Question 1

On September 1,Year 1,Laredo Company purchased equipment making a down payment of $15,500 cash and signing a one-year note payable on the $22,500 balance.The note carried an interest rate of 6%,and all interest was to be paid on the maturity date.Which of the following correctly shows the combined effect of the purchase as well as the accrual of interest on December 31,Year 1?
Cash Flows
Net Income Operating Investing Financing

Accepted Answer

A)     (450)   NA (15,500)  NA 	ext { (450)  } \quad 	ext { NA } \quad ( 15,500 )  \quad 	ext { NA } (450)   NA (15,500)  NA  
B)     NA (450) NA22,500\begin{array} { l l l l } 	ext { NA } & ( 450 )  & N A & 22,500\end{array} NA ​(450) ​NA​22,500​ 
C)     (450)   NA (15,500) 22,500	ext { (450)  } \quad 	ext { NA } \quad ( 15,500 )  \quad 22,500 (450)   NA (15,500) 22,500 
D)    (450) (450) (15,500)  NA \begin{array}{llll}(450)  & (450)  & (15,500)  & 	ext { NA }\end{array}(450) ​(450) ​(15,500) ​ NA ​ A

Question 2

The following income statement was drawn from the annual report of Newtown Company:
  Cash revenue $30,000 Depreciation expense (10,000)  Accrued interest expense (3,000)  Cash operating expenses (12,000)  Operating income 5,000 Gain on sale of equipment 600 Net Income $5,600‾\begin{array}{|c|c|}\hline 	ext { Cash revenue } & \$ 30,000 \\hline 	ext { Depreciation expense } & (10,000)  \\hline 	ext { Accrued interest expense } & (3,000)  \\hline 	ext { Cash operating expenses } & (12,000)  \\hline 	ext { Operating income } & 5,000 \\hline 	ext { Gain on sale of equipment } & 600 \\hline 	ext { Net Income } & \underline{\$ 5,600} \\hline\end{array} Cash revenue  Depreciation expense  Accrued interest expense  Cash operating expenses  Operating income  Gain on sale of equipment  Net Income ​$30,000(10,000) (3,000) (12,000) 5,000600$5,600​​​  
What is the net cash flow from operating activities?

Accepted Answer

A)   $18,000
B)   $18,600
C)   $13,000
D)   $14,400

Question 3

Which of the following would not be a cash flow from financing activities?

Accepted Answer

A)   Borrowing on a long-term note payable
B)   Repayment of principal on bonds payable
C)   Payment of interest on bonds payable
D)   Payment of a cash dividend

Question 4

When using the indirect method to prepare the operating activities section of the statement of cash flows,how is an increase in noncash current assets handled?

Accepted Answer

A)   It is subtracted from net income in the cash flows from operating activities section.
B)   It is subtracted from current liabilities in the cash flows from financing activities section.
C)   It is added to net income in the cash flows from operating activities section.
D)   It is added to equipment purchases in the cash flows from investing activities section.

Question 5

When using the indirect method to prepare the operating activities section of the statement of cash flows,how is a decrease in current liabilities handled?

Accepted Answer

A)   It is subtracted from net income in the cash flows from operating activities section.
B)   It is subtracted from current assets in the cash flows from financing activities section.
C)   It is added to net income in the cash flows from operating activities section.
D)   It is added to inventory purchases in the cash flows from investing activities section. A

Question 6

When the direct method is used to prepare the operating activities section of the statement of cash flows,cash inflows from customers and cash outflows for depreciation are among the categories of cash flows likely to be reported.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following items would be classified as a cash flow from investing activities?
1) Issue common stock for cash
2) Payment on principal of note payable
3) Payment of dividends
4) Sale of equipment for cash

Accepted Answer

A)   1 and 4
B)   4 only
C)   3 only
D)   1, 2, 3, and 4

Question 8

The FASB requires that companies report cash flow per share in their audited financial statements.

Accepted Answer

A) True 
 B)False

Question 9

On January 1,Year 1,Colgate Corporation decided to switch from the direct method to the indirect method of preparing the statement of cash flows.Assuming a positive net income figure but a decrease in the cash balance,what can be said about the change in method of preparing the statement?

Accepted Answer

A)   The direct method will yield a larger amount for cash flows from operating activities.
B)   The only difference will be in the cash flows from financing activities section.
C)   The indirect method will yield a larger amount for cash flows from operating activities.
D)   There will be no difference in the totals on the statement of cash flows.

Question 10

Middleton Corporation reported utilities expense of $18,200 on its income statement for Year 1.For the year,the beginning balance in Utilities Payable was $2,500 and the ending balance was $1,500.The amount of cash that Mayes paid for utilities in Year 1 was $19,200.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is the correct sequence of the three sections that are presented on the statement of cash flows?

Accepted Answer

A)   Operating, Investing, Financing
B)   Investing, Operating, Financing
C)   Operating, Financing, Investing
D)   Financing, Investing, Operating

Question 12

The investing activities section of the statement of cash flows distinguishes between acquisitions of long-term assets that expand operating capacity and those that replace old,worn-out assets.

Accepted Answer

A) True 
 B)False

Question 13

LePage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account.During the year,a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800.How much cash did LePage pay for insurance during the year?

Accepted Answer

A)   $16,600
B)   $17,400
C)   $17,000
D)   $18,800

Question 14

A company experiencing rapid growth can be short of cash despite earning substantial net income.

Accepted Answer

A) True 
 B)False

Question 15

For the year ended December 31,Year 1,Fields Company made cash payments of $50,000 for dividends,paid interest of $20,500,paid $30,000 cash to suppliers,and purchased equipment for $64,000 cash.What is the net cash used by investing activities for Year 1?

Accepted Answer

A)   $114,000
B)   $64,000
C)   $20,500
D)   $134,500 B

Question 16

Which of the following transactions is a use of cash?

Accepted Answer

A)   Short-term borrowing of cash
B)   Acquisition of land by issuing a short-term note payable
C)   Issuance of a stock dividend
D)   Purchase of treasury stock

Question 17

How are interest expense and interest paid reported?

Accepted Answer

A)   Interest expense is reported as an operating item on the income statement and interest paid is reported as an investing activity on the statement of cash flows.
B)   Interest paid is reported as an operating activity on the statement of cash flows and interest expense is reported as a nonoperating expense on the income statement.
C)   Interest expense is reported as an operating expense on the income statement and interest paid is reported as a financing activity on the statement of cash flows.
D)   Interest paid is reported as a financing activity on the statement of cash flows and interest expense is reported as an operating item on the income statement.

Question 18

[The following information applies to the questions displayed below.]
On August 1, Year 1, Jackson Company issued a one-year $80,000 face value interest-bearing note with a stated interest rate of 9% to Galaxy Bank. Jackson accrues interest expense on December 31, Year 1, its calendar year-end.
-What is the amount of interest expense and the cash outflow for interest during the year ending December 31,Year 1?
Interest Expense \quad\quad\quad\quad\quad Cash Outflow

Accepted Answer

A)    $7,200$7,200\$ 7,200 \quad \$ 7,200$7,200$7,200 
B)    $7,200$0\$ 7,200\quad\quad\quad\quad\quad\$0$7,200$0 
C)    $3,000\$ 3,000$3,000\quad\quad\quad$0\quad \$0$0 
D)    $3,000$3,000\$ 3,000 \quad\quad\quad\quad\quad \$ 3,000$3,000$3,000

Question 19

Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?

Accepted Answer

A)   Accrual method
B)   Direct method
C)   Indirect method
D)   Computational method

Question 20

Which of the following describes the only difference between the direct and indirect methods of preparing the statement of cash flows?

Accepted Answer

A)   The manner in which cash flows from operating activities is presented.
B)   The manner in which cash flows from investing activities is presented.
C)   The manner in which cash flows from financing activities is presented.
D)   Whether a schedule of noncash items needs to be presented.

Exam 12: Statement of Cash Flows

Correct Answer
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A

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Which of the following would not be a cash flow from financing activities?

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When using the indirect method to prepare the operating activities section of the statement of cash flows,how is an increase in noncash current assets handled?

Correct Answer
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When using the indirect method to prepare the operating activities section of the statement of cash flows,how is a decrease in current liabilities handled?

Correct Answer
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A

When the direct method is used to prepare the operating activities section of the statement of cash flows,cash inflows from customers and cash outflows for depreciation are among the categories of cash flows likely to be reported.

Correct Answer
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Which of the following items would be classified as a cash flow from investing activities? 1) Issue common stock for cash 2) Payment on principal of note payable 3) Payment of dividends 4) Sale of equipment for cash

Correct Answer
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The FASB requires that companies report cash flow per share in their audited financial statements.

Correct Answer
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On January 1,Year 1,Colgate Corporation decided to switch from the direct method to the indirect method of preparing the statement of cash flows.Assuming a positive net income figure but a decrease in the cash balance,what can be said about the change in method of preparing the statement?

Correct Answer
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Middleton Corporation reported utilities expense of $18,200 on its income statement for Year 1.For the year,the beginning balance in Utilities Payable was $2,500 and the ending balance was $1,500.The amount of cash that Mayes paid for utilities in Year 1 was $19,200.

Correct Answer
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Which of the following is the correct sequence of the three sections that are presented on the statement of cash flows?

Correct Answer
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The investing activities section of the statement of cash flows distinguishes between acquisitions of long-term assets that expand operating capacity and those that replace old,worn-out assets.

Correct Answer
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LePage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account.During the year,a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800.How much cash did LePage pay for insurance during the year?

Correct Answer
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A company experiencing rapid growth can be short of cash despite earning substantial net income.

Correct Answer
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For the year ended December 31,Year 1,Fields Company made cash payments of $50,000 for dividends,paid interest of $20,500,paid $30,000 cash to suppliers,and purchased equipment for $64,000 cash.What is the net cash used by investing activities for Year 1?

Correct Answer
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B

Which of the following transactions is a use of cash?

Correct Answer
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How are interest expense and interest paid reported?

Correct Answer
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Correct Answer
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Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?

Correct Answer
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Which of the following describes the only difference between the direct and indirect methods of preparing the statement of cash flows?

Correct Answer
verified

Exam 12: Statement of Cash Flows

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

Which of the following would not be a cash flow from financing activities?

Correct AnswerverifiedShow Answer

When using the indirect method to prepare the operating activities section of the statement of cash flows,how is an increase in noncash current assets handled?

Correct AnswerverifiedShow Answer

When using the indirect method to prepare the operating activities section of the statement of cash flows,how is a decrease in current liabilities handled?

Correct AnswerverifiedA

When the direct method is used to prepare the operating activities section of the statement of cash flows,cash inflows from customers and cash outflows for depreciation are among the categories of cash flows likely to be reported.

Correct AnswerverifiedShow Answer

Which of the following items would be classified as a cash flow from investing activities? 1) Issue common stock for cash 2) Payment on principal of note payable 3) Payment of dividends 4) Sale of equipment for cash

Correct AnswerverifiedShow Answer

The FASB requires that companies report cash flow per share in their audited financial statements.

Correct AnswerverifiedShow Answer

On January 1,Year 1,Colgate Corporation decided to switch from the direct method to the indirect method of preparing the statement of cash flows.Assuming a positive net income figure but a decrease in the cash balance,what can be said about the change in method of preparing the statement?

Correct AnswerverifiedShow Answer

Middleton Corporation reported utilities expense of $18,200 on its income statement for Year 1.For the year,the beginning balance in Utilities Payable was $2,500 and the ending balance was $1,500.The amount of cash that Mayes paid for utilities in Year 1 was $19,200.

Correct AnswerverifiedShow Answer

Which of the following is the correct sequence of the three sections that are presented on the statement of cash flows?

Correct AnswerverifiedShow Answer

The investing activities section of the statement of cash flows distinguishes between acquisitions of long-term assets that expand operating capacity and those that replace old,worn-out assets.

Correct AnswerverifiedShow Answer

LePage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account.During the year,a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800.How much cash did LePage pay for insurance during the year?

Correct AnswerverifiedShow Answer

A company experiencing rapid growth can be short of cash despite earning substantial net income.

Correct AnswerverifiedShow Answer

For the year ended December 31,Year 1,Fields Company made cash payments of $50,000 for dividends,paid interest of $20,500,paid $30,000 cash to suppliers,and purchased equipment for $64,000 cash.What is the net cash used by investing activities for Year 1?

Correct AnswerverifiedB

Which of the following transactions is a use of cash?

Correct AnswerverifiedShow Answer

How are interest expense and interest paid reported?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?

Correct AnswerverifiedShow Answer

Which of the following describes the only difference between the direct and indirect methods of preparing the statement of cash flows?

Correct AnswerverifiedShow Answer

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A

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A

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B

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