MGMT 200 - Chapter 11
Roberts Company's operating expenses (excluding depreciation expense) were $50,000 and its balance in prepaid insurance increased by $2,000. Cash paid for operating expenses was: a. $52,000 b. $50,000 c. $48,000
a
Which of the following would result in a cash outflow from investing activities? a. Purchase of inventory for cash. b. Purchase of the company's common stock for cash. c. Purchase of a machine for cash.
c
The three classifications on the statement of cash flows are cash flows from (Select all that apply.) a. investing activities. b. discontinued activities. c. business activities. d. operating activities. e. financing activities.
a, d, e
Which of the following cash transactions are classified as cash inflows from investing activities? a. Sale of equipment b. Borrowing from bank c. Sale of merchandise inventory d. Sale of investments e. Sale of building
a, d, e
Which of the following are classified as cash outflows from investing activities? a. Sale of land b. Purchase of an investment c. Payment of accounts payable balance d. Purchase of land e. Sale of equipment
b, d
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? a. Issuance of common stock b. Collection on account c. Sale of building d. Interest received on notes receivable e. Borrowing from bank
b, d
The return on assets is calculated by dividing ____ by _______. a. net income; ending balance of total assets b. ending balance of total assets; net income c. net income; average total assets d. average total assets; net income
c
Repayments of formal, long-term debt contracts are classified as ______ activities. a. operating b. investing c. financing
c
When there is no change in interest payable, the interest expense on the income statement is ______ the actual cash paid out during the period. a. less than b. more than c. equal to
c
Which of the following would be reported as a cash outflow from financing activities? a. Borrowing on a line of credit b. Sale of common stock c. Purchase of treasury shares d. Paying interest on a long-term notes payable
c
A review of Elisa Company's financial statements reveals the following information: cost of goods sold: $200,000; increase in inventory: $10,000; increase in accounts payable: $20,000. Cash paid to suppliers was: a. $190,000 b. $170,000 c. $230,000 d. $210,000 e. $200,000
a
A review of Munchen Corporation's financial statements reveals the following information: cost of goods sold: $100,000; decrease in inventory: $5,000; increase in accounts payable: $10,000. Cash paid to suppliers was: a. $85,000 b. $100,000 c. $115,000 d. $95,000 e. $105,000
a
Adam Company's operating expenses (excluding depreciation expense) were $80,000 and its balance in prepaid insurance decreased by $5,000. Cash paid for operating expenses was: a. $75,000 b. $80,000 c. $85,000
a
An increase in accounts receivable will result in a(n) ______ in cash from sales revenue when using the direct method to determine cash flows from operations. a. decrease b. increase
a
Changes to current assets and current liabilities require adjustment of net income under the indirect method because a. related cash may be higher or lower than the accrued amount included in net income b. these changes increase or decrease cash flows related to long-term assets c. these changes increase or decrease cash flows related to debt and stockholders' equity
a
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: a. $215,000 b. $200,000 c. $185,000
a
The financial statement that provides information about cash receipts and cash disbursements for the period is the a. statement of cash flows. b. balance sheet. c. income statement. d. statement of retained earnings.
a
The purchase and sale of long-term assets and current investments are classified as a. investing activities. b. operating activities. c. financing activities.
a
When prepaid accounts increase, it indicates the company has paid ______ cash than it recorded as operating expenses. a. more b. less
a
Which of the following are nonoperating items that require adjustments under the indirect method? a. Gains on the sale of long-term assets b. Losses on the sale of long-term assets c. Depreciation expense d. Amortization expense
a, b
Adjustments to net income in calculating operating cash flows include: a. Noncash items b. Nonoperating items c. Changes in current assets and current liabilities d. Changes in noncurrent assets and noncurrent liabilities
a, b, c
The two types of adjustments to net income for the indirect method are adjustments for a. changes in operating assets and liabilities during the period that affected cash and were not in net income. b. changes in owners' equity accounts during the period that affected cash. c. components of net income that do not affect cash. d. changes in liabilities and owners' equity accounts during the period that affected cash.
a, c
An increase in accounts receivable indicates that the company collected ________ cash than the amount of ________. a. more; sales revenue b. less; sales revenue
b
Cash from operating activities differs between the direct and indirect method with respect to the: a. detail, presentation, and total amount b. detail and presentation only c. total amount only
b
Repayments of formal, long-term debt contracts are classified as ______ activities. a. investing b. financing c. operating
b
Sales on account are $200,000. Cash sales during the period are $50,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $30,000. What is the total cash collected from customers during the period? a. $250,000 b. $240,000 c. $230,000 d. $220,000
b
The ratio that is calculated by dividing net income by average total assets is referred to as: a. asset turnover b. return on assets c. asset utilization
b
The starting point for preparing the operating activities section using the indirect method is: a. current assets b. net income c. ending cash balance d. current liabilities
b
When accounts receivable decrease a. net sales are greater than cash receipts from customers. b. net sales are less than cash receipts from customers. c. net sales are equal to cash receipts from customers.
b
When the ______ account decreases, it means the company paid less cash for insurance than it recorded as insurance expense. a. assets b. prepaid insurance c. payables d. cash
b
Which method of preparing the operating activities section of the statement of cash flows consists of a summary of all operating transactions that result in either a debit or a credit to cash? a. Cash b. Direct c. Indirect d. Accrual
b
Which of the following represents the final step in preparing a statement of cash flows in the correct order? a. calculate the net cash flows from operating activities b. combine operating, investing, and financing activities c. determine the net cash flows from financing activities d. determine the net cash flows from investing activities
b
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? a. purchase of a building b. purchase of supplies c. Interest paid on bonds d. payment on account e. retirement of common stock
b, c, d
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? a. retirement of common stock b. purchase of supplies c. Interest paid on bonds d. purchase of a building e. payment on account
b, c, e
Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own common shares for $12 million and pays cash dividends of $5 million. Which of the following are cash outflows from financing activities? a. issuance of bonds b. payment of cash dividends c. sale of Kleister Company common shares d. repayment of notes payable
b, d
Which of the following nonoperating items require adjustments to net income under the indirect method? a. prepaid expenses b. gains from sale of long-term assets c. accrued expenses d. losses from sale of long-term assets e. stock dividends distributed during the year
b, d
Which of the following are cash outflows from investing activities? a. Payment on account payable b. Purchase of land c. Repurchase of common stock d. Purchase of inventory e. Purchase of investment
b, e
Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as a. investing activities b. financing activities c. operating activities
c
If interest payable increases, which of the following is true? a. Interest paid is greater than the interest expense on the income statement. b. Interest paid is equal to interest expense on the income statement. c. Interest paid is lower than the interest expense on the income statement.
c
Which of the following are common noncash items requiring adjustment to net income under the indirect method? a. prepaid expense b. salaries expense c. amortization expense d. depreciation expense e. insurance expense
c, d
The direct method presents a summary of all operating transactions that result in either a debit or credit to the ________ account.
cash
Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income. a. negative b. increase c. decrease d. noncash e. cash
d
Sales on account are $100,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $15,000. What is the cash collected from customers during the period? a. $115,000 b. $95,000 c. $120,000 d. $105,000
d
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 a. changes in equity. b. all long-term assets and liabilities. c. all current assets and liabilities. d. amounts presented in the income statement.
d
Cash flows from ________ activities include both inflows and outflows of cash from the external funding of a business.
financing
Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as ________ activities.
financing
Issuing stock to owners is classified as a(n) ________ activity.
financing
A decrease in accounts receivable will result in a(n) ________ in cash from sales revenue when using the direct method to determine cash flows from operations.
increase
A(n) ________ in accounts payable indicates that cash payments were less than credit purchases and must be subtracted from purchases to calculate cash payments to suppliers.
increase
The statement of cash flows provides summary information about cash ________ and cash ________ during the year.
inflows, outflows
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
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
________ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.
operating
True or false: Cost of goods sold must be adjusted to a cash number because the cost of merchandise sold may be more or less than the amount of cash paid to suppliers during the period.
true
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 a. added to net income. b. subtracted from net income. c. ignored.
a
In a statement of cash flows, the sum of cash inflows and outflows is equal to a. the change in the cash balance. b. net income plus depreciation and amortization. c. cash flows from operating activities.
a
Which statement regarding the amount of cash from operating activities is correct? a. It is higher under the direct than the indirect method b. It is lower under the direct than the indirect method c. It is identical under the direct and the indirect method
c
The statement of cash flows classifies items as a. recurring and nonrecurring. b. current and noncurrent. c. operating and nonoperating. d. operating, investing, and financing.
d
When using the direct method to prepare the Statement of Cash Flows, depreciation expense is a. shown as outflows in the operating section of the statement of cash flows. b. not reported on the statement of cash flows. c. shown as inflows in the operating section of the statement of cash flows
b
When using the direct method, why is cash received from customers greater than sales revenue on the income statement when accounts receivable decreases? a. There were more cash sales than credit sales during the year. b. There were more collections of accounts receivable than sales on account during the year. c. There were more sales on account than collections of accounts receivable during the year. d. There were more credit sales than cash sales during the year.
b
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? a. Borrowing from bank b. Collection from customers c. Payment of utilities d. Sale of a building e. Collection of interest
b, e
Which of the following would result in a cash inflow from investing activities? a. Sale of a machine for cash. b. Sale of inventory in excess of cost. c. Sale of the company's common stock for cash.
a
Which of the following are classified as cash inflows from investing activities? a. Sale of equipment b. Sale of land c. Purchase of an investment d. Issuance of common stock
a, b
In preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for a. loss from sale of asset. b. payment of a noncurrent liability. c. gain from sale of asset. d. depreciation expense. e. issuance of bonds for cash.
a, c, d
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? a. Collection from customers b. Payment of utilities c. Borrowing from bank d. Collection of interest e. Sale of a building
a, d
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? a. Accounts payable b. Bonds payable c. Notes receivable d. Accounts receivable e. Inventory
a, d, e
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? a. Payment of salaries b. purchase of building c. issuance of bonds d. purchase of supplies on account e. payment on account
a, e
Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows? a. Depreciation expense originally reduced net income, but it is a noncash expense. b. Depreciation expense originally reduced net income, but it actually represents a cash inflow for the company. c. Depreciation expense originally reduced net income, but it is not classified as an operating activity. d. Depreciation expense is not included in net income, so its cash effect must be accounted for separately.
a
One of the purposes of adjusting net income for changes to certain balance sheet accounts is to a. derive the correct ending balance of cash. b. convert items included in net income to cash.
b
When using the ________ method for determining cash flows from operations, noncash expenses are omitted from the Statement of Cash Flows.
direct
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? a. Send an e-mail inquiry to her professor b. Calculate the change in the beginning and ending balance of cash c. Wait until the problem is reviewed in class
b
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: a. $15 mill b. $112 mill c. $17 mill d. $110 mill
b