ACC Ch12 Flashcards
An item readily convertible to a known amount of cash with a maturity to the investor of three months or less.
Cash equivalent
For preparing the Operating Activities section of the statement of cash flows, the approach in which cash receipts and cash payments are reported.
Direct method
Activities concerned with the raising and repaying of funds in the form of debt and equity.
Financing activities
For preparing the Operating Activities section of the statement of cash flows, the approach in which net income is reconciled to net cash flow from operations.
Indirect method
Activities concerned with the acquisition and disposal of long-term assets.
Investing activities
Activities concerned with the acquisition and sale of products and services.
Operating activities
The financial statement that summarizes an entity’s cash receipts and cash payments during the period from operating, investing, and financing activities.
Statement of cash flows
Which of the following statements is true about the relationship between net income and cash flow?a. Cash will increase during a year in which a company reports net income. b. Net in come and cash flow are the same amount from year to year. c. Cash will decrease during a year in which a company reports a net loss. d. Cash can increase or decrease during a year in which a company reports net income.
Cash can increase or decrease during a year in which a company reports net income.
Organic Foods Corp. reported the following information for 2012 and 2013.Accounts Payable, December 31, 2012 $51,000Accounts Payable, December 31, 2013 $46,000Purchases 2013 - - $467,000How much cash was paid for merchandise purchases during 2013?a. $467,000 b. $472,000 c. $421,000 d. $462,000
$472,000
In preparing a statement of cash flows using the indirect method, what is the proper adjustment to net income for changes in the balances of current assets or liabilities?a. current assets - add the increase or subtract the decreasecurrent liabilities - add the increase or subtract the decrease b. current assets - add the decrease or subtract the increasecurrent liabilities - add the decrease or subtract the increase c. current assets - add the decrease or subtract the increasecurrent liabilities - add the increase or subtract the decrease d. current assets - add the increase or subtract the decreasecurrent liabilities - add the decrease or subtract the increase
current assets - add the decrease or subtract the increasecurrent liabilities - add the increase or subtract the decrease
How is depreciation expense treated under the indirect method of preparing the statement of cash flows?a. As an addition to net income in the Operating Activities section of the statement. b. As an outflow in the Investing Activities section of the statement. c. Depreciation expense does not appear on the statement of cash flows when the indirect method is used. d. As an outflow in the Operating Activities section of the statement.
As an addition to net income in the Operating Activities section of the statement.
The statement of cash flows must be classified into each of the following categories except for:a. operating activities. b. current activities. c. financing activities. d. investing activities.
current activities.
The purchase of a three-year Treasury bill two months before its maturity is considered a:a. long-term investment. b. current liability. c. cash equivalent. d. short-term investment.
cash equivalent.
How should the repurchase of a company’s own stock be reported on the statement of cash flows?a. As a financing activity b. As an operating activity c. Repurchase of a company’s own stock is not reported on the statement of cash flows. d. As an investing activity
As a financing activity
An example of an operating activity is:a. the payment of a loan from a bank. b. a cash payment to suppliers of inventory. c. the purchase of a piece of equipment. d. the payment of cash dividends
a cash payment to suppliers of inventory.
A company began the year with a balance of $5,000 in Accounts Receivable and ended the year with $8,000 in the account. Revenues for the period amounted to $37,000. Under the direct method of preparing the statement of cash flows, the company will report cash collected from customers of:a. $42,000 b. $40,000 c. $34,000 d. $37,000
$34,000
What are the three categories into which cash flows are classified?a. Operating, investing, and financing b. Operating, investing, and producing c. Operating, nonoperating, and financing d. None of these choices are correct.
Operating, investing, and financing
How is depreciation expense treated under the direct method of preparing the statement of cash flows?a. As an outflow in the Operating Activities section of the statement. b. As an addition to net income in the Operating Activities section of the statement. c. As an outflow in the Investing Activities section of the statement. d. Depreciation expense does not appear on the statement of cash flows when the direct method is used.
Depreciation expense does not appear on the statement of cash flows when the direct method is used.
Which of the following statements is true about the indirect method?a. Many companies believe that the use of the indirect method reveals too much about their business by telling readers exactly the amount of cash receipts and cash payments from operations. b. If a company uses the indirect method, it must present a separate schedule to reconcile net income to net cash from operating activities. c. Advocates of the indirect method believe that the information provided with this approach is valuable in evaluating a company’s operating efficiency. d. If a company uses the indirect method, it must separately disclose two important cash payments: income taxes paid and interest paid.
If a company uses the indirect method, it must separately disclose two important cash payments: income taxes paid and interest paid.
Cash flow per share is:a. the same as earnings per share. b. an acceptable alternative to earnings per share according to the accounting profession. c. computed by dividing cash on the balance sheet by the number of shares outstanding. d. not an acceptable alternative to earnings per share according to the accounting profession.
not an acceptable alternative to earnings per share according to the accounting profession.
The following items were reported on the balance sheets and income statement for a service company:Accounts Payable, December 31, 2012 $64,000Accounts Payable, December 31, 2013 $48,000Operating Expenses - - $170,000What was the amount of cash paid for operating expenses in 2013?a. $154,000 b. $180,000 c. $170,000 d. $186,000
$186,000
A firm’s beginning balance in retained earnings was $100 and its ending balance was $90. Net income for the period was $75. Dividends paid during the period:a. must have been $65. b. must have been $75. c. Cannot be determined from the information provided. d. must have been $85.
must have been $85.
On the worksheet illustrated in this appendix, what should be the total of the Changes column?a. The same number as total assets b. The same number as net income c. A changes column does not appear on the worksheet d. Zero
Zero
