MOD 3 CHAPTER 11

Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be Multiple choice question. added to net income. subtracted from net income. ignored.

added to net income.

One of the purposes of adjusting net income for changes to certain balance sheet accounts is to Multiple choice question. convert items included in net income to cash. derive the correct ending balance of cash.

convert items included in net income to cash.

The three classifications on the statement of cash flows are cash flows from Select all that apply discontinued activities. investing activities. business activities. financing activities. operating activities.

investing activities. financing activities. operating activities.

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

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? Select all that apply Interest received on notes receivable Collection on account Sale of building Borrowing from bank Issuance of common stock

Interest received on notes receivable Collection on account

Which of the following are cash inflows from financing activities? Select all that apply Purchasing treasury stock Issuance of bonds Collecting from customers Issuing stock to investors for cash Receiving dividends

Issuance of bonds Issuing stock to investors for cash

Which of the following are nonoperating items that require adjustments under the indirect method? Multiple select question. Amortization expense Losses on the sale of long-term assets Gains on the sale of long-term assets Depreciation expense

Losses on the sale of long-term assets Gains on the sale of long-term assets

Adjustments to net income in calculating operating cash flows include: Multiple select question. Nonoperating items Changes in noncurrent assets and noncurrent liabilities Changes in current assets and current liabilities Noncash items

Nonoperating items Changes in current assets and current liabilities Noncash items

Which of the following would be reported as a cash outflow from financing activities? Multiple choice question. Paying interest on a long-term notes payable Sale of common stock Purchase of treasury shares Borrowing on a line of credit

Purchase of treasury shares

Which of the following cash transactions are classified as cash inflows from investing activities? Select all that apply Sale of investments Sale of equipment Sale of building Sale of merchandise inventory Borrowing from bank

Sale of investments Sale of equipment Sale of building

When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to Multiple choice question. all current assets and liabilities. all long-term assets and liabilities. amounts presented in the income statement. changes in equity.

amounts presented in the income statement.

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

depreciation expense amortization expense

Cash flow from ________ activities include both inflows and outflows of cash from the external funding of a business.

financing

Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as ________ activities.

financing

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

financing

Which of the following nonoperating items require adjustments to net income under the indirect method? Select all that apply losses from sale of long-term assets gains from sale of long-term assets prepaid expenses stock dividends distributed during the year accrued expenses

losses from sale of long-term assets gains from sale of long-term assets

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

non-operating

Depreciation expense and amortization expense represent _________ items requiring adjustments to net income under the indirect method.

noncash

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income. Multiple choice question. negative cash decrease noncash increase

noncash

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as Multiple choice question. operating activities financing activities investing activities

operating activities

The statement of cash flows classifies items as Multiple choice question . operating, investing, and financing. recurring and nonrecurring. current and noncurrent. operating and nonoperating.

operating, investing, and financing.

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? Select all that apply purchase of building payment on account purchase of supplies on account Payment of salaries issuance of bonds

payment on account Payment of salaries

Changes to current assets and current liabilities require adjustment of net income under the indirect method because Multiple choice question. these changes increase or decrease cash flows related to long-term assets these changes increase or decrease cash flows related to debt and stockholders' equity related cash may be higher or lower than the accrued amount included in net income

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

The ratio that is calculated by dividing net income by average total assets is referred to as: Multiple choice question. asset utilization asset turnover return on assets

return on assets

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year? Select all that apply Inventory Accounts payable Notes receivable Bonds payable Accounts receivable

Inventory Accounts payable Accounts receivable

Which of the following are nonoperating items that require adjustments under the indirect method? Select all that apply Gains on the sale of long-term assets Depreciation expense Losses on the sale of long-term assets Amortization expense

Gains on the sale of long-term assets Losses on the sale of long-term assets

*** Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? Multiple select question. Interest paid on bonds purchase of supplies purchase of a building retirement of common stock payment on account payable

Interest paid on bonds purchase of supplies payment on account payable

The financial statement that provides information about cash receipts and cash disbursements for the period is the Multiple choice question. balance sheet. statement of cash flows. income statement. statement of retained earnings.

statement of cash flows.

In order to determine cash flows from financing activities, we need to examine changes to Multiple choice question. long-term liability and stockholders' equity accounts long-term asset accounts current assets and current liability accounts

long-term liability and stockholders' equity accounts

The statement of cash flows provides information about the cash inflows and cash outflows of an entity. For financing activities, a cash _______ occurs when cash is borrowed from a creditor, and a cash ________ occurs when a loan is repaid.

inflow; outflow

Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as _________ activities.

investing

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ______ ________.

net income

The return on assets is calculated by dividing ____ by _______. Multiple choice question. average total assets; net income net income; average total assets net income; ending balance of total assets ending balance of total assets; net income

net income; average total assets

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own common shares for $12 million and pays cash dividends of $5 million. Which of the following are cash outflows from financing activities? Select all that apply payment of cash dividends sale of Kleister Company common shares repayment of notes payable issuance of bonds

payment of cash dividends repayment of notes payable