The statement of financial position of D. Thomas, sole trader, showed the following.
The profit for the year ended 30 June 2023 was $120 000. During the year additional capital of $20 000 was contributed in cash. Drawings in cash were made weekly. The amount of drawings for the year was:
a. $60 000.
b. $80 000.
c. $40 000.
d. $20 000.
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: (Drawings of $40 000 = $200 000 + $120 000 + $20 000 - $300 000
16. Which statement concerning the treatment of the purchase and sale of non-current assets in a statement of cash flows is incorrect?
a. Inflows and outflows for the purchase and sale of non-current assets must not be netted off against each other.
b. The proceeds of sale from a non-current asset are treated as an investing inflow.
c. The cash purchase of a non-current asset is treated as an investing outflow.
d. The carrying value of a non-current asset that has been sold is treated as an investing outflow.
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: The carrying amount is a non-cash item.
17. Which of the following are methods that are used to prepare a statement of cash flows?
I. Use information obtained directly from the primary records of cash transactions.
II. Use information in the accrual-based statement of profit or loss and statement of financial positions but remove the effect of non-cash items.
III. Use information in the accrual-based statement of profit or loss and statement of financial positions but add the effect of non-cash items.
a. I and II
b. I and III
c. I, II and III
d. II and III
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
18. For a manufacturer, which of the following is not an operating cash outflow?
a. Payment for the purchase of manufacturing equipment
b. Payment of wages
c. Payment of GST
d. Payment to suppliers
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
19. If cost of sales is $300 000, inventory has increased by $12 000 and creditors have decreased by $20 000 what is the amount of cash paid for the purchase of goods for resale?
a. $288 000
b. $268 000
c. $320 000
d. $332 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $332 000 = $300 000 + $12 000 + $20 000
20. What effect does the following journal entry have on cash flows?
DR Depreciation expense $55 000
CR Accumulated depreciation $55 000
a. No effect on outflows or inflows
b. Decrease inflows
c. Increase outflows
d. Decrease outflows
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
21. A firm reported that accounts receivable increased by $20 000 between the current year and the prior year. If accrual-basis sales were $150 000 the amount of cash received from customers during the year was:
a. $20 000.
b. $150 000.
c. $170 000.
d. $130 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $130 000 = $150 000 - $20 000
22. From the following information, determine the amount of cash received from customers during 2022-23.
Accounts receivable (30-Jun-2022) $81 000
Accounts receivable (30-Jun-2023) $76 000
Sales $350 000
a. $355 000
b. $423 000
c. $431 000
d. $345 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $355 000 = $350 000 + $81 000 - $76 000.
23. Fraser Inc supplied the following information for 2023.
Beginning inventory $ 60 000
Ending inventory 90 000
Cost of sales 130 000
Credit purchases for the year are:
a. $100 000
b. $130 000
c. $90 000
d. $160 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $ 160 000 = $130 000 - $60 000 + $90 000.
24. The records of Angelo's Pizza showed the following:
The investing cash outflow for equipment for the year ending 30 June 2023 is:
a. Equipment purchased $4 500
b. Equipment purchased $6 000
c. Equipment purchased $3 000
d. Equipment purchased $10 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: Equipment purchased $10 000 = $43 000 - $39 000 + $6000
25. The statement of financial performance shows interest revenue for the year of $12 000 and the statement of financial position show interest receivable at the beginning of the year of $5 000 and at the end of the year of $8 000. The amount of interest received in cash for the year is:
a. $17 000
b. $9 000
c. $12 000
d. $13 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $9 000 = $12 000 + $5000 - $8000.
26. If wages expense for the year is $480 000, wages accrued at the beginning of the period are $15 600 and wages accrued at the end of the period are $18 200 what amount for wages paid will appear in the statement of cash flows?
a. $482 600
b. $480 000
c. $477 400
d. $461 800
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $477 400 = $480 000 + $15 600 - $18 200.
27. The records of Angelo's Pizza showed the following:
The amount of depreciation expense on ovens and equipment that would appear in a note attached to a statement of cash flows reconciling profit with cash flow from operations is:
a. $8 000.
b. $15 000.
c. $9 000.
d. $6 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $8 000 = $9 000 - $6 000 + $5 000.
Accumulated depreciation on equipment sold = cost of equipment sold $6000 minus carrying value of equipment sold $1000 = $5000.
28. The following details relate to the equity of R. Simpson, sole proprietor.
Includes profit for the year of $48 000.
How much was withdrawn by R. Simpson during year 2?
a. $72 000
b. $34 000
c. Cannot be calculated from the information provided
d. $62 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $34 000 = $48 000 - ($38 000 - $24 000).
29. Superb Ltd reports for 2022:
Beginning inventory $ 42 000
Ending inventory 35 000
Cost of sales 120 000
The credit purchases for the year equal:
a. $120 000
b. $155 000
c. $113 000
d. $127 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($120 000 - $42 000 + $35 000)
30. From the information provided below, determine the amount of cash received from customers during 2023.
Accounts receivable (31-Dec-2022) $23 000
Accounts receivable (31-Dec-2023) 31 000
Sales 270 000
a. $262 000
b. $278 000
c. $270 000
d. $239 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($270 000 + $23 000 - $31 000)
31. During the year Mike's Bikes reported that accounts receivable had increased by $13 000. If accrual basis sales were $118 000 the amount of cash received from customers during the year must have been:
a. Cannot be calculated from the information provided.
b. $118 000.
c. $131 000.
d. $105 000.
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: $118 000 - $13 000
32. The ledger account for buildings had a balance of $720 000 at the beginning of the year and a balance of $1 050 000 at the end of the year. If the buildings have been revalued upwards by $100 000 during the year what is the investing outflow for the period, for buildings, assuming no buildings were sold?
a. $430 000
b. $130 000
c. $330 000
d. $230 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($230 000 = $1 050 000 - $720 000 - $100 000)
33. If credit purchases for the period are $150 000 determine the cash paid for the purchase of inventory for 2022.
Beginning accounts payable $22 000
Ending accounts payable 26 000
a. $146 000
b. $150 000
c. Unable to be calculated
d. $154 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($150 000 + $22 000 - $26 000)
34. Pearson Co's cost of sales for the year ended 30 June 2023 was $180 000. During the year, accounts payable and inventory each increased by $18 000. What amount of cash was paid for purchases during the year?
a. $216 000
b. $162 000
c. $180 000
d. $198 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($180 000 - $18 000 accounts payable + $18 000 inventory)
35. The statement of financial performance of Little Co shows accrual-basis interest income for the year ended 30 June 2023 as $4 000. The comparative statements of financial position
show that interest receivable at 30 June 2022 and 30 June 2023 was $500 and $800 respectively. The amount of cash received by way of interest during the year was:
a. $3 700
b. $4 300
c. $3 200
d. $4 500
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($4 000 + $500 - $800)
36. The records of Thin Crust Pizzas showed the following.
What is the investing cash inflow for equipment sold during 2022/23?
a. Proceeds of sale of equipment $7 500
b. Cost of equipment sold $8 000
c. Carrying value of equipment sold $6 000
d. Equipment sold $8 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
37. Jackson Company's accounting records are set out below.
Determine the amount of cash paid for purchases of inventory during the period.
a. $53 000
b. $67 000
c. $60 000
d. $64 000
General Feedback:
Learning objective 18.5: prepare a statement of cash flows for a sole trader using the direct method by analysing cash records and other financial statements.
Feedback: ($60 000 + $30 000 - $26 000 - $40 000 + $43 000)
38. When preparing the note attached to the cash flow statement reconciling profit and cash flow from operations, losses incurred from the sale of non-current assets are:
a. do not appear in the reconciliation.
b. subtracted from the profit.
c. sometimes added back to the profit and sometimes subtracted from the profit depending on whether a loss or profit on disposal is incurred.
d. added back to the profit
General Feedback:
Learning objective 18.6: determine the notes to the statement of cash flows.
39. Under IAS 7/AASB 107 which of the following is required to be disclosed in the notes attached to the statement of cash flows?
a. Proceeds from a share issue
b. The closing bank balance
c. The opening bank balance
d. Standby credit arrangements
General Feedback:
Learning objective 18.6: determine the notes to the statement of cash flows.
40. Given the following information, calculate the net cash from operating activities for the period.
Profit $380 000
Accounts receivable decreased by 12 000
Proceeds from the sale of equipment 41 000
Inventory increased by 20 000
Depreciation expense 40 000
Carrying value of equipment sold 3 000
a. $386 000
b. $368 000
c. $456 000
d. $374 000
General Feedback:
Learning objective 18.6: determine the notes to the statement of cash flows.
Feedback: $374 000 = $380 000 + $12 000 - $41 000 - $20 000 + $40 000 + $3 000.
41. When preparing the note reconciling profit/loss and cash flow from operations, depreciation:
a. is added back to a profit.
b. does not appear in the reconciliation.
c. is added back to a loss.
d. is subtracted from a profit.
General Feedback:
Learning objective 18.6: determine the notes to the statement of cash flows.
42. Using the indirect approach, determine the net cash flow from operating activities from the information provided.
Profit $45 000
Depreciation 10 000
Decrease in prepaid expenses 3 000
Increase in accounts receivable 6 000
Decrease in accounts payable 5 000
a. $63 000
b. $43 000
c. $27 000
d. $47 000
General Feedback:
Learning objective 18.6: determine the notes to the statement of cash flows.
Feedback: ($45 000 + $10 000 + $3 000 - $6 000 - $5 000)
43. For a statement of cash flows, when preparing the note reconciling a net loss and cash flow from operations, depreciation is:
a. appears as part of the profit figure.
b. added back to the net loss.
c. subtracted from net loss
d. does not appear in the reconciliation.
General Feedback:
Learning objective 18.6: determine the notes to the statement of cash flows.
44. The accrual-basis tax expense in the statement of financial performance is $90 000, the beginning balance in the current tax liability account is $130 000 and the ending balance is $150 000. What is the amount of tax paid to be included in the statement of cash flows for the year?
a. $130 000
b. $110 000
c. $150 000
d. $70 000
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: $70 000 = $130 000 + $90 000 - $150 000.
45. Osco Ltd uses the allowance method of accounting for bad and doubtful debts. Bad and doubtful debts expense shown in the statement of financial performance is $10 000 and the amount of bad debts actually written off is $8 000. If sales are $220 000 and accounts receivable have increased by $12 000 over the period, the amount to be shown in the statement of cash flows for receipts from customers is:
a. $220 000
b. $210 000
c. $240 000
d. $200 000
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: $200 000 = $220 000 - $12 000 - $8 000.
46. Discount allowed is a:
a. cash item that is adjusted in a note attached to the statement of cash flows
b. non-cash item that is deducted from accrual based revenue and thus not included in the statement of cash flows.
c. cash item that is included as an inflow in the statement of cash flows.
d. cash item that is included as an outflow in the statement of cash flows.
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
47. Assume tax is paid annually in a lump sum. The beginning balance in the current tax liability account is $52 000 and the ending balance is $73 000. There was no under or over provision of tax for the year. What is the amount of tax paid to be included in the statement of cash flows for the period?
a. $13 000
b. $73 000
c. Nil
d. $52 000
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: $52 000. i.e. the amount of tax owing for the previous year. (Tax is paid in arrears.)
48. The statements of financial position of Blue Skies Ltd show:
In addition to the information above, an interim dividend of $10 000 was declared and paid on 31 January 2023. The dividends paid amount that will appear in the statement of cash flows for the year ended 30 June 2023 will be:
a. $28 000
b. $10 000
c. $15 000
d. $33 000
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: Opening final dividend paid plus interim dividend paid = $18 000 + $10 000.
49. According to AASB's Interpretation 1031, which of the following statements relating to the treatment of GST in the statement of cash flows are correct?
I. All GST outlays and GST collections are regarded as effecting operating activities.
II. Cash flows from operating activities are reported at gross amounts inclusive of GST.
III. Cash flows from investing activities are shown net of GST, with GST on investing activities included as part of operating activities.
a. I, II and III
b. I and III only
c. II and III only
d. I and II only
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
50. Which of the following transactions would be reported directly in the statement of cash flows rather than in the notes?
a. The acquisition of another entity by means of a share issue
b. Amortisation of goodwill
c. Interim dividend paid
d. A bonus share issue
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
51. Bender Ltd uses the allowance method of accounting for bad and doubtful debts. Their accounts show:
Allowance for doubtful debts 1 July 2023 $21 600
Allowance for doubtful debts 30 June 2024 18 000
Bad & doubtful debts expense for the year 4 000
The amount of bad debts actually written off during the year is:
a. $21 600
b. $4 000
c. $18 000
d. $7 600
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: ($7 600 = $21 600 + $4 000 - $18 000)
52. The statements of financial position of Rainbow Ltd show:
The statement of financial performance for the year ended 31 December 2023 shows income tax expense of $65 000.
What amount, in respect of income tax paid, will appear in the statement of cash flows for the year ended 31 December 2023? Assume tax is paid annually in arrears and there are no over- or under-provisions of tax.
a. $55 000
b. $120 000
c. Nil
d. $65 000
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: Opening tax liability $55 000.
53. Davis Ltd provided the following information for the year ended 30 June 2024.
Sales $345 000
Accounts receivable 1 July 2023 60 000
Accounts receivable 30 June 2024 50 000
Bad debts written off during the year 26 000
Direct method (DR Bad debts expense $26 000; CR Accounts receivable $26 000).
Cash receipts from customers for the year ending 30 June 2024 were:
a. $381 000.
b. $309 000.
c. $361 000.
d. $329 000
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: ($329 000 = $345 000 + $60 000 - $50 000 - $26 000)
54. Xander Ltd's financial information includes the following.
Sales $140000
Accounts receivable balance 1 July 18 20000
Accounts receivable balance 30 June 19 28000
Bad debts written off 3000
Discount allowed 9000
[] The direct write-off method is used.
The cash received from customers for the year ended 30 June 23 was:
a. $144 000.
b. $138 000.
c. $120 000
d. $160 000.
General Feedback:
Learning objective 18.7: identify and explain some of the more advanced issues involved in the preparation of the statement of cash flows.
Feedback: ($140 000 + $20 000 - $28 000 - $3 000 - $9 000)
55. Which statement concerning the indirect method of preparing a cash flow statement is correct?
a. The investing and financing sections of a cash flow statement differ depending on whether the direct or indirect method of preparation is used.
b. With the indirect method, depreciation is deducted from profit to arrive at net cash from operating activities.
c. The indirect method is more expensive to implement that the direct method.
d. The direct, rather than the indirect method of preparation, is the method preferred by standard setters
General Feedback:
Learning objective 18.8 ~ prepare and analyse the statement of cash flows for a company after consideration of the more advanced issues.
56. Which of the following statements is not correct?
a. Analysis of an entity's cash flow position requires an examination of trends in statement of cash flows items over several years.
b. The statement of cash flows can explain the effects of operating activities on the entity's cash position.
c. The statement of cash flows can provide information about the causes of changes in the entity's cash position over the period.
d. The statement of cash flows effectively duplicates the function of the cash budget.
General Feedback:
Learning objective 18.8 ~ prepare and analyse the statement of cash flows for a company after consideration of the more advanced issues.
57. Which of the following are non-cash transactions?
I. Share dividend
II. Discount allowed
III. Bad debt write-off
IV. Impairment of goodwill
a. I, II, III and IV
b. II and IV only
c. I and IV only
d. II, III and IV only
General Feedback:
Learning objective 18.8 ~ prepare and analyse the statement of cash flows for a company after consideration of the more advanced issues.
58. Which statement concerning the interpretation of a statement of cash flows is incorrect?
a. The statement of cash flows as required under IAS 7/AASB 107 only goes some of the way in enabling users to establish the liquidity/solvency position of an entity.
b. Ways in which cash flows can be manipulated include delaying cash payments and employing finance leases.
c. The notes to the statement of cash flows are important in interpreting the firm's cash position.
d. It is the indirect method rather than the direct method of preparation that is preferred by the standard setters.
General Feedback:
Learning objective 18.9 identify the limitations of the statement of cash flows.
59. Which of the following are non-cash transactions or events?
I. Credit sale
II. Barter transaction
III. Purchase of a building partly financed by a mortgage
IV. Takeover paid for with shares in the acquiring company
a. All four options are non-cash transactions or events.
b. I, II and IV only
c. I and II only
d. II and IV only
General Feedback:
Learning objective 18.9 identify the limitations of the statement of cash flows.
60. Which of the following is not a way in which cash flows may be manipulated?
a. Charging excessive depreciation
b. Use of lease financing
c. Use of barter
d. Deferring repayment of debts
General Feedback:
Learning objective 18.9 identify the limitations of the statement of cash flows.
61. Which of the following are limitations of a statement of cash flows?
I. Only past cash flows are reported
II. Cash flows can be manipulated, e.g. postponing expenditures
III. Non-cash transactions can be significant in affecting future investing and financing cash flows
a. I, II and III
b. II and III only
c. None are considered limitations.
d. I and II only
General Feedback:
Learning objective 18.9 identify the limitations of the statement of cash flows.
Document Information
Connected Book
Financial Accounting 11e | Test Bank with Answer Key by John Hoggett
By John Hoggett, Lew Edwards, John Medlin, Keryn Chalmers, Andreas Hellmann, Claire Beattie, Jodie Maxfield