MGT11A Ch. 12

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

$50,000.

The cash flow on total assets ratio:

Can be an indicator of earnings quality.

A statement of cash flows should reconcile the differences between the beginning and ending balances of:

Cash and cash equivalents.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n):

Cash equivalent.

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:

Financing activities

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

Financing activities.

The accounting principle that requires significant noncash financing and investing activities be reported on the statement of cash flows is the:

Full disclosure principle

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

Investing activities.

The direct method of reporting operating cash flows:

Is recommended but not required by the FASB.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

Net income

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Operating activities

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

Operating activities

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Operating activities.

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

Operating activity.

Under IFRS, cash outflows for interest expense are classified as

Operating or investing, assuming that the classification is applied consistently across all periods.

Which of the following items is reported on the statement of cash flows under financing activities?

Payment of a cash dividend.

Which one of the following is representative of typical cash flows from operating activities?

Receipts of cash sales.

The indirect method for the preparation of the operating activities section of the statement of cash flows:

Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.

Accounting standards:

Require that companies include a statement of cash flows in a complete set of financial statements.

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

Schedule of noncash financing and investing activities.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

Schedule of noncash investing or financing activity.

The direct method for the preparation of the operating activities section of the statement of cash flows:

Separately lists each major item of operating cash receipts and cash payments.