Management Chapter 11

A company had the following cash flows for the year (a) Purchased land, $60,000 (b) Borrowed from a local bank, $100,000 (c) Issued common stock, $75,000 (d) Paid dividends, $20,000 (e) Sold equipment, $40,000 What amount would be reported for net financing cash flows on the Statement of Cash Flows? A. $155,000 B. $70,000 C. ($20,000) D. $40,000

A

A decrease in wages payable represents a decrease in cash. a) True b) False

A

A reduction of inventory represents an increase in cash. a) True b) False

A

Decreases in current assets other than cash have positive effects on cash flows and increases in current assets (other than cash) have negative effects on cash flows. a) True b) False

A

Given the items below, which of the following is an addition to net income to arrive at operating cash flows? I. Loss on sale of assets II. Increase in Supplies III. Increase in Accounts Payable IV. Increase in Accounts Receivable A. I and III B. I. only C. III. and IV D. II. and III

A

The long‐term assets section of the balance sheet is the place to look for investing activities A. True B. False

A

The total of the cash flows from operating, investing, and financing activities equals the net increase or decrease in cash for the period. A. True B. False

A

We report interest paid on bonds or notes payable with operating activities rather than financing activities A. True B. False

A

Which of the following is not true regarding cash flows? A. Operating activities include the payment of dividends B. Investing activities involve long‐term investments C. Financing activities involve long‐term liabilities and equities D. Purchasing a building with a note is considered a noncash activity

A

Which of the following is reported as a noncash investing and financing transaction on the statement of cash flows? A. Conversion of long‐term liability to common stock B. Purchase of treasury stock C. Payment of long‐term debt D. Sale of preferred stock

A

A company collected an accounts receivable. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows. A. Does not represent a cash flow B. Operating activities section C. Financing activities section D. Investing activities section

B

A gain on the sale of long‐term assets is added back to net income to arrive at net cash flows from operating activities. A. True B. False

B

An increase in accounts receivable represents a increase in cash. a) True b) False

B

Cash flows from investing activities include A. Proceeds from the issuance of common stock B. Cash outflows from acquiring land C. Retirement of bonds payable D. Interest received

B

How is a increase in inventory reported on the statement of cash flows. What is the effect on cash flows? A. Operating activities & increase in cash B. Operating activities & decrease in cash C. Investing activities & increase in cash D. Financing activities & increase in cash E. Noncash transaction & no effect on cash

B

How is the retirement of long‐term debt reported on the statement of cash flows. What is the effect on cash flows? A. Operating activities & increase in cash B. Financing activities & decrease in cash C. Investing activities & increase in cash D. Financing activities & increase in cash E. Noncash transaction & no effect on cash

B

If a company declared and paid a $20,000 cash dividend where does this transaction get recorded on the the statement of cash flows: a) cash flows from operating activities section. b) cash flows from financing activities section. c) cash flows from investing activities section. d) noncash investing and financing transactions section.

B

On a reconciliation of net income to cash from operations, depreciation is added back to net income since depreciation a) is a direct outflow of cash. b) reduces net income but does not involve an outflow of cash. c) reduces net income and involves an outflow of cash. d) is an outflow of cash to a fund established for the replacement of assets.

B

The purchase of long‐term assets by issuing debt is recorded as both an investing activity and a financing activity A. True B. False

B

The purchase of treasury stock represents an increase in cash. a) True b) False

B

Which of the following is an example of a cash inflow from a financing activity? A. Sale of an intangible asset B. Issuance of bonds C. Receipt of cash dividends D. Purchase of land

B

Which of the following represents an increase in cash flows? a) Increase in Inventory b) Increase in Accounts Payable c) Decrease in Accounts Payable d) Increase in Prepaid Insurance

B

Woodcrest Mfg. Co. sold land costing $10,000 for $12,000. Shively would report: A. Investing cash inflows of $10,000 B. Investing cash inflows of $12,000 C. Financing cash inflows of $12,000 D. Financing cash inflows of $10,000

B

A loss on the sale of machinery in the ordinary course of business should be presented in a statement of cash flows as a(n) a) inflow from operating activities. b) inflow from investing activities. c) adjustment to reconcile net income to cash from operating activities. d) outflow from investing activities

C

How are dividends paid reported on the statement of cash flows? A. Operating activities B. Investing activities C. Financing activities D. Schedule of noncash transactions E. Not on the statement of cash flows

C

How is the issuance of common stock reported on the statement of cash flows? A. Operating activities B. Investing activities C. Financing activities D. Schedule of noncash transactions E. Not on the statement of cash flow

C

Knomark Corporation reports net income of $450,000 that includes depreciation expense of $70,000. Also, cash of $50,000 was borrowed on a 5‐year note payable. Based on this data, total cash inflows from operating activities are A. $380,000 B. $470,000 C. $520,000 D. $570,000

C

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

C

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

C

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

C

Which of the following is a non‐cash transaction that should be disclosed in a schedule accompanying the statement of cash flows? a) Sale of an investment for cash b) Purchase of a machine for cash c) Issuance of common stock in exchange for land d) Declaration and payment of a cash dividend on common stock

C

Which of the following would be added to net income to arrive at net cash flows from operating activities? A. Decrease in accrued liabilities B. Gain on sale of investments C. Decrease in prepaid expenses D. Increase in accounts receivable

C

A company issued common stock for cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows. A. Operating activities section B. Does not represent a cash flow C. Investing activities section D. Financing activities section

D

How is sale of treasury stock reported on the statement of cash flows. What is the effect on cash flows? A. Operating activities & increase in cash B. Operating activities & decrease in cash C. Investing activities & increase in cash D. Financing activities & increase in cash E. Noncash transaction & no effect on cash

D

If a company issues both a balance sheet and an income statement with comparative figures from last year, a statement of cash flows: a) should be issued if cash is presented on the balance sheet. b) should be presented for only those periods that the accrual basis is significantly different than the cash basis. c) should be issued for the current year only. d) should be issued for each period for which an income statement is presented.

D

LePage's Inc. reports net income of $95,000. The accounting records reveal Depreciation Expense of $50,000 as well as increases in Prepaid Rent, Accounts Payable, and Income Tax Payable of $40,000, $23,000, and $20,000, respectively. What is the net cash flows from operating activities? A. $188,000 B. $228,000 C. $128,000 D. $148,000

D

How is a purchase of land and buildings with a bank mortgage reported on the statement of cash flows. What is the effect on cash flows? A. Operating activities & increase in cash B. Financing activities & decrease in cash C. Investing activities & decrease in cash D. Financing activities & increase in cash E. Noncash transaction & no effect on cash

E