Chapter 11 Textbook Flashcards
The financial statement that provides information about cash receipts and cash disbursements for the period is the
statement of cash flows.
The three classifications on the statement of cash flows are cash flows from
investing activities.
operating activities.
financing activities.
_________ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.
operating
The purchase and sale of long-term assets and current investments are classified as
investing activities.
Cash flows from ______ activities include both inflows and outflows of cash from the external funding of a business.
Financing
The statement of cash flows provides summary information about cash ______________
and cash ___________________
during the year.
inflows, outflows
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?
Collection from customers
Borrowing from bank
Payment of utilities
Sale of a building
Collection of interest
collection from customers
collection of interest
The statement of cash flows classifies items as
operating, investing, and financing
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?
purchase of supplies
purchase of a building
interest paid on bonds
retirement of common stock
payment on account payable
purchase of supplies
interest paid on bonds
payment on account payable
Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as
operating activities
Which of the following cash transactions are classified as cash inflows from investing activities?
Sale of equipment
Sale of investments
Borrowing from bank
Sale of merchandise inventory
Sale of subsidiary
Sale of equipment
Sale of investments
Sale of subsidiary
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
Which of the following are classified as cash outflows from investing activities?
Sale of equipment
Sale of land
Purchase of an investment
Payment of accounts payable balance
Purchase of land
Purchase of an investment
Purchase of land
Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as _____________
activities.
financing
The basic purpose of the statement of cash flows is to
report the activities that changed the cash balance during the year
Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?
Issuance of common stock
Borrowing from bank
Sale of building
Collection from customers
Interest received on notes receivable
Collection from customers
Interest received on notes receivable
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?
purchase of building
payment on account
purchase of supplies on account
issuance of bonds
payment of salaries
payment on account
payment of salaries
Which of the following are classified as cash inflows from investing activities?
Purchase of an investment
Sale of equipment
Sale of land
Issuance of common stock
Sale of equipment
Sale of land
Which of the following are cash outflows from investing activities?
cash acquisition of another company
repayment of long-term debt
purchase of land
purchase of long-term investments
payment of income taxes
cash acquisition of another company
purchase of land
purchase of long-term investments
The primary purpose of the statement of cash flows is to report activities that increased or decreased cash during the year and to group those activities based on
Operating, Investing, and Financing
In a statement of cash flows, the sum of cash inflows and outflows is equal to
the change in the cash balance.
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?
payment on account payable
purchase of supplies
interest paid on bonds
retirement of common stock
purchase of a building
payment on account payable
purchase of supplies
interest paid on bonds
Which of the following cash transactions are classified as cash inflows from investing activities?
Borrowing from bank
Sale of subsidiary
Sale of merchandise inventory
Sale of investments
Sale of equipment
Sale of subsidiary
Sale of investments
Sale of equipment
When using the indirect method to prepare the operating activities section of the statement of cashflows, the first amount listed is ___________
net income
Which of the following are classified as cash outflows from investing activities?
Sale of land
Purchase of land
Purchase of an investment
Sale of equipment
Payment of accounts payable balance
Purchase of land
Purchase of an investment
Changes to current assets and current liabilities require adjustment of net income under the indirect method because ______________
related cash may be higher or lower than the accrued amount included in net income
Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?
Calculate the change in the beginning and ending balance of cash
Select the items that would be added to net income in order to prepare the operating activities section of a statement of cash flows using the indirect method.
depreciation expense
increase in current asset
gain on sale of land
loss on sale of land
decrease in current asset
depreciation expense
loss on sale of land
decrease in current asset
Adjustments to net income in calculating operating cash flows include:
Nonoperating items
Noncash items
Changes in noncurrent assets and noncurrent liabilities
Changes in current assets and current liabilities
Nonoperating items
Noncash items
Changes in current assets and current liabilities
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?
Accounts payable
Inventory
Notes receivable
Bonds payable
Accounts receivable
Accounts payable
Inventory
Accounts receivable
In a statement of cash flows, the sum of cash inflows and outflows is equal to
the change in the cash balance.
Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?
Depreciation expense originally reduced net income, but it actually represents a cash inflow for the company.
Depreciation expense originally reduced net income, but it is not classified as an operating activity.
Depreciation expense originally reduced net income, but it is a noncash expense.
Depreciation expense is not included in net income, so its cash effect must be accounted for separately.
Depreciation expense originally reduced net income, but it is a noncash expense.
Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?
payment on account payable
purchase of a building
retirement of common stock
purchase of supplies
interest paid on bonds
payment on account payable
purchase of supplies
interest paid on bonds
Which of the following nonoperating items require adjustments to net income under the indirect method?
gains from sale of long-term assets
prepaid expenses
losses from sale of long-term assets
accrued expenses
stock dividends distributed during the year
gains from sale of long-term assets
losses from sale of long-term assets
Select the items that would be subtracted from net income in order to prepare the operating activities section of a statement of cash flows using the indirect method.
increase in current liability
decrease in current liability
gain on sale of land
depreciation expense
loss on sale of land
decrease in current liability
gain on sale of land
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
Changes to current assets and current liabilities require adjustment of net income under the indirect method because
related cash may be higher or lower than the accrued amount included in net income
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
Non-Cash
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 ______________.
added to net income.
Select the items that would be added to net income in order to prepare the operating activities section of a statement of cash flows using the indirect method.
decrease in current asset
loss on sale of land
gain on sale of land
increase in current asset
depreciation expense
decrease in current asset
loss on sale of land
depreciation expense
Adjustments to net income in calculating operating cash flows include:
Nonoperating items
Changes in current assets and current liabilities
Changes in noncurrent assets and noncurrent liabilities
Noncash items
Nonoperating items
Changes in current assets and current liabilities
Noncash items
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?
Notes receivable
Accounts payable
Inventory
Bonds payable
Accounts receivable
Accounts payable
Inventory
Accounts receivable
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
A. all long-term assets and liabilities.
B. amounts presented in the income statement.
C. all assets and liabilities.
D. changes in equity.
amounts presented in the income statement
