Question 1

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to accounts payable?

Accepted Answer

A)   The increase of $8,000 will be subtracted from purchases to determine payments to suppliers.
B)   The increase of $8,000 will be added to net income.
C)   The increase of $8,000 will be added to purchases to determine payments to suppliers.
D)   The increase of $8,000 will be subtracted from net income

Question 2

A cash flow statement shows $13,000 from operations, ($9,000)  from investing, and $21,000 from financing. The cash balance must have increased or decreased by:

Accepted Answer

A)   $13,000.
B)   $25,000.
C)   $ 9,000.
D)   $34,000. B

Question 3

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
 *Relates solely to the acquisition of inventory
What will appear in the operating activities section related to accounts receivable?

Accepted Answer

A)   The increase of $10,000 will be subtracted from sales revenue.
B)   The increase of $10,000 will be added to net income.
C)   The increase of $10,000 will be added to sales revenue.
D)   The increase of $10,000 will be subtracted from net income

Question 4

A company acquires its own stock to hold as treasury stock. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Accepted Answer

A)   The acquisition of treasury stock would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash payment under the direct method.
B)   The acquisition of treasury stock would be presented in the financing activities section as a cash payment under both methods.
C)   The acquisition of treasury stock would be presented in the non-cash investing and financing activities section under both methods.
D)   The acquisition of treasury stock would be presented in the investing activities section as a cash payment under both methods.

Question 5

Which of the following sections from the statement of cash flows includes activities that create revenue, expenses, gains and losses?

Accepted Answer

A)   Activities that create revenue, expenses, gains and losses are included in the investing section.
B)   Activities that create revenue, expenses, gains and losses are included in the financing section.
C)   Activities that create revenue, expenses, gains and losses are included in the operating section.
D)   Activities that create revenue, expenses, gains and losses are not included in any of the above-mentioned sections. C

Question 6

Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock?

Accepted Answer

A)   The payment of a note payable by issuing common stock would be included in the investing section.
B)   The payment of a note payable by issuing common stock would be included in the financing section.
C)   The payment of a note payable by issuing common stock would be included in the operating section.
D)   The payment of a note payable by issuing common stock would not be included in any of the above-mentioned sections.

Question 7

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to accounts payable?

Accepted Answer

A)   The increase of $8,000 will be added to net income.
B)   The increase of $8,000 will be subtracted from net income.
C)   The increase of $8,000 will be subtracted from cost of goods sold.
D)   The increase of $8,000 will be added to cost of goods sold.

Question 8

Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock?

Accepted Answer

A)   The acquisition of a building by issuing common stock would be included in the investing section.
B)   The acquisition of a building by issuing common stock would be included in the financing section.
C)   The acquisition of a building by issuing common stock would be included in the operating section.
D)   The acquisition of a building by issuing common stock would not be included in any of the above-mentioned sections.

Question 9

Which of the following sections from the statement of cash flows includes activities that affect net income on the income statement?

Accepted Answer

A)   Activities that affect net income on the income statement are included in the financing section.
B)   Activities that affect net income on the income statement are included in the operating section.
C)   Activities that affect net income on the income statement are included in the investing section.
D)   Activities that affect net income on the income statement are not included in any of the above-mentioned sections.

Question 10

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to salary payable?

Accepted Answer

A)   The increase of $3,000 will be subtracted from net income.
B)   The increase of $3,000 will be subtracted from salary expense to determine payments to employees.
C)   The increase of $3,000 will be added to salary expense to determine payments to employees.
D)   The increase of $3,000 will be added to net income.

Question 11

A company purchases equipment for use in its business activities. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Accepted Answer

A)   The purchase of equipment would be presented in the non-cash investing and financing activities section under both methods.
B)   The purchase of equipment would be presented in the financing activities section as a cash payment under both methods.
C)   The purchase of equipment would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash payment under the direct method.
D)   The purchase of equipment would be presented in the investing activities section as a cash payment under both methods.

Question 12

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to accounts receivable?

Accepted Answer

A)   The increase of $10,000 will be subtracted from sales to determine cash received from customers.
B)   The increase of $10,000 will be subtracted from net income.
C)   The increase of $10,000 will be added to sales to determine cash received from customers.
D)   The increase of $10,000 will be added to net income.

Question 13

Which of the following is the correct order of the sections on a statement of cash flows?

Accepted Answer

A)   The correct order is operating, financing, investing.
B)   The correct order is financing, investing, operating.
C)   The correct order is investing, operating, financing.
D)   The correct order is operating, investing, financing.

Question 14

A company sells equipment at a loss. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Accepted Answer

A)   The sale of equipment at a loss would be presented in the investing activities section as a cash receipt under the both methods.
B)   The sale of equipment at a loss would be presented in the investing activities section as a cash payment under the both methods.
C)   The sale of equipment at a loss would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash receipt under the direct method.
D)   The sale of equipment at a loss would be presented in the financing activities section as a cash receipt under the both methods. A

Question 15

A company sells treasury stock for an amount less than its acquisition cost. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Accepted Answer

A)   The sale of treasury stock would be presented in the investing activities section as a cash receipt under the both methods.
B)   The sale of treasury stock would be presented in the financing activities section as a cash receipt under the both methods.
C)   The sale of treasury stock would be presented in the operating activities section as a reduction in net income under the indirect method and as a cash receipt under the direct method.
D)   The sale of treasury stock would be presented in the non-cash investing and financing activities section under both methods.

Question 16

Which of the following sections from the statement of cash flows includes loans to others and collections on loans?

Accepted Answer

A)   Loans to others and collections of loans are included in the financing section.
B)   Loans to others and collections of loans are included in the investing section.
C)   Loans to others and collections of loans are included in the operating section.
D)   Loans to others and collections of loans are not included in any of the above-mentioned sections.

Question 17

Which of the following sections from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet?

Accepted Answer

A)   Activities that affect current assets and current liabilities on the balance sheet are included in the investing section.
B)   Activities that affect current assets and current liabilities on the balance sheet are included in the financing section.
C)   Activities that affect current assets and current liabilities on the balance sheet are included in the operating section.
D)   Activities that affect current assets and current liabilities on the balance sheet are not included in any of the above-mentioned sections.

Question 18

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to inventory?

Accepted Answer

A)   The decrease of $19,000 will be subtracted from net income.
B)   The decrease of $19,000 will be added to net income.
C)   The decrease of $19,000 will be added to cost of goods sold to determine payments to suppliers.
D)   The decrease of $19,000 will be subtracted from cost of goods sold to determine payments to suppliers.

Question 19

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements.
 *Relates solely to the acquisition of inventory
-
What will appear in the operating activities section related to inventory?

Accepted Answer

A)   The decrease of $19,000 will be subtracted from net income
B)   The decrease of $19,000 will be subtracted from cost of goods sold.
C)   The decrease of $19,000 will be added to cost of goods sold.
D)   The decrease of $19,000 will be added to net income.

Question 20

A company uses the indirect method to prepare the statement of cash flows. How will the adjustment to reflect the amount of cash payments to suppliers be presented on the statement?

Accepted Answer

A)   The adjustment will be for the increase or decrease in accounts payable for the period and will adjust net income in the operating activities section.
B)   The adjustment will be for the increase or decrease in inventory for the period and will adjust net income in the operating activities section.
C)   The adjustment will be for the increase or decrease in accrued expenses for the period and will adjust net income in the operating activities section.
D)   The adjustment will be for the increase or decrease in accounts receivable for the period and will adjust net income in the operating activities section.

Exam 13: The Statement of Cash Flows

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements. *Relates solely to the acquisition of inventory - What will appear in the operating activities section related to accounts payable?

Correct AnswerverifiedShow Answer

A cash flow statement shows $13,000 from operations, ($9,000) from investing, and $21,000 from financing. The cash balance must have increased or decreased by:

Correct AnswerverifiedB

A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements. *Relates solely to the acquisition of inventory What will appear in the operating activities section related to accounts receivable?

Correct AnswerverifiedShow Answer

A company acquires its own stock to hold as treasury stock. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Correct AnswerverifiedShow Answer

Which of the following sections from the statement of cash flows includes activities that create revenue, expenses, gains and losses?

Correct AnswerverifiedC

Which of the following sections from the statement of cash flows would include the payment of a note payable by issuing common stock?

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A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements. *Relates solely to the acquisition of inventory - What will appear in the operating activities section related to accounts payable?

Correct AnswerverifiedShow Answer

Which of the following sections from the statement of cash flows would include the acquisition of a building by issuing common stock?

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Which of the following sections from the statement of cash flows includes activities that affect net income on the income statement?

Correct AnswerverifiedShow Answer

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements. *Relates solely to the acquisition of inventory - What will appear in the operating activities section related to salary payable?

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A company purchases equipment for use in its business activities. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Correct AnswerverifiedShow Answer

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements. *Relates solely to the acquisition of inventory - What will appear in the operating activities section related to accounts receivable?

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Which of the following is the correct order of the sections on a statement of cash flows?

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A company sells equipment at a loss. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

Correct AnswerverifiedA

A company sells treasury stock for an amount less than its acquisition cost. Where would this transaction appear if the company prepares the statement of cash flows using the indirect method or the direct method?

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Which of the following sections from the statement of cash flows includes loans to others and collections on loans?

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Which of the following sections from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet?

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A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2009 financial statements. *Relates solely to the acquisition of inventory - What will appear in the operating activities section related to inventory?

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A company uses the indirect method to prepare the statement of cash flows. It presents the following amounts on its December 31, 2007 financial statements. *Relates solely to the acquisition of inventory - What will appear in the operating activities section related to inventory?

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A company uses the indirect method to prepare the statement of cash flows. How will the adjustment to reflect the amount of cash payments to suppliers be presented on the statement?

Correct AnswerverifiedShow Answer

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