Accounting Ch 11 Quiz

Which of the following are classified as cash inflows from investing activities?

Sale of equipment Sale of land

Carola Inc. issues common stock for $20 million and pays dividends of $2 million. Net cash inflows from financing activities will be:

$18 million

During the current period, Kunze Corp. disposed of old equipment for $2,000, purchased new equipment for $20,000, collected an accounts receivable balance of $2,500, and purchased an investment for $3,000. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$21,000 net outflow.

Neue Inc. reports sales revenue of $200,000; in addition, its accounts receivable balance decreased by $15,000. Neue's cash flows from sales were:

$215,000

List the four steps in preparing a statement of cash flows in the correct order.

1. calculate the net cash flows from operating activities 2. determine the net cash flows from investing activities 3. determine the net cash flows from financing activities 4. combine operating, investing, and financing activities

Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?

Calculate the change in the beginning and ending balance of cash

Which of the following methods for reporting cash flows from operating activities begins with net income and works backward to calculate net cash flow from operating activities?

Indirect method

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year?

Inventory Accounts receivable Accounts payable

Adjustments to net income in calculating operating cash flows include:

Nonoperating items Noncash items Changes in current assets and current liabilities

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

Payment of salaries payment on account

Which of the following would be reported as a cash outflow from financing activities?

Purchase of treasury shares

Which of the following would result in a cash inflow from investing activities?

Sale of a machine for cash.

Which of the following cash transactions are classified as cash inflows from investing activities?

Sale of building Sale of investments Sale of equipment

Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be

added to net income.

Which of the following are common noncash items requiring adjustment to net income under the indirect method?

amortization expense depreciation expense

When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to

amounts presented in the income statement.

Which of the following represents the first step in preparing a statement of cash flows in the correct order?

calculate the net cash flows from operating activities

Which of the following represents the final step in preparing a statement of cash flows in the correct order?

combine operating, investing, and financing activities

One of the purposes of adjusting net income for changes to certain balance sheet accounts is to

convert items included in net income to cash.

True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

false

Cash flows from _________ activities include both inflows and outflows of cash from the external funding of a business.

financing

Issuing stock to owners is classified as a(n) ________ activity.

financing

The _______________ method of reporting cash flows from operating activities begins with net income.

indirect

Cash flows from ______________ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets.

investing

Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as __________ activities.

investing

An increase in accounts receivable indicates that the company collected _____ cash than the amount of ______.

less; sales revenue

In order to determine cash flows from financing activities, we need to examine changes to

long-term liability and stockholders' equity accounts

Which of the following nonoperating items require adjustments to net income under the indirect method?

losses from sale of long-term assets gains from sale of long-term assets

Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to ________ ________ to prepare the operating section for the indirect format of the statement of cash flows.

net income

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ______________ _________. (Enter one word per blank.)

net income

Depreciation expense and amortization expense represent ______________ items requiring adjustments to net income under the indirect method.

noncash

Gains and losses on the sale of long-term assets represent common _________________ items needing adjustment under the indirect method.

nonoperating

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

operating activities

The statement of cash flows classifies items as

operating, investing, and financing.

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

purchase of supplies Interest paid on bonds payment on account

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

related cash may be higher or lower than the accrued amount included in net income

In a statement of cash flows, the sum of cash inflows and outflows is equal to

the change in the cash balance.

Net cash flows provided by operating activities will be ______ when using the direct method compared to the indirect method.

the same

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own shares for $12 million and pays cash dividends of $5 million. Cash inflows from financing activities will be:

$112 mill

Roberts Inc. sells common stock for $10 million and pays dividends of $1 million. Net cash inflows from financing activities will be:

$9 million

Which of the following are cash outflows from investing activities?

Purchase of investment Purchase of land purchase of a building

Depreciation expense and amortization expense represent _______________ items requiring adjustments to net income under the indirect method.

noncash

During the current period, Schmidt Corp. sold equipment for $1,000, purchased new equipment for $10,000, paid an accounts payable balance of $2,500, and sold an investment costing $2,000 for $2,800. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$6,200 net outflow.

Using the indirect method to report cash flows from operating activities, a(n) _______________ in the accounts receivable from the prior period is added to net income in the ________ activities section of the statement of cash flows.

Blank 1: decrease or reduction Blank 2: operating

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection from customers Collection of interest

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

Depreciation expense originally reduced net income, but it is a noncash expense.

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection on account Interest received on notes receivable

Which of the following sections will be identical in every detail under the direct and indirect methods.

Cash flows from investing activities Cash flows from financing activities