Chapter 12

The total change in cash as shown near the bottom of the statement of cash flows for the year should agree with which of the following? a. difference in retained earnings when reviewing the comparative balance sheet b. net income or net loss as found on the income statement c. difference in cash when reviewing the comparative balance sheet d. none of the above

C

If a company engages in a material noncash transaction which of the following is required? a. company must include an explanatory narrative or schedule accompanying the statement of cash flows b. no disclosure is necessary c. company must include and explanatory narrative or schedule accompanying the balance sheet d. it must be reported in the investing and financing sections of the statement of cash flows

A

If the balance in prepaid expenses increased during the year, what action should be taken on the statement of cash flows when following the indirect method and why? a. the change in the account balance should be subtracted from the net income because the net increase in prepaid expenses did not impact net income but did reduce the cash balance. b. the change in the account balance should be added to net income because the net increase in prepaid expenses did not impact net income but did increase the cash balance c. the net change in prepaid expenses should be subtracted from net income to reverse the income statement effect that had no impact on cash d. the next change in prepaid expenses should be added to net income to reverse the income statement that had no impact on cash

A

Which of the following would not appear in the investing section of the statement of cash flows? a. purchase of inventory b. sale of investments c. purchase of land d. all of the above would appear in the investing section

A

If a company's current assets (such as accounts receivable adn inventories) are allowed to grow out of control, which of the following would occur? a. cash flows from investing activities would be reduced b. cash flows from operating activities would be reduced c. cash flows from financing activities would increase d. none of the above

B

Where is the overall change in cash shown in the statement of cash flows? a. in the top part, before the operating activities section b. in one of the operating, investing, or financing activities sections c. in the bottom part, following the financing activities section d. none of the above

C

In what order do the three sections of the statement of cash flows appear when reading top to bottom? a. financing, investing, operating b. investing, operating, financing c. operating, financing, investing d. operating, investing, financing

D

Total cash inflow in the operating section of the statement of cash flows should include which of the following? a. cash received from customers at the point of sale b. cash collections from customer accounts receivable c. cash received in advance of revenue recognition (unearned revenue) d. all of the above

D

Which of the following is not added when computing cash flows from operating using the indirect method? a. net increase in accounts payable b. net decrease in accounts receivable c. net decrease in inventory d. all of the above should be added

D

Which of the following items would not appear in the financing section of cash flows? a. issuance of the company's own stock b. repayment of debt c. payment of dividends d. all of the above would appear in the financing section of the statement of cash flow

D