ACC II CH16 - SB

There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.

1. Compute the net increase or decrease in cash 2. Compute net cash from or for operating activities 3. Compute net cash from or for investing activities 4. Compute net cash from or for financing acitivites 5. Compute the net cash from all sources; then prove it by adding it to beginning cash to get ending cash

A loss from the sale of an investment would be (added/subtracted) __________ to (from) net income when computing cash flows from operations, using the indirect method.

Added

The information needed to prepare a statement of cash flows could come from which of the following sources? (Check all that apply.) Cash account Statement of retained earnings Income statement Comparative balance sheets

Cash account Income statement Comparative balance sheets

Collecting money for notes receivable would be reported on the statement of cash flows as a(n) ________ activity.

Investing

Current liabilities _____ operations, including short-term notes payable and dividends payable are categorized as financing activities.

Unrelated

Which of the following questions could not be answered from the statement of cash flows? Does the company have the resources to pursue opportunities? What are the earnings-per-share of common stock? Can the company pay its debts? Where does a company spend its cash?

What are the earnings-per-share of common stock?

The statement of cash flows explains the difference between beginning and ending balances of cash and cash equivalents. A cash equivalent must exhibit all of the following criteria, except: be close to maturity. be readily convertible to a known amount of cash. be held at a local institution.

be held at a local institution.

Investing activities are affected by

changes in long-term assets.

The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items that do not affect cash.

indirect

Collecting money for notes receivable would be reported on the statement of cash flows as a(n) ___________ activity.

investing

The format of a statement of cash flows includes reporting cash flows from three activities including:

investing operating financing

A(n) _______ occurs when the receipts in a category exceed the payments.

net cash inflow

The purchase of goods and services, the sale of goods and services to customers, and costs to operate the business are all reported on the statement of cash flows under ___________ activities.

operating

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

Cash received from issuing notes payable Cash dividends paid to shareholders Cash paid to repay debt

Which of the following items would be reported under financing activities on the statement of cash flows? (Select all that apply). Cash paid for interest on long-term debt Cash received from issuing notes payable Cash paid to repay debt Cash dividends paid to shareholders

Cash received from issuing notes payable Cash paid to repay debt Cash dividends paid to shareholders

Which of the following items would not be adjusted to net income when computing cash flows from operating activities, using the indirect method? Cash received from sale of building Depreciation expense Gain on sale of building

Cash received from sale of building

Which of the following would not be reported under financing activities on the statement of cash flows? Cash received from sale of plant assets Cash paid to purchase treasury stock Cash received from issuing bonds Cash contributions by owners

Cash received from sale of plant assets

______________ activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

Financing

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method? (Check all that apply.) Increase in market value of stock Gain on sale of building Loss on sale of investment Depreciation expense

Gain on sale of building Loss on sale of investment Depreciation expense

Information about cash flows can influence decision makers in important ways. Which of the following questions could be answered by the statement of cash flows? (Check all that apply.) How does a company spend its cash? Can the company pay its debts? Does the company have the resources to pursue opportunities? Is the company using its assets efficiently?

How does a company spend its cash? Can the company pay its debts? Does the company have the resources to pursue opportunities?

Accountants can use a three-step process to determine cash provided (or used) by investing activities. Which of the following steps is not part of this process Report their cash flow effects. Determine the cash effects using T-accounts. Identify changes in investing-related accounts. Identify adjustments to net income.

Identify adjustments to net income.

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method? (Check all that apply.) Decrease in taxes payable Decrease in wages payable Increase in accounts payable Increase in unearned fees

Increase in accounts payable Increase in unearned fees

In a statement of cash flows, cash received from the sale of a building would be classified under "cash flows _________ from activities."

Investing

_______ activities include those transactions and events such as lending and collecting money for notes receivable and cash receipts from sale of short-term investments.

Investing

Which of the following statements about the statement of cash flows are correct? (Check all that apply.)

It details the sources and uses of cash. The purpose is to report cash receipts and cash payments during a period.

Both the direct and indirect methods of operating activities report which of the following items?

Net cash inflows (outflows)

A(n) _____________ activity includes those transactions and events that affect net income, including the purchase of goods and services, cash sales to customers, and payment of operating expenses.

Operating

The presentation of the _____ section is shown differently depending on if the statement of cash flows is reported using the direct or indirect method.

Operating

The purchase of goods and services, the sale of goods and services to customers, and costs to operate the business are all reported on the statement of cash flows under __________ activities.

Operating

_____________ activities include those transactions and events that affect net income.

Operating

A net cash ______ occurs when the payments in a category exceed the receipts.

Outflow

Lakeview, Inc.'s statement of cash flows reports financing activities with payments that exceed receipts. This means that Lakeview had a net cash (inflow/outflow) _____________ from financing activities.

Outflow

Identify which of the following items is a noncash investing and financing activity that must be reported in a note to the statement of cash flows. (Check all that apply.) Retirement of debt by issuing stock Repayment of a note with cash Purchase of a plant asset with cash Lease of an asset in a long-term lease transaction

Retirement of debt by issuing stock Lease of an asset in a long-term lease transaction

Which of the following items are classified as noncash investing and financing activities? (Check all that apply.) Retirement of debt by issuing stock Lease of assets in a long-term lease transaction Repayment of a note with cash Conversion of preferred stock to common stock

Retirement of debt by issuing stock Lease of assets in a long-term lease transaction Conversion of preferred stock to common stock

Which of the following items would be correct adjustments to net income to arrive at cash flows from operating activities, using the indirect method? (Correct all that apply.) Add increase in accounts receivable Subtract increase in inventory Subtract increase in wages payable Add increase in accounts payable

Subtract increase in inventory Add increase in accounts payable

Which of the following questions could not be answered from the statement of cash flows?

What are the earnings-per-share of common stock?

Information on the statement of cash flows helps users answer all of the following questions except: Where does a company spend its cash? Why did the company invest in long-term assets? How does a company obtain its cash? Why was there a change in the cash balance?

Why did the company invest in long-term assets?

Which of the following transactions would not be classified as an operating activity on the statement of cash flows? Payments for goods and services Collections on credit sales Cash dividends paid to shareholders Cash paid for salaries and wages

Cash dividends paid to shareholders

Which of the following transactions would not be reported under investing activities in the statement of cash flows?

Cash paid for interest on long-term notes

Which of the following transactions would not be reported under investing activities in the statement of cash flows? Cash receipts from collecting principal on loans, which do not result from sales Cash paid to purchase investments Cash paid to purchase plant assets Cash paid for interest on long-term notes

Cash paid for interest on long-term notes

Which of the following transactions would be reported under investing activities in the statement of cash flows? (Check all that apply.) Cash paid to purchase plant assets Cash paid for interest on long-term notes Cash distributions to shareholders Cash paid to purchase investments in securities

Cash paid to purchase plant assets Cash paid to purchase investments in securities

The statement of cash flows reports noncash investing and financing transactions in

a note or separate schedule

The information needed to prepare a statement of cash flows could come from all of the following sources, except the: comparative balance sheets. cash account. income statement. statement of retained earnings.

statement of retained earnings.