Question 1

A company issues $1 million of new stock and pays $200,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $1.5 million in a new bond issue and paid off existing bonds with a face value of $2 million.The company bought 500 of another company's $1,000 bonds at a $100,000 premium.The net cash flow from financing activities is:

Accepted Answer

A)  An inflow of $500,000.
B)  An outflow of $200,000.
C)  An outflow of $100,000.
D)  An inflow of $300,000.E) A) and B)
F) All of the above

Question 2

A corporation had a net increase in retained earnings of $65,000 for the year.The corporation also paid $20,000 of cash dividends that had been declared in the previous year.This year,the corporation declared $18,000 of dividends but has not paid them as of year-end.Given this information,the net income for the current year must have been:

Accepted Answer

A)  $63,000
B)  $85,000
C)  $65,000
D)  $83,000E) A) and B)
F) All of the above

Question 3

A company has a net cash inflow from operating activities of $789,000,a net cash outflow of $50,000 from investing activities and a net cash inflow of $100,000 from financing activities.The company paid $124,000 in interest,$186,500 in income taxes,and $200,000 in dividends.Which of the following statements about the statement of cash flows is not true?

Accepted Answer

A)  Dividends of $200,000 will be reported as a cash outflow in the cash flow from investing activities section.
B)  Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.
C)  The statement of cash flows will show a net increase to cash and cash equivalents of $839,000.
D)  If the direct method is used,the $124,000 of interest paid and the $186,500 of income taxes paid will be reported in the cash flows from operating activities.E) B) and D)
F) A) and D)

Question 4

Which of the following would not be considered cash and cash equivalents for purposes of preparing a statement of cash flows?

Accepted Answer

A)  Money market funds.
B)  Checking accounts.
C)  Treasury bills.
D)  Notes receivable.E) A) and D)
F) A) and C)

Question 5

In 2014,a company paid $4,500 which it owed from its 2013 income tax liability and $30,000 for its 2014 tax liability.The company still owes $6,000 at year-end.How much should the company report as cash paid for income taxes on its 2014 statement of cash flows,using the direct method?

Accepted Answer

A)  $34,500
B)  $40,500
C)  $30,000
D)  $3,500E) A) and B)
F) A) and C)

Question 6

Cash flows from financing activities include all of the following except

Accepted Answer

A)  payment of long-term debt.
B)  interest expense.
C)  proceeds from stock issuance.
D)  dividends paid to stockholders.E) B) and C)
F) None of the above

Question 7

Consider the following information:  The company would report net cash provided by operating activities of:

Accepted Answer

A)  $17,500.
B)  $18,500.
C)  $21,500.
D)  $23,300.E) A) and B)
F) C) and D)

Question 8

The direct exchange of debt for equipment would be shown:

Accepted Answer

A)  on the statement of cash flows as an operating activity.
B)  on the statement of cash flows as an investing activity.
C)  on the statement of cash flows as a financing activity.
D)  as a supplementary disclosure to the statement of cash flows.E) A) and C)
F) All of the above

Question 9

When preparing the operating activities section of the statement of cash flows using the indirect method,an increase in income taxes payable is added to net income.

Accepted Answer

A) True 
 B)False

Question 10

Your company owned equipment with a book value of $120,000 that was sold during this accounting period for $30,500 in cash,and purchased new equipment for cash of $148,000.Your company would record:

Accepted Answer

A)  a debit of $148,000 and a credit of $30,500 to the cash account for a net cash inflow of $117,500.
B)  a debit of $148,000 and a credit of $89,500 to the cash account for a net cash inflow of $58,500.
C)  a debit of $30,500 and a credit of $148,000 to the cash account for a net cash outflow of $117,500.
D)  a debit of $89,500 and a credit of $148,000 to the cash account for a net cash outflow of $58,500.E) None of the above
F) C) and D)

Question 11

If insurance expense is $7,000 and the beginning and ending balances of prepaid insurance are $1,500 and $2,000,respectively,the cash paid for insurance is

Accepted Answer

A)  $7,000
B)  $6,500
C)  $5,000
D)  $7,500E) A) and B)
F) A) and D)

Question 12

Which of the following represent cash provided by financing activities?

Accepted Answer

A)  Issuing stock in exchange for another company's stock.
B)  Paying a bond's face value at maturity.
C)  Issuing long-term bonds at a discount.
D)  Receiving interest on promissory notes.E) C) and D)
F) All of the above

Question 13

Which of the following statements is true regarding cash flows from financing activities?

Accepted Answer

A)  When companies borrow,cash outflows for financing activities have occurred.
B)  When companies receive dividends,cash inflows from financing activities have occurred.
C)  When companies repurchase their own stock,cash outflows for financing activities have occurred.
D)  When companies pay dividends,cash inflows from financing activities have occurred.E) B) and D)
F) C) and D)

Question 14

When the direct method is used to determine the cash flows from operating activities,other operating expenses are converted into cash outflows by:

Accepted Answer

A)  adding changes in prepaid expenses and accrued liabilities to other expenses.
B)  subtracting increases in prepaid expenses and subtracting decreases in accrued liabilities from other expenses.
C)  adding increases in prepaid expenses and adding decreases in accrued liabilities to other expenses.
D)  subtracting changes in prepaid expenses and accrued liabilities from other expenses.E) A) and C)
F) None of the above

Question 15

Use the information above to answer the following question.What is the amount of cash paid for rent?

Accepted Answer

A)  $9,000
B)  $11,000
C)  $10,000
D)  $12,000E) A) and C)
F) A) and D)

Question 16

Which of the following items would be reported on a statement of cash flows using the indirect method,but not on a statement prepared using the direct method?

Accepted Answer

A)  Cash paid for dividends.
B)  Cash received from stock issuances.
C)  Depreciation expense.
D)  Cash paid for purchase of treasury stock.E) A) and B)
F) A) and C)

Question 17

What is the first step in calculating cash flows from operations when the indirect method is used?

Accepted Answer

A)  Find net income on the income statement.
B)  Calculate the net change in the cash account.
C)  Add the change in accounts receivable to sales revenue.
D)  Identify the balance sheet accounts that relate to operating activities.E) A) and C)
F) B) and C)

Question 18

Which of the following represent cash outflows from financing activities?

Accepted Answer

A)  Distributing a stock dividend.
B)  Paying a bond's face value at maturity.
C)  Issuing long-term bonds at a discount.
D)  Paying interest on promissory notes.E) A) and B)
F) A) and C)

Question 19

Negative operating cash flow may indicate all of the following except:

Accepted Answer

A)  the company may not be able to replace property,plant and equipment.
B)  stockholders may not receive a dividend.
C)  the company may be in the introductory phase of its life cycle.
D)  The company did not earn a profit from its core business activity.E) A) and B)
F) None of the above

Question 20

Use the information above to answer the following question.What was the amount of cash paid for purchases of equipment during the year?

Accepted Answer

A)  $40,000
B)  $43,000
C)  $50,000
D)  $31,000E) B) and C)
F) A) and D)

Exam 12: Statement of Cash Flows

Correct Answer
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The direct exchange of debt for equipment would be shown:

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Cash flows from financing activities include all of the following except

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If insurance expense is $7,000 and the beginning and ending balances of prepaid insurance are $1,500 and $2,000,respectively,the cash paid for insurance is

Correct Answer
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In 2014,a company paid $4,500 which it owed from its 2013 income tax liability and $30,000 for its 2014 tax liability.The company still owes $6,000 at year-end.How much should the company report as cash paid for income taxes on its 2014 statement of cash flows,using the direct method?

Correct Answer
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Which of the following represent cash provided by financing activities?

Correct Answer
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When preparing the operating activities section of the statement of cash flows using the indirect method,an increase in income taxes payable is added to net income.

Correct Answer
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Which of the following would not be considered cash and cash equivalents for purposes of preparing a statement of cash flows?

Correct Answer
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What is the first step in calculating cash flows from operations when the indirect method is used?

Correct Answer
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Use the information above to answer the following question.What is the amount of cash paid for rent?

Correct Answer
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Which of the following items would be reported on a statement of cash flows using the indirect method,but not on a statement prepared using the direct method?

Correct Answer
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When the direct method is used to determine the cash flows from operating activities,other operating expenses are converted into cash outflows by:

Correct Answer
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Which of the following represent cash outflows from financing activities?

Correct Answer
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Negative operating cash flow may indicate all of the following except:

Correct Answer
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Which of the following statements is true regarding cash flows from financing activities?

Correct Answer
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Correct Answer
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Use the information above to answer the following question.What was the amount of cash paid for purchases of equipment during the year?

Correct Answer
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Your company owned equipment with a book value of $120,000 that was sold during this accounting period for $30,500 in cash,and purchased new equipment for cash of $148,000.Your company would record:

Correct Answer
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Consider the following information: The company would report net cash provided by operating activities of:

Correct Answer
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Correct Answer
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Exam 12: Statement of Cash Flows

Correct AnswerverifiedShow Answer

The direct exchange of debt for equipment would be shown:

Correct AnswerverifiedShow Answer

Cash flows from financing activities include all of the following except

Correct AnswerverifiedShow Answer

If insurance expense is $7,000 and the beginning and ending balances of prepaid insurance are $1,500 and $2,000,respectively,the cash paid for insurance is

Correct AnswerverifiedShow Answer

In 2014,a company paid $4,500 which it owed from its 2013 income tax liability and $30,000 for its 2014 tax liability.The company still owes $6,000 at year-end.How much should the company report as cash paid for income taxes on its 2014 statement of cash flows,using the direct method?

Correct AnswerverifiedShow Answer

Which of the following represent cash provided by financing activities?

Correct AnswerverifiedShow Answer

When preparing the operating activities section of the statement of cash flows using the indirect method,an increase in income taxes payable is added to net income.

Correct AnswerverifiedShow Answer

Which of the following would not be considered cash and cash equivalents for purposes of preparing a statement of cash flows?

Correct AnswerverifiedShow Answer

What is the first step in calculating cash flows from operations when the indirect method is used?

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What is the amount of cash paid for rent?

Correct AnswerverifiedShow Answer

Which of the following items would be reported on a statement of cash flows using the indirect method,but not on a statement prepared using the direct method?

Correct AnswerverifiedShow Answer

When the direct method is used to determine the cash flows from operating activities,other operating expenses are converted into cash outflows by:

Correct AnswerverifiedShow Answer

Which of the following represent cash outflows from financing activities?

Correct AnswerverifiedShow Answer

Negative operating cash flow may indicate all of the following except:

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding cash flows from financing activities?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the information above to answer the following question.What was the amount of cash paid for purchases of equipment during the year?

Correct AnswerverifiedShow Answer

Your company owned equipment with a book value of $120,000 that was sold during this accounting period for $30,500 in cash,and purchased new equipment for cash of $148,000.Your company would record:

Correct AnswerverifiedShow Answer

Consider the following information: The company would report net cash provided by operating activities of:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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