Chapter 23 Accounting Quiz

an increase in inventory balance would be reported in a statement of cash flows using the indirect method(reconciliation method) As a

deduction from net income in arriving at net cash flow from operating activities

An objective of the statement of cash flows is to

provide information about the operating, investing, and financing activities of an entity during a period.

A statement of cash flows typically would not disclose the effects of

stock dividends declared

T/F Under the accrual basis of accounting, net income is usually the same as net cash flow from operating activities

FALSE

Proper Classification: Issuance of Common Stock

Financing

Proper Classification: Payment of dividends

Financing

Proper Classification: Purchase of treasury stock

Financing

Proper Classification: Redemption of Bonds Payable

Financing

Investing Activities

Generally involve longs term assets and include making and collecting loans as well as acquiring and disposing of investments

When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustment in determine cash flows from operating activities?

Indirect - Increase Direct - Decrease

When preparing a statement of cash flows, a decreasing in A/R during a period would cause which of the following adjustments in determining cash flow from operating activities.

Indirect - Increase Direct - Increase

Proper Classification: Purchase of Equipment

Investing

Proper Classification: Sale of Building

Investing

Define Operating Activities

Involve the cash effects of transactions that enter into the determination of net income (receipts from sales and payments)

Financing Activities

Involved liability and stockholders' equity items

Proper Classification: Increase in interest receivable on N/R

Operating - Deduct from Net Income

Proper Classification : Pension expense exceeds amount funded

Operating - add to net income

Proper Classification: Depreciation

Operating - add to net income

Proper Classification: Amortization of intangible assets

Operating - added to net income

Which of the following would be classified as a financing activity on a statement of cash flows?

Payment of a bond payable

Define statement of cash flows

Provides information about a company's cash receipts and cash payments during a period

Proper classification: Exchange of equipment for furniture

Significant non cash investing and financing activities

T/F A company can convert net income to net cash flow from operating activities through either the direct or indirect method

TRUE

T/F The indirect method adjusts net income for items that affected reported net income but did not affect cash

TRUE

T/F The net increase (decrease) in cash reported on the statement of cash flows should reconcile the beginning and ending cash balances reported in the cooperative balance sheets

TRUE

T/F The statement of cash flows provides information to help investors and creditors assess the cash and noncash investing and financing transactions during the period

TRUE

When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities?

A change in dividends payable BUT A change in income taxes and interest payable are

When using the indirect method to prepare the operating section of a statement, which of the following is added to net income to compute cash provided by/used by operating activities?

Amortization of patent

When using the indirect method to prepare the operating section of a statement of cash lows, which of the following is deducted form net income to compute cash provided by/used by operating activities?

gain on sale of land