AC 210 Learn Smarts Ch 12

The sale of its intangible asset, trademark, is considered a(n) ______.

investing activity

An increase in Prepaid Insurance ______ net income.

is subtracted from

In arriving at cash from operating activities using the indirect method, subtracting a decrease in Accounts Payable from net income adjusts net income for transactions that ______ net income.

decreased cash but did not affect

An increase in Accrued Liabilities indicates that ______ was expensed than paid. Thus the increase will be ______ net income on the statement of cash flows prepared using the indirect method.

more; added to

Repayments of loans will be reported as a:

negative cash flow under financing activities

Which of the following are the classifications on the statement of cash flows?

operating, financing, investing

An increase in Accounts Payable indicates that ______ was purchased than paid. Thus the increase will be ______ net income on the statement of cash flows prepared using the indirect method.

more; added to

The starting point for preparing the operating activities section using the indirect method is ______.

net income

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ___ ___

net income

The cash flow statement should be evaluated by examining the cash flow pattern ______.

of the subtotals for the three sections of the statement

It is most important that a company's statement of cash flows reports a positive cash flows from _____ activities.

operating

Revenues and expenses relate to the cash inflows and outflows found in the ____ activities section of the statement of cash flows.

operating

U.S. GAAP classifies the payment of interest as a(n) activity on the statement of cash flows.

operating

cash paid for interest is considered a(n) ____ activity on the statement of cash flows

operating

The statement of cash flows separates cash inflows and outflows into the following classifications.

operating, investing, financing

Purchases of property, buildings, equipment are a cash ______ activities section of the statement of cash flows.

outflow in investing

Cash transactions that result in a debit to a Property or Equipment account will be reported on the statement of cash flows as a cash ______ activities.

outflow under investing

Which of the following is necessary for a company to remain in business for the long run?

positive outflow from the operating activities

Which of the following will result in a decrease to Net Cash from Investing Activities?

purchase of equipment and intangible assets

Match whether the cash activity is an investing activity cash inflow, outflow or neither on the statement of cash flows

purchase of property (O for tangible asset), purchase of copyright (O for intangible asset), sale of property (I for tangible asset), issuance of stock (not act), sale of copyright (I for intangible)

Free cash flow is the amount of cash available to use to ______.

repay existing financing, build up the company's cash balance, expand the business through additional investing activities

An increase in Inventory will be ______ net income when determining net cash flow provided by operating activities.

subtracted from

When using the indirect method, subtracting an increase in Accounts Receivable from net income eliminates the effect of recording credit sales ______.

that increased net income, but did not impact cash

The payment of dividends and changes in the Dividends Payable account are classified as activities.

financing

Any additional cash that can be used in the future to expand the business, repay existing financing and/or build up the cash balance is referred to as cash flow.

free

To properly evaluate the statement of cash flows, it is important to evaluate ______.

the pattern of the three sections, not just the change in cash during the period

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

the same

True or false: Depreciation Expense is added to net income when preparing the operating activity section of the statement of cash flows using the indirect method.

true

True or false: Net cash flows provided by (used in) operating activities is always the same under the direct and indirect methods.

true

Cash flows associated with intangible assets are ______ activities.

investing

A(n) ___ in accrued liabilities, such as interest payable, will be added to net income when determining net cash flow from operating activities.

increase

Which of the following cash flows are classified as operating activities?

Cash flow causing decrease in current liabilities, Cash from revenue earned in daily transactions

Which of the following are steps in preparing the statement of cash flows?

Create schedules that summarize operating, investing, and financing cash flows, Determine the change in each balance sheet account, Identify the cash flow category or categories to which each balance sheet account relates

Which of the following are financing activities and show the appropriate cash effect?

Repayment of bond face value; outflow Repurchase of stock; outflow Issuance of bonds; inflow

Which of the following accounts may relate to more than one cash flow category?

Retained Earnings may affect both operating and financing activities, Accumulated Depreciation may affect both operating and investing activities.

Which of the following transactions would be classified as investing activities?

The sale of a building used in the business, The purchase of investments for cash, The purchase of equipment

Which related balance sheet account will explain the difference between revenues on the income statement and cash collected from customers?

accounts receivable

When preparing the statement of cash flow using the indirect method, Depreciation Expense is ______.

added back to net income under the operating activities section

Depreciation Expense is ______ net income in a statement of cash flows prepared using the indirect method because it ______

added back to; is a noncash expense

When operating cash flows are calculated using the indirect method, if Accrued Liabilities increased, then the change is ______ during the period.

added to net income because less cash was paid than expensed

When operating cash flows are calculated using the indirect method, if Accounts Receivable balance decreased, then the change is ______ during the period.

added to net income because more cash was collected than revenues generated

When using the indirect method, ______ an increase in Deferred Revenue to net income allows the inclusion of transactions that increase cash, but do not impact net income.

adding

Credits to the Notes Payable T-account are reported as ______.

cash inflows under financing activities

When operating cash flows are calculated using the indirect method, if Accrued Liabilities decreased, then the change is ______ during the period

deducted from net income because more cash was paid than expensed

List the steps in preparing a Statement of Cash Flows in the correct order from top to bottom.

determine the change in each balance sheet account, identify the cash flow category to which each account relates, create schedules that summarize the OIF cash flows

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

Using the indirect method, when the direction of change in Inventory is a(n) ____, the amount of that change is subtracted from net income to include inventory transactions that decrease cash, but do not impact net income.

increase

The issuance of common stock for cash will be reported on the statement of cash flows as a cash ______ activities.

inflow under financing

Credits to the Common Stock account recorded during the period will be reported as cash ______ activities on the statement of cash flows.

inflows under financing

How is the change in cash classified on the statement of cash flows?

it is the sum of OIF

Accrual-basis accounting is superior to cash-basis accounting in that ______

it provides a better measure of profitability

A decrease in Accounts Payable indicates that ______ was purchased than paid during the accounting period. Thus the decrease will be ______ net income on the statement of cash flows prepared using the indirect method.

less; subtracted from

A increase in Prepaid Expenses indicates that ______ was expensed than paid during the period. Thus the increase will be ______ net income on the statement of cash flows prepared using the indirect method.

less; subtracted from

A decrease in Inventory indicates that ______ inventory has been sold than purchased and thus the decrease will be ______ net income on the statement of cash flows prepared using the indirect method.

more; added to

The complete list of items needed to prepare a statement of cash flows includes ______.

comparative balance sheets, complete income statement, and additional data concerning accounts in investing and financing activities

Cash inflows from financing activities on the statement of cash flows reports the ______.

credits recorded in the Common Stock account

When using the indirect method in preparing the statement of cash flows, if cash collected from customers is greater than the revenues generated, then the ______ net income.

decrease in Accounts Receivable will be added to

When calculating net cash flow provided by operating activities using the indirect method, a decrease in Accrued Liabilities, such as Wages and Salaries Payable, is subtracted from net income to include the effects of transactions that ______ cash, but ______ net income.

decrease; do not effect

When using the indirect method, adding a decrease in Prepaid Insurance to net income eliminates the effect of recording Insurance Expense that ______.

decreased net income, but did not impact cash

The net change in cash on the statement of cash flows equals ______.

operating plus investing plus financing