Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

ACCT 203 > Ch 12 Rev. > Flashcards

Ch 12 Rev. Flashcards

1
Q

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

A

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

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Choose the list below that contains only cash or cash equivalents.

A

customer checks, money orders, certified checks

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

A cash …. must satisfy two criteria: (1) be readily convertible to a known amount of cash and (2) be sufficiently close to maturity so its market value is unaffected by interest rate changes.

A

equivalent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

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

A

net cash inflow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Which of the following statements about the statement of cash flows are correct?

A

It details the sources and uses of cash.

The purpose is to report cash receipts and cash payments during a period.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

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.

A

outflow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

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?

Multiple select question.

A

How does a company spend its cash?

Does the company have the resources to pursue opportunities?

Can the company pay its debts?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Which of the following transactions would not be classified as an operating activity on the statement of cash flows?

A

Cash dividends paid to shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Cash equivalents include short term investments within

A

three months of their due date

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

A(n) Blank______ 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.

A

operating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

The statement of cash flows does not report the following transactions

A

transactions between cash and cash equivalents

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

___ (Operating/Investing/Financing) activities include those transactions and events such as lending and collecting money for notes receivable and cash receipts from sale of short-term investments.

A

Investing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

A net cash (inflow/outflow) …
occurs when the receipts in a category exceed the payments.

A

inflow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

In a statement of cash flows, cash received from the sale of a building would be classified under “cash flows from ….
activities.”

A

investing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

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

A

outflow

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

______ 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.

A

Financing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Which of the following transactions would be reported under cash flows from operating activities?

A

Cash paid for salaries and wages

Cash paid to lenders for interest

Cash received from sales

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

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

A

Cash paid to repay debt

Cash received from issuing notes payable

Cash dividends paid to shareholders

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

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.

A

operating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

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

A

unrelated to

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

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

A

investing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Which of the following items are classified as noncash investing and financing activities?

A

Conversion of preferred stock to common stock

Retirement of debt by issuing stock

Lease of assets in a long-term lease transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Which of the following transactions would be reported under investing activities in the statement of cash flows?

A

Cash paid to purchase plant assets

Cash paid to purchase investments in securities

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

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

A

a note or separate schedule

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

….. 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.

A

Financing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Which of the following is not one of the five important steps to preparing a statement of cash flows?

A

Compute the net income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Which of the following would not be reported under financing activities on the statement of cash flows?

A

Cash received from sale of plant assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Which of the following would not be reported under financing activities on the statement of cash flows?

A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

A company reported total assets at the end of the previous year of $95,000; including cash of $35,000, accounts receivable of $20,000, and inventory of $40,000. It reported total assets at the end of the current year of $110,000; including cash of $44,000; accounts receivable of $29,000, and inventory of $37,000. Compute the net increase or decrease in cash for the current year.

A

Increase of $9,000
Reason: $44,000 current period balance minus $35,000 prior period balance= $9,000 increase.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Investing activities are affected by

A

changes in long-term assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

A company’s cash receipts and cash payments are recorded in the cash account in its general ledger. Which of the following can be determined by analyzing the cash account?

A

Cash payments for equipment

Cash receipts from customers

Cash payments on notes

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

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.

A

Retirement of debt by issuing stock

Lease of an asset in a long-term lease transaction

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

The information needed to prepare a statement of cash flows could come from which of the following sources?

A

Income statement

Comparative balance sheets

Cash account

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

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

A

investing

operating

financing

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

When analyzing the noncash accounts to assist in preparing the statement of cash flows, the changes in liabilities, equity and noncash asset accounts are analyzed along with the

A

income statement accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

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

A
  1. Compute net increase or decrease in cash
  2. Compute net cash from operating activities
  3. Compute net cash from investing
  4. Compute net cash from financing
  5. Compute net cash from all sources; prove by adding amount to beginning to get ending cash balance.
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

At the beginning of the year, Rex Co. showed a debit balance in the cash account of $20,500. Total debits to this account during the year were $45,000, and total credits during the year were $35,000. The net (increase/decrease) ….. in cash for the year equals $…..

A

Increase; 10,000

((25,000+45,000)
−35,000)−25,000

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Cash flows provided (used) by operating activities are reported in one of two ways: the …. method or the … method. These two methods apply only to the operating activities section.

A

direct; indirect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

A company’s cash receipts and cash payments are recorded in the cash account in its general ledger. Identify which of the following could not be determined by analyzing the cash account?

A

Payment for land by issuing a note

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

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

A

indirect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

The information needed to prepare a statement of cash flows could come from all of the following sources, except the:

A

statement of retained earnings.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

The net cash amount provided by operating activities is identical under both the … and …methods.

A

direct; indirect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

In addition to analyzing the cash account, a second approach to preparing the statement of cash flows is to explain changes in cash by analyzing changes in:

A

liability accounts

noncash asset accounts

equity accounts

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Which of the following is not one of the five important steps to preparing a statement of cash flows?

A

Compute the net income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

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

A

Operating

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

The indirect method of computing and reporting net cash flows from operating activities involves adjusting …. to obtain the net cash provided or used by operating activities.

A

Net income

47
Q

Carol Co. prepares a statement of cash flows starting with net income and then adjusting for items that do not affect cash. Carol Co. is using the (direct/indirect)…. method of reporting the statement of cash flows.

A

indirect

48
Q

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method?

A

Gain on sale of building

Depreciation expense

Loss on sale of investment

49
Q

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

A

Net cash inflows (outflows)

50
Q

A gain from the sale of a building would be (added/subtracted) …..
to (from) net income when computing cash flows from operations, using the indirect method.

A

subtracted

51
Q

When analyzing the noncash accounts to assist in preparing the statement of cash flows, the changes in liabilities, equity and noncash asset accounts are analyzed along with the

A

income statement accounts

52
Q

An income statement reports:

A

the revenues minus the expenses incurred by a business

53
Q

Which of the following would be included in the operating section when preparing the statement of cash flows using the indirect method?

A

Net income

54
Q

In preparing a cash flows from operating activities using the indirect method, an increase in accounts receivable would be (added/subtracted) ….
to (from) net income.

A

subtracted

55
Q

Which of the following items would not be adjusted to net income when computing cash flows from operating activities, using the indirect method?

A

Cash received from sale of building

56
Q

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.

A

added

57
Q

Accounts receivable had a debit balance of $10,000 at the beginning of the period, and a debit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

A

a decrease of $4,000 which will be added to net income

10,000 - 6,000 = 4000

58
Q

Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $7,000 at the end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:

A

a decrease of $2,000 which will be added to net income
9,000−7,000 = 2000

59
Q

Which of the following would be included on an income statement?

A

Total revenues

Net income

Total expenses

60
Q

Sheldon Company’s balance in prepaid insurance at the beginning and end of the year was $2,500 and $1,000, respectively. This will be reported on the statement of cash flows using the indirect method as:

A

a decrease of $1,500 which will be added to net income.
2,500−1,000 = 1500

61
Q

Which of the following items would not be a correct adjustment to net income to arrive at cash flows from operating activities, using the indirect method?

A

Subtract increase in taxes payable

62
Q

Sunshine Company had a credit balance of $4,000 in accounts payable at the beginning of the period, and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

A

an increase of $2,000 which will be added to net income
(−4,000)−(−6,000) = 2000

63
Q

An increase in wages payable would be (added/subtracted) …
to (from) net income when preparing cash flows from operating activities, using the indirect method.

A

added

64
Q

Accounts receivable had a debit balance of $4,000 at the beginning of the period, and a debit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

A

an increase of $2,000 which will be subtracted from net income
4,000−6,000 = 6000

65
Q

The Coffee Cup Company had a credit balance of $500 in interest payable at the beginning of the period, and a credit balance of $600 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

A

an increase of $100 which will be added to net income

66
Q

Inventory at the beginning of the period had a debit balance of $7,000, and a debit balance of $10,000 at the end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:

A

an increase of $3,000 which will be subtracted from net income

67
Q

The TeaCup Company reported an increase to net income in their income taxes payable account on the statement of cash flows using the indirect method. This means that TeaCup’s income taxes payable account (increased/decreased)
for the period.

A

increased

68
Q

Reid Company’s balance in prepaid insurance at the beginning and end of the year was $1,000 and $1,200, respectively. This will be reported on the statement of cash flows using the indirect method as:

A

an increase of $200 which will be subtracted from net income

69
Q

An increase in wages payable would be (added/subtracted) ….
to (from) net income, when computing cash flows from operations using the indirect method.

A

added

70
Q

LiveLife Company had a credit balance of $10,000 in accounts payable at the beginning of the period, and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

A

a decrease of $4,000 which will be subtracted from net income

71
Q

The three-step analysis to determine cash provided or used by investing activities includes:

A

determining the cash effects using T-accounts and reconstructed entries

reporting the cash flow effects

identifying changes in investing-related accounts

72
Q

Which of the following items would be subtracted from net income when reporting cash flows from operating activities, using the indirect method?

A

Decrease in wages payable

Decrease in taxes payable

73
Q

To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:

A

Interest Payable

74
Q

Emerald Jewelery Store had a credit balance in interest payable of $200 at the beginning of the period, and a credit balance of $50 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

A

a decrease of $150 which will be subtracted from net income

75
Q

The three-step analysis to determine cash provided or used by financing activities includes:

A

reporting the cash flow effects

identifying changes in financing-related accounts

determine the cash effects using T-accounts and reconstructed entries

76
Q

The Breezy Fan reported a decrease to net income in their income taxes payable account on the statement of cash flows using the indirect method. This means that Breezy Fan’s income taxes payable account (increased/decreased)…..
for the period.

A

decreased

77
Q

Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000. This will be reported as _____ on the statement of cash flows.

A

an increase of $5,000 in the cash flows from financing activities section

78
Q

A gain from the sale of equipment would be (added/subtracted) ……
to (from) net income, when computing cash flows from operations using the indirect method.

A

subtracted

79
Q

At the beginning of the period, a company reported $100,000 of common stock, $10 par; and $50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000 of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $…

A

50,000
(110,000−100,000)
+(90,000−50,000) = 50,000

80
Q

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?

A

Identify adjustments to net income.

81
Q

Dividends paid during a period totaled $5,000. This will be reported on the statement of cash flows as:

A

a decrease in the financing activities section

82
Q

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts?

A

Bonds Payable

Common Stock

83
Q

The three-step process to determine cash provided or used by financing activities includes all of the following steps except:

A

identify an increase or decrease in cash.

84
Q

Net cash provided by operating activities was $12,000. Net cash provided by investing activities was $2,000. Net cash used in financing activities was $7,000. The cash balance at the beginning of the year was $4,000. The cash balance at the end of the year is:

A

$11,000
(4,000+12,000+2,000)
−7,000 = 11,000

85
Q

A company repaid a long-term debt during the year. They will report this as a(n) (increase/decrease)…..
in the …..
activities section on the statement of cash flows.

A

Decrease; financing

86
Q

Investors assess cash flows before

A

buying and selling stock

87
Q

Red Co.’s beginning Common Stock balance was $110,000 and their ending Common Stock balance was $125,000. This will be reported as Blank______ in the statement of cash flows.

A

an increase of $15,000 in the financing activities section

Reason: Common stock issued totaled $15,000 ($125,000 - $110,000). Cash received from issuing stock is reported in the financing activities section.

88
Q

Retained earnings at the beginning and end of the year totaled $25,000 and $75,000, respectively. Net income reported during the period was $70,000. Using this information, dividends paid will be reported as Blank______ on the statement of cash flows.

A

a decrease of $20,000 in the financing activities section.
25,000+70,000−75,000

Reason: $25,000 + $70,000 = $95,000. Ending retained earnings is $75,000. $95,000 - 75,000 = dividends of $20,000. Dividends paid will be reported as a decrease in the financing activities section.

89
Q

The Blank______ helps measure a company’s ability to meet its obligations, pay dividends, expand operations, and obtain financing. It is computed by taking cash flow from operations divided by average total assets.

A

cash flow on total assets

90
Q

To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:

A

Interest Payable

91
Q

A(n) ….
, also called a worksheet, can help organize the information needed to prepare a statement of cash flows.

A

spreadsheet

92
Q

Net cash used in operating activities was $10,000. Net cash provided by investing activities was $2,000. Net cash provided by financing activities was $5,000. The cash balance at the end of the year was $12,000. The cash balance at the beginning of the year was $…

A

15,000 beg bal.
(12,000−2,000−5,000)
+10,000

93
Q

It is important to analyze the sources and uses of cash because:

A

Creditors use this information to assist them in deciding whether to loan funds to them.

Investors use this information to decide if they will purchase their stock.

94
Q

Cash flows from operating activities under the ….
method adjusts accrual-based income statement items to a cash basis.

A

Direct

95
Q

At the beginning of the period, a company reported $100,000 of common stock, $10 par; and $50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000 of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $…

A
96
Q

If all sales are for cash, the amount received from customers will equal the …..
reported on the income statement.

A

sales

97
Q

MRC Company reports the following information for the current year: total assets of $65,000 and total cash provided from operations of $20,000; For the previous year: total assets of $75,000 and cash provided from operations of $5,000. Cash flow on total assets for the current year is (round to the nearest tenth):

A

28.6%
(20,000÷((75,000
+65,000)÷2))×100

98
Q

To compute cash received from customers under the direct method, the ….
account is adjusted for the decrease or increase in accounts receivable.

A

sales

99
Q

A spreadsheet can help a company prepare a statement of cash flows.

A

True

100
Q

If rent receivable decreases during the period, cash received from renters is ______ rent revenue reported on the income statement.

A

greater than

101
Q

Sheldon Company pays for insurance policies in advance, recording the expenditure to Prepaid Insurance. The balance in the prepaid insurance account at the beginning and end of the year was $2,500 and $1,000, respectively. Insurance expense during this period totaled $10,000. Using this information, what is the total cash paid for insurance during the period?

A

$8,500
Reason: $10,000 plus (1,000 - 2,500) =$8,500.

102
Q

True or false: The direct method of reporting operating cash flows begins with revenue and adjusts for changes in related balance sheet accounts.

A

True

103
Q

Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $10,000 at the end of the period. Cost of goods sold for the period totaled $40,000. Using this information, purchases for the period must have totaled:

A

$41,000
Reason: ($10,000 minus $9,000) plus $40,000.
Or (40,000−9,000)+10,000

104
Q

Beginning accounts receivable were $20,000 and ending accounts receivable were $25,000. If sales were $150,000, cash receipts equal $

A

145,000
(150,000+20,000)
−25,000

105
Q

Reid Company pays for insurance policies in advance, recording the expenditure to Prepaid Insurance. The balance in the prepaid insurance account at the beginning and end of the year was $1,000 and $1,200, respectively. Insurance expense during this period totaled $10,000. Using this information, what is the total cash paid for insurance during the period?

A

$10,200
(10,000−1,000)+1,200

106
Q

The formula used to compute the cash received from customers under the direct method is:

A

sales plus decrease in accounts receivable OR minus increase in accounts receivable

107
Q

Income taxes expense reported on the income statement was $2,500. The beginning balance in Income Taxes Payable was $1,000 and the ending balance was $1,500. Cash paid for taxes during the period is equal to:

A

2,000
Reason: $1,000 plus 2,500 = $3,500. $3,500 - $1,500 = $2,000
Or
(1,000+2,500)−1,500
Or
(2,500−1,500)+1,000

108
Q

Which of the following items could be “other cash receipts”?

A

Cash received from interest

Cash received from rent

Cash received from dividends

109
Q

When creating a statement of cash flows using the direct method, loss on sale of assets is:

A

never reported

110
Q

Under the direct method, operating expenses includes all of the following except:

A

inventory

111
Q

The inventory account had a debit balance of $7,000 at the beginning of the period, and a debit balance of $8,000 at the end of the period. Cost of goods sold for the period equaled $30,000. Based on this information, purchases during the period equal $

A

31,000
(30,000−7,000)+8,000

112
Q

The income statement shows Wages Expense of $4,000 for the period. The balance sheet indicates that Wages Payable at the beginning of the year had a balance of $300 and at the end of the year had a balance of $500. Cash paid for wages equals:

A

$3,800
(4,000+300)−500

Reason: $4,000 - ($500 - 300) = $3,800.

113
Q

Interest expense reported on the income statement was $1,000. The beginning balance in Interest Payable was $150 and the ending balance was $50. Cash paid for interest during the period is equal to:

A

$1,100

(1,000+150)−50
Reason: $150 plus 1,000 = $1,150. $1,150 - 50 = $1,100.

114
Q

When creating a statement of cash flows using the direct method, depreciation is:

A

not reported

ACCT 203 (14 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions