ACCT Chapter 23 Conceptual

When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities? -A change in interest payable. -A change in dividends payable. -A change in income taxes payable. -All of these are answers are correct.

a change in dividends payable

Acquiring land and a building by issuing common stock would be reported as: -both an investing activity and a financing activity. -a financing activity. -a noncash investing and financing activity. -an investing activity.

a noncash investing and financing activity

The reconciliation of net income to net cash flow from operating activities is reported under: -the direct method only. -the indirect method only. -both the direct method and the indirect method. -neither the direct nor the indirect method.

both the direct method and the indirect method

To arrive at net cash provided by operating activities using the indirect method, it is necessary to report revenues and expenses on a cash basis. This is done by -eliminating all transactions that have no current or future effect on cash, such as depreciation, from the net income computation. -re-recording all income statement transactions that directly affect cash in a separate cash flow journal. -estimating the percentage of income statement transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions. -eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash.

eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash.

The sources of information used to prepare the statement of cash flows includes all of the following except -last year's income statement. -other selected transaction data. -this year's income statement. -comparative balance sheets.

last year's income statement

Which of the following is not needed in order to prepare a statement of cash flows? -selected transaction data. -current year's income statement. -comparative balance sheets. -last year's statement of cash flows.

last year's statement of cash flows

Net cash flow from operating activities is determined by eliminating -incurred expenses from net income. -earned revenues from net income. -cash expenses and cash revenues from net income. -noncash expenses and noncash revenues from net income.

noncash expenses and noncash revenues from net income

Activities involving the cash effects of transactions that enter into the determination of net income are: -investing activities. -financing activities. -operating activities. -noncash investing and financing activities.

operating activities

All of the following would be considered investing activities except: -receipt of cash dividends from investments. -sale of land for cash. -purchase of 25% interest in the stock of a supplier. -purchase of equipment for cash.

receipt of cash dividends from investments.

A statement of cash flows typically would not disclose the effects of -a purchase and immediate retirement of treasury stock. -capital stock issued at an amount greater than par value. -stock dividends declared. -cash dividends paid.

stock dividends declared

Which of the following statements related to a worksheet used for the preparation of a statement of cash flows is not correct? -Accounts with debit balances are listed separately from those with credit balances in the balance sheet accounts section. -Inflows of cash are entered as debits and outflows as credits in the reconciling columns. -The bottom portion of the worksheet consists of the operating, investing, and financing activities sections. -The reconciling items shown in the worksheet are entered in a journal and posted to the appropriate accounts.

The reconciling items shown in the worksheet are entered in a journal and posted to the appropriate accounts.

Of the following questions, which one would not be answered by the statement of cash flows? -Where did the cash come from during the period? -What was the change in the cash balance during the period? -Were all the cash expenditures of benefit to the company during the period? -What was the cash used for during the period?

Were all the cash expenditures of benefit to the company during the period?

The method of calculating net cash flow from operating activities that adjusts net income for items that affected reported net income but not cash is the: -adjustment method. -direct method. -income statement method. -indirect method.

indirect method

All of the following would be classified as financing cash flows except: -interest paid on long-term debt. -dividends paid on preferred stock. -proceeds from the sale of stock. -purchases of treasury stock.

interest paid on long-term debt

All of the following adjustments would be deducted in determining net cash flow from operating activities using the indirect method except: -gain on the sale of plant assets. -increase in accrued liabilities. -amortization of bond premium. -decrease in deferred income tax liability.

increase in accrued liabilities

Which method adjusts net income for items that affected reported net income but did not affect cash? -Accrual. -Direct. -Indirect. -Adjustment.

indirect

The primary purpose of the statement of cash flows is to provide information -that is useful in assessing cash flow prospects. -about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing. -about the cash receipts and cash payments of an entity during a period. -about the operating, investing, and financing activities of an entity during a period.

about the cash receipts and cash payments of an entity during a period

Which of the following statements related to a work sheet used for preparation of the statement of cash flows is correct? -The use of a worksheet is strictly optional. -After all reconciling items have been entered, each line pertaining to a balance sheet account should foot across. -The reconciling items shown in the work sheet are used only to facilitate preparation of the statement of cash flows; these items are never entered as adjustments. -All of these answers are correct.

all of these answers are correct

All of the following adjustments are added to net income in computing net cash flow from operating activities using the indirect method except: -amortization expense. -an increase in salaries payable. -a decrease in supplies. -an increase in accounts receivable.

an increase in accounts receivable

T/F An increase in short-term notes receivable will be added to net income under the indirect method of preparing the statement of cash flows.

false

T/F Only the comparative balance sheet is needed to prepare the statement of cash flows.

false

T/F Payment of a stock dividend is classified as a financing activity.

false