Chapter 11 - ACCT 2331

Preparing the statement of cash flows involves all of the following except determining the - cash provided by operations. - cash provided by or used in investing and financing activities. - change in cash during the period. - cash collections from customers during the period.

cash collections from customers during the period.

Which of the following combinations under the indirect method represents adjustments that are made to net income to arrive at cash from operations? Increases in current assets Increases in current liabilities - deducted from net income added to net income - deducted from net income deducted from net income - added to net income added to net income - added to net income deducted from net income

deducted from net income added to net income

An example of a cash flow from an investing activity is: - receipt of cash from the sale of equipment - receipt of cash from the sale of stock - payment of cash for dividends - payment of cash to acquire treasury stock.

receipt of cash from the sale of equipment

A statement of cash flows has been prepared. The sum of the three major components (operating activities, investing activities, financing activities) will add up to an amount equal to - the ending cash balance reported on the balance sheet - net income for the period on the accrual basis - the ending amount of working capital - the net change in the cash account during the year

the net change in the cash account during the year

Of the following, which is NOT a cash inflow from a financing activity? - Additional owner investment - Issuance of stock - Interest revenue on loans - Mortgage proceeds

Issuance of stock

Which of the following is NOT a true statement about the statement of cash flows? - It shows where cash came from and how it was spent. - It reports why cash increased or decreased. - It covers a specific span of time the same as the income statement. - It shows how the profits or losses of the company were generated.

It shows how the profits or losses of the company were generated.

An outflow of cash from an investing activity would be: - purchasing treasury stock. - issuing notes payable. - paying cash dividends to stockholders. - making loans to third parties.

making loans to third parties

The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they purchased equipment for $10,000 cash. Which of the following statements is TRUE? - $10,000 would be shown as a negative cash flow in the operating activities section. - $10,000 would be shown as a negative cash flow in the investing activities section. - $10,000 would be shown as a positive cash flow in the investing activities section. - $10,000 would be shown as a positive cash flow in the financing activities section.

$10,000 would be shown as a negative cash flow in the investing activities section.

Starfire Company uses the indirect method to prepare the statement of cash flows. Please refer to the following income statement: Sales revenue $140,000 Interest revenue 5,000 Loss on sale of plant assets (4,000) Total revenues and gains $141,000 Cost of goods sold 100,000 Salary expense 23,000 Depreciation expense 8,000 Other operating expenses 9,000 Interest expense 2,000 Income tax expense 5,000 Total expenses $147,000 Net income (loss) $(6,000) Other information provided: Current assets other than cash decrease by $4,000. Current liabilities increase by $1,000. How much is the Net cash flow provided by operations? - $11,000 positive - $11,000 negative - $23,000 positive - $1,000 negative

$11,000 positive

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: 2014 2013 Increase/decrease Cash $ 21,000 $ 18,000 $ 3,000 Accounts receivable 31,000 35,000 (4,000) Inventory 53,000 25,000 28,000 PP&E, net 120,000 90,000 30,000 Total assets $225,000 $168,000 $57,000 Additional information provided: Equipment costing $52,000 was purchased for cash. Equipment with a net asset value of $10,000 was sold for $14,000. Depreciation expense of $12,000 was recorded during the year. What was the net amount of Cash from investing activities? - $30,000 negative - $60,000 positive - $52,000 negative - $38,000 negative

$38,000 negative

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: 2014 2013 Increase/decrease Accounts payable $ 4,000 $ 6,000 $(2,000) Accrued liabilities 2,000 1,000 1,000 Long-term notes payable 84,000 90,000 (6,000) Total liabilities $90,000 $97,000 $(7,000) Additional information provided: During 2014, the company repaid $40,000 of long-term notes payable. During 2014, the company borrowed $34,000 on a new note payable. Based on the above information only, what amount of net cash flow would be shown in the financing section of the statement of cash flows? - $6,000 negative - $6,000 positive - $5,000 positive - $7,000 negative

$6,000 negative

Which of the following are the activities that are included in the operating activities section of the statement of cash flows? - Activities that obtain the cash needed to launch and sustain the business are included in the operating activities section. - Activities that create revenue or expenses in the entity's major line of business are included in the operating activities section. - Activities that increase or decrease long-term assets are included in the operating activities section. - Activities that pertain to construction of new facilities are included in the operating activities section.

Activities that create revenue or expenses in the entity's major line of business are included in the operating activities section

Which of the following would be considered an operating activity on the statement of cash flows? - Dividends paid to stockholders - The sale of inventory - Payment to purchase equipment - The receipt of cash from sale of equipment

Dividends paid to stockholders

If common stock was issued to acquire an $8,000 machine, how would the transaction appear on the statement of cash flows? - It would depend on whether you are using the direct or the indirect method. - It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section. - It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section. - It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.

It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities.

A loss of $35,000 from the sale of equipment would be included in which of the activities sections of the statement of cash flows? - Operating - Investing - Financing - Would not be on the statement of cash flows

Operating

Which of the following is the CORRECT order of the sections on a statement of cash flows? - Operating, financing, investing - Financing, investing, operating - Investing, operating, financing - Operating, investing, financing

Operating, investing, financing

Of the following, which is NOT a cash outflow from an investing activity? - Purchase of another company's stock as an investment - Loans made to another party - Purchase of treasury stock - Purchase of commercial real estate

Purchase of treasury stock

Of the following, which is NOT a cash outflow from an investing activity? - Purchase of long-term investments, such as the stock of another company - Loans made to another party - Purchase of treasury stock - Purchase of land

Purchase of treasury stock

The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they sold equipment for $4,800 cash. The net book value of the asset prior to sale was $4,000. Which of the following statements is true? - The gain on sale of $800 would be added back to net income in the operating activities section. - The book value of the assets sold would be shown as a negative cash flow in the investing activities section. - The cash receipt of $4,800 would be shown as a positive cash flow in the investing activities section. - The gain on sale of $800 would be shown as a positive cash flow in the financing activities section.

The cash receipt of $4,800 would be shown as a positive cash flow in the investing activities section.

Which of the following sections from the statement of cash flows includes activities that increase and decrease long-term liabilities and stockholders' equity? - The financing section - The operating section - The investing section - The noncash investing and financing section

The financing section

Which of the following sections from the statement of cash flows includes the issuance of stock and the payment of dividends? - The investing section - The financing section - The operating section - The noncash investing and financing section

The financing section

. Which of the following sections from the statement of cash flows includes activities that increase and decrease long-term assets? - The financing section - The operating section - The investing section - The noncash investing and financing section

The investing section

Which of the following sections from the statement of cash flows includes the purchase of equipment and the selling of land? - The investing section - The financing section - The operating section - The noncash investing and financing section

The investing section

Which of the following sections from the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet? - The investing section - The financing section - The operating section - The noncash investing and financing section

The operating section

Paying cash dividends would be: - a cash outflow from financing. - a cash outflow from operations. - a cash outflow from investing. - none of the above.

a cash outflow from financing.

Which of the following is a financing activity? - inventory for resale is purchased on credit - equipment to be used in the firm is purchased with cash - employees are paid their weekly wages in cash - a loan is obtained from the bank

a loan is obtained from the bank

Issuing preferred stock to stockholders would be a: - cash inflow from investing. - cash inflow from operations. - cash inflow from financing. - cash inflow from depreciation.

cash inflow from financing.