Accounting Multiple Choice Ch 11

Using the information below, calculate net cash flows from financing activities. Net income$120,000 Receive cash from issuing stock 80,000 Pay cash for equipment 90,000 Increase in accounts receivable 10,000 Depreciation expense$30,000 Increase in accounts payable 5,000 Receive cash from sale of land 75,000 Pay cash dividends 20,000 A.) $60,000. B.) $(15,000). C.) $100,000. D.) $80,000.

A.) $60,000.

In preparing a statement of cash flows under the indirect method, an increase in accounts payable would be reported or included as a(n): A.) Addition to net income in the operating activities section. B.) Deduction from net income in the operating activities section. C.) Investing activity. D.) Financing activity.

A.) Addition to net income in the operating activities section.

We can identify operating activities from income statement information and changes in: A.) Current asset and current liability accounts. B.) Long-term asset accounts. C.) Long-term liability accounts. D.) Stockholders' equity accounts.

A.) Current asset and current liability accounts.

Which of the following best describes the indirect method of preparing the operating activities section of the statement of cash flows? A.) Net income reconciled from accrual basis to cash basis. B.) A list of cash inflows and cash outflows from transactions involving the purchase and sale of long-term assets and current investments. C.) A list of cash inflows and cash outflows from transactions related to revenue and expense activities. D.) A list of cash inflows and cash outflows from transactions with lenders and stockholders.

A.) Net income reconciled from accrual basis to cash basis.

The payment of semi-annual interest on outstanding bonds payable is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

A.) Operating activity.

The purchase of inventory for cash is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

A.) Operating activity.

The sale of inventory to a customer for cash is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

A.) Operating activity.

Which of the following is an example of a cash inflow from a financing activity? A.) Receipt of cash from the issuance of common stock. B.) Receipt of cash from the sale of equipment. C.) Receipt of cash from the collection of a note receivable. D.) Receipt of cash from the sale of inventory.

A.) Receipt of cash from the issuance of common stock.

The two types of adjustments to net income for the indirect method are adjustments for A.) components of net income that do not affect cash. B.) changes in owners' equity accounts during the period that affected cash. C.) changes in liabilities and owners' equity accounts during the period that affected cash. D.) changes in operating assets and liabilities during the period that affected cash and were not in net income.

A.) components of net income that do not affect cash., D.) changes in operating assets and liabilities during the period that affected cash and were not in net income.

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 debt and stockholders' equity C.) these changes increase or decrease cash flows related to long-term assets

A.) related cash may be higher or lower than the accrued amount included in net income

Using the indirect method to report cash flows from operating activities, an increase in the inventory account will be ______ net income to arrive at net cash flow provided by operating activities. A.) subtracted from B.) added back to

A.) subtracted from

Under the indirect method of preparing the statement of cash flows, depreciation expense is added back to net income because it A.) was subtracted in deriving net income. B.) did not require an outflow of cash. C.) increases the cash balance. D.) provides an inflow of cash.

A.) was subtracted in deriving net income.

Under the indirect method of preparing the statement of cash flows, depreciation expense is added back to net income because it A.) was subtracted in deriving net income. B.) did not require an outflow of cash. C.) provides an inflow of cash. D.) increases the cash balance.

A.) was subtracted in deriving net income., B.) did not require an outflow of cash.

The balance of cash at the beginning of the year was $120,000, and at the end of the year was $140,000. Assuming operating cash flows equal $90,000 and investing cash flows equal $(40,000), calculate financing cash flows for the year. A.) $50,000. B.) $(30,000). C.) $10,000. D.) $(70,000).

B.) $(30,000).

In preparing a statement of cash flows under the indirect method, an increase in accounts receivable would be reported or included as a(n): A.) Addition to net income in the operating activities section. B.) Deduction from net income in the operating activities section. C.) Investing activity. D.) Financing activity.

B.) Deduction from net income in the operating activities section.

The purchase of a long-term asset is classified in the statement of cash flows as a(n) A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

B.) Investing activity.

The purchase of an intangible asset is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

B.) Investing activity.

The sale of an intangible asset for cash is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

B.) Investing activity.

We can identify investing activities from additional information and changes in: A.) Current asset and current liability accounts. B.) Long-term asset accounts. C.) Long-term liability accounts. D.) Stockholders' equity accounts.

B.) Long-term asset accounts.

Which of the following are nonoperating items that require adjustments under the indirect method? A.) Amortization expense B.) Losses on the sale of long-term assets C.) Depreciation expense D.) Gains on the sale of long-term assets

B.) Losses on the sale of long-term assets, D.) Gains on the sale of long-term assets

Which of the following is the correct sequence of presenting the activities in the statement of cash flows? A.) Investing activities, financing activities, operating activities. B.) Operating activities, investing activities, financing activities. C.) Operating activities, financing activities, investing activities. D.) Financing activities, investing activities, operating activities.

B.) Operating activities, investing activities, financing activities.

Which of the following is an example of a cash outflow from financing activities? A.) Payment of interest. B.) Payment of cash dividends. C.) Purchase of equipment. D.) Purchase of an investment.

B.) Payment of cash dividends.

Which of the following is an example of a cash outflow from an investing activity? A.) Payment of interest. B.) Purchase of a building. C.) Payment of cash dividends. D.) Purchase of treasury stock.

B.) Purchase of a building.

Which of the following is an example of a noncash activity? A.) Cash received from the sale of land for more than its cost. B.) Purchase of land by issuing common stock to the seller. C.) Cash received from the sale of land for less than its cost. D.) Purchase of land using cash proceeds from issuance of common stock.

B.) Purchase of land by issuing common stock to the seller.

Which of the following is an example of a cash inflow from an investing activity? A.) Receipt of cash from the issuance of common stock. B.) Receipt of cash from the sale of equipment. C.) Receipt of cash from the issuance of a note payable. D.) Receipt of cash from the sale of inventory.

B.) Receipt of cash from the sale of equipment.

When preparing the statement of cash flows using the indirect method, depreciation expense is ______ ______ net income. A.) subtracted from B.) added to

B.) added to

Repayments of formal, long-term debt contracts are classified as ______ activities. A.) operating B.) financing C.) investing

B.) financing

Using the information below, calculate net cash flows from operating activities: Net income $120,000 Receive cash from issuing stock 80,000 Pay cash for equipment 90,000 Increase in accounts receivable 10,000 Depreciation expense $30,000 Increase in accounts payable 5,000 Receive cash from sale of land 75,000 Pay cash dividends 20,000 A.) $115,000. B.) $155,000. C.) $145,000. D.) $190,000.

C.) $145,000.

Which of the following methods for preparing the statement of cash flows is acceptable under U.S. GAAP? A.) The direct method. B.) The indirect method. C.) Both the direct and the indirect method are acceptable. D.) The accrual accounting method.

C.) Both the direct and the indirect method are acceptable.

Which of the following is an example of a cash inflow from investing activities? A.) Receipt of interest. B.) Payment of cash dividends. C.) Cash received from the sale of equipment. D.) Receipt of cash dividends.

C.) Cash received from the sale of equipment.

Depreciation expense is added to net income in the statement of cash flows under the indirect method because: A.) Cash was received. B.) Cash was paid. C.) Depreciation expense reduced net income, but is a noncash item. D.) Depreciation is tax deductible.

C.) Depreciation expense reduced net income, but is a noncash item.

The issuance of a note payable is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

C.) Financing activity.

The issuance of common stock is classified in the statement of cash flows as a(n) A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

C.) Financing activity.

The issuance of notes payable is classified in the statement of cash flows as a(n) A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

C.) Financing activity.

The payment of cash dividends is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

C.) Financing activity.

The repayment of a note payable is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

C.) Financing activity.

We can identify financing activities from additional information and changes in: A.) Current asset and current liability accounts. B.) Long-term asset accounts. C.) Long-term liability and stockholders' equity accounts. D.) Stockholders' equity accounts only.

C.) Long-term liability and stockholders' equity accounts.

Which of the following is an example of a cash outflow from a financing activity? A.) Payment of interest. B.) Purchase of an intangible asset. C.) Payment of cash dividends. D.) Purchase of land.

C.) Payment of cash dividends.

Which of the following would result in a cash inflow from investing activities? A.) Sale of the company's common stock for cash. B.) Sale of inventory in excess of cost. C.) Sale of a machine for cash.

C.) Sale of a machine for cash.

The net cash flows from operating, investing, and financing activities will equal: A.) Net income minus dividends for the year. B.) The ending balance of cash this year. C.) The change in cash reported in the balance sheet from this year versus last year. D.) The change in stockholders' equity for the year.

C.) The change in cash reported in the balance sheet from this year versus last year.

When reporting cash flows from operating activities using the indirect method, an increase in accounts payable is ______ net income because payments to suppliers are ______ than new purchases. A.) deducted from; more B.) added to; more C.) added to; less D.) deducted from; less

C.) added to; less

In order to determine cash flows from financing activities, we need to examine changes to A.) long-term asset accounts B.) current assets and current liability accounts C.) long-term liability and stockholders' equity accounts

C.) long-term liability and stockholders' equity accounts

Michaela is comparing two companies using three years of financial statement data. Company A's net income for the three years was $200 million and its operating cash flows $80 million. Company B's net income for the three years was $120 million and its operating cash flows $110 million. Which company appears to have a higher quality net income?

Company B

Using the information below, calculate net cash flows from investing activities. Net income $120,000 Receive cash from issuing stock 80,000 Pay cash for equipment 90,000 Increase in accounts receivable 10,000 Depreciation expense $30,000 Increase in accounts payable 5,000 Receive cash from sale of land 75,000 Pay cash dividends 20,000 A.) $(165,000). B.) $15,000. C.) $60,000. D.) $(15,000).

D.) $(15,000).

Assuming Net Income for the year is $98,000, what is the net operating cash flows given the following information: Depreciation Expense $6,000 Increase in Prepaid Rent $4,000 Decrease in Accounts Receivable $3,000 Increase in Inventory $5,000 Increase in Accounts Payable $2,000 A.) $98,000. B.) $104,000. C.) $96,000. D.) $100,000.

D.) $100,000.

Carola Inc. issues common stock for $20 million and pays dividends of $2 million. Net cash inflows from financing activities will be: A.) $20 million B.) $1 million C.) $22 million D.) $18 million

D.) $18 million

Which of the following is a noncash transaction? A.) Purchase of long-term assets by issuing debt. B.) Purchase of long-term assets by issuing stock. C.) Conversion of bonds payable into common stock. D.) All of these are noncash transactions.

D.) All of these are noncash transactions.

The indirect and direct methods A.) Are used by companies about equally in actual practice. B.) Affect the presentations of operating, investing, and financing activities. C.) Arrive at different amounts for net cash flows from operating activities. D.) Are two allowable methods to present operating activities in the statement of cash flows.

D.) Are two allowable methods to present operating activities in the statement of cash flows.

The purchase of long-term assets by issuing common stock is classified in the statement of cash flows as a(n): A.) Operating activity. B.) Investing activity. C.) Financing activity. D.) Noncash activity.

D.) Noncash activity.

The starting point for preparing the operating activities section using the indirect method is: A.) current assets B.) ending cash balance C.) current liabilities D.) net income

D.) net income

When cash flows from operating activities are reported using the indirect method, a(n) __________, in accounts payable will be subtracted from net income.

Decrease

Issuing stock to owners is classified as a(n) _________ activity.

Financing

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

Gains and losses on the sale of long-term assets represent common ____________ items needing adjustment under the indirect method.

Non operating

Which of the following are common noncash items requiring adjustment to net income under the indirect method? prepaid expense amortization expense salaries expense insurance expense depreciation expense

amortization expense depreciation expense

Select the items that would be added to net income in order to prepare the operating activities section of a statement of cash flows - indirect method.: depreciation expense increase in current asset loss on sale of land decrease in current asset gain on sale of land

depreciation expense loss on sale of land decrease in current asset

Cash flows from _____________ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets.

investing

In preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for: loss from sale of asset. depreciation expense. payment of a noncurrent liability. gain from sale of asset. issuance of bonds for cash.

loss from sale of asset. depreciation expense gain from sale of asset.

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