Chapter 11 Textbook

Question 1

The financial statement that provides information about cash receipts and cash disbursements for the period is the

Answer 1

statement of cash flows.

Question 2

The three classifications on the statement of cash flows are cash flows from

Answer 2

investing activities.
operating activities.
financing activities.

Question 3

_________ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

Answer 3

operating

Question 4

The purchase and sale of long-term assets and current investments are classified as

Answer 4

investing activities.

Question 5

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

Answer 5

Financing

Question 6

The statement of cash flows provides summary information about cash ______________
and cash ___________________
during the year.

Answer 6

inflows, outflows

Question 7

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

Answer 7

collection from customers

collection of interest

Question 8

The statement of cash flows classifies items as

Answer 8

operating, investing, and financing

Question 9

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

Answer 9

purchase of supplies

interest paid on bonds

payment on account payable

Question 10

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

Answer 10

operating activities

Question 11

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

Answer 11

Sale of equipment

Sale of investments

Sale of subsidiary

Question 12

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

Answer 12

investing

Question 13

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

Answer 13

Purchase of an investment

Purchase of land

Question 14

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

Answer 14

financing

Question 15

The basic purpose of the statement of cash flows is to

Answer 15

report the activities that changed the cash balance during the year

Question 16

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

Answer 16

Collection from customers

Interest received on notes receivable

Question 17

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

Answer 17

payment on account

payment of salaries

Question 18

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

Answer 18

Sale of equipment

Sale of land

Question 19

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

Answer 19

cash acquisition of another company

purchase of land

purchase of long-term investments

Question 20

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

Answer 20

Operating, Investing, and Financing

Question 21

In a statement of cash flows, the sum of cash inflows and outflows is equal to

Answer 21

the change in the cash balance.

Question 22

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

Answer 22

payment on account payable

purchase of supplies

interest paid on bonds

Question 23

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

Answer 23

Sale of subsidiary

Sale of investments

Sale of equipment

Question 24

When using the indirect method to prepare the operating activities section of the statement of cashflows, the first amount listed is ___________

Answer 24

net income

Question 25

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

Answer 25

Purchase of land

Purchase of an investment

Question 26

Changes to current assets and current liabilities require adjustment of net income under the indirect method because ______________

Answer 26

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

Question 27

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?

Answer 27

Calculate the change in the beginning and ending balance of cash

Question 28

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

Answer 28

depreciation expense

loss on sale of land

decrease in current asset

Question 29

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

Answer 29

Nonoperating items

Noncash items

Changes in current assets and current liabilities

Question 30

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

Answer 30

Accounts payable

Inventory

Accounts receivable

Question 31

In a statement of cash flows, the sum of cash inflows and outflows is equal to

Answer 31

the change in the cash balance.

Question 32

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.

Answer 32

Depreciation expense originally reduced net income, but it is a noncash expense.

Question 33

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

Answer 33

payment on account payable

purchase of supplies

interest paid on bonds

Question 34

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

Answer 34

gains from sale of long-term assets

losses from sale of long-term assets

Question 35

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

Answer 35

decrease in current liability

gain on sale of land

Question 36

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.

Answer 36

net income

Question 37

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

Answer 37

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

Question 38

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

Answer 38

Non-Cash

Question 39

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 ______________.

Answer 39

added to net income.

Question 40

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

Answer 40

decrease in current asset

loss on sale of land

depreciation expense

Question 41

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

Answer 41

Nonoperating items

Changes in current assets and current liabilities

Noncash items

Question 42

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

Answer 42

Accounts payable

Inventory

Accounts receivable

Question 43

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.

Answer 43

amounts presented in the income statement