ACCT Ch. 17

Which is an example of a cash flow from an operating activity? Payment of cash to lenders for interest. Receipt of cash from the sale of capital stock. Payment of cash dividends to the company's stockholders. None of the answer choices is correct.

Payment of cash to lenders for interest.

Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, what is net cash provided by operating activities? $102,000 $136,000 $112,000 $124,000

$136,000

The following data are available for Allen Clapp Corporation: Net income $200,000 Depreciation expense 40,000 Dividends paid 60,000 Gain on disposal of land 10,000 Decrease in accounts receivable 20,000 Decrease in accounts payable 30,000 Net cash provided by operating activities is: $220,000. $160,000. $240,000. $280,000.

$220,000. Net cash provided by operating activities is $220,000 or (Net Income, $200,000 + Depreciation Expense, $40,000 - Gain on disposal of land, $10,000 + Decrease in accounts receivable, $20,000 - Decrease in accounts payable, $30,000).

Accounts receivable arising from sales to customers amounted to $80,000 and $70,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $240,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is $240,000. $250,000. $310,000. $230,000.

$250,000. = 240,000 + 10,000

Gentry Company's land account decreased $120,000 because of a cash sale for $120,000, its equipment account increased $40,000 as a result of a cash purchase, and its bonds payable account increased $130,000 from issuance of bonds for cash at face value. The net cash provided by investing activities is $90,000. $210,000. $120,000. $80,000.

80,000 The sale of land for cash of $120,000 and the purchase of equipment for $40,000 equals $80,000 net cash provided by investing activities. The issuance of bonds for $130,000 is a financing activity.

Which is an example of a cash flow from a financing activity? Receipt of cash from sale of land. Issuance of debt for cash. Purchase of equipment for cash. None of the answer choices is correct.

Issuance of debt for cash.

Which of the following is not a reason that companies favor the indirect method of preparing the statement of cash flows? It requires less information. It focuses on the differences between net income and the cash flows from operating activities. It is easier to prepare. It is less costly to prepare.

It requires less information.

Which of the following would be classified as an operating activity? Sale of equipment. Making a loan to another entity. Payment of interest. Payment of a cash dividend.

Payment of interest.

Which is an example of a cash flow from an investing activity? Payment of cash to suppliers for inventory. Receipt of cash from the sale of equipment. Receipt of cash from the issuance of bonds payable. Payment of cash to repurchase outstanding capital stock.

Receipt of cash from the sale of equipment.

Which of the following will not be reported in the statement of cash flows? The net change in plant assets during the year. Cash receipts from sales of plant assets during the year. Cash payments for plant assets during the year. Cash dividends paid during the year.

The net change in plant assets during the year.

Which of the following is incorrect about the statement of cash flows? The indirect method may be used to report cash provided by operations. The direct method may be used to report cash provided by operations. The statement shows the cash provided (used) for three categories of activities. The operating section is the last section of the statement.

The operating section is the last section of the statement.

Items that are added back to net income in determining cash provided by operating activities under the indirect method do not include depreciation expense. loss on sale of equipment. amortization expense. an increase in inventory.

an increase in inventory.

Which of the following is incorrect about the statement of cash flows? a) It is a fourth basic financial statement. b) It provides information about cash receipts and cash payments of an entity during a period. c) It reconciles the ending cash account balance to the balance per the bank statement. d) It provides information about the operating, investing, and financing activities of the business.

c) It reconciles the ending cash account balance to the balance per the bank statement.

When converting net income to net cash provided (used) by operating activities under the indirect method decreases in inventory and increases in accrued liabilities are added. decreases in accounts receivable and increases in prepaid expenses are added. decreases in accounts payable and decreases in inventory are deducted. increases in accounts receivable and increases in accrued liabilities are deducted.

decreases in inventory and increases in accrued liabilities are added.

By examining relationships between items in the statement of cash flows, investors and creditors can do all of the following except: review cash investing and financing transactions during the period. determine reasons for the difference between net income and net cash provided by operating activities. make predictions of the amounts, timing, and uncertainty of future cash flows. determine the entity's ability to earn future income

determine the entity's ability to earn future income.

The statement of cash flows should not be used to evaluate an entity's ability to: earn net income. generate future cash flows. pay dividends. meet obligations.

earn net income.

Cash dividends paid to stockholders are classified on the statement of cash flows as a combination of operating and investing activities. financing activities. operating activities. investing activities.

financing activities.

Cash flow activities that include acquiring and disposing of investments and property, plant, and equipment are classified as operating activities. investing activities. financing activities. non-cash activities.

investing activities.

The statement of cash flows classifies cash receipts and cash payments by these activities: investing, financing, and non-operating. financing, operating, and non-operating. operating and non-operating. investing, financing, and operating.

investing, financing, and operating.

The best measure of a company's ability to generate sufficient cash to continue as a going concern is net cash provided by operating activities. investing activities. processing activities. financing activities.

operating activities.

Information used to prepare the statement of cash flows usually comes from all of the following except comparative balance sheet. current income statement. retained earnings statement. additional information.

retained earnings statement.

Operating activities include cash outflows to: make loans to other entities. purchase debt or equity securities. suppliers for inventory. purchase property and equipment.

suppliers for inventory.

Companies do not report significant non-cash activities in: the body of the statement of cash flows. a supplementary schedule to the financial statements. a separate schedule at the bottom of the statement of cash flows. a separate note to the financial statements.

the body of the statement of cash flows.