Chapter 24 ("The Statement of Cash Flows")

Question 1

When the net cash provided by operating activities is determined, a gain on a sale of equipment should

• be added to the net income.
• be subtracted from the net income.
• not be used in the calculation.
• be reported in the cash flows from financing activities section.

Answer 1

-be subtracted from the net income.

Question 2

Generally, if a short-term investment is to be classified as a cash equivalent, it must fall due within

12 months from the date it was acquired.
6 months from the date it was acquired.
3 months from the date it was acquired.
1 month from the date it was acquired.

Answer 2

3 months from the date it was acquired.

Question 3

Chattel Company sold for $7,000 equipment that originally cost $40,000 and had depreciation in the amount of $34,000 taken. What amount is reported in the Cash Flows from Investing Activities section of the Statement of Cash Flows?

$7,000
$6,000
$5,000
$1,000

Answer 3

$7,000

Question 4

The payment of interest is considered to be

an outflow of cash that results from a financing activity.
an outflow of cash that results from an investing activity.
an outflow of cash that results from an operating activity.
an activity that is not reported on the statement of cash flows.

Answer 4

an outflow of cash that results from an operating activity.

Question 5

On a statement of cash flows, an increase in a prepaid expense:

• is included in computing cash flows from operating activities.
• is included in computing cash flows from investing activities.
• is included in computing cash flows from financing activities.
• is not used in computing cash flows.

Answer 5

is included in computing cash flows from operating activities.

Question 6

A corporation received $50,000 in cash when it sold a building and paid $90,000 in cash when it purchased some new machinery. As a result, the statement of cash flows would report

$40,000 as the net cash used in financing activities.
$40,000 as the net cash provided by investing activities.
$40,000 as the net cash used in investing activities.
$40,000 as the net cash provided by financing activities.

Answer 6

$40,000 as the net cash used in investing activities.

Question 7

The net cash provided by operating activities is affected by

a change in merchandise inventory.
a purchase of land for cash.
the issue of bonds payable for cash.
proceeds of cash investments by stockholders.

Answer 7

a change in merchandise inventory.

a purchase of land for cash.これはinvestment activity
the issue of bonds payable for cash.これはfinancing activity
proceeds of cash investments by stockholders. これはfinancing activity

Question 8

Investing activities include

purchases of merchandise for cash.
purchases of plant and equipment for cash.
purchases of prepaid expense items such as supplies and insurance for cash.
increase in accounts receivable.

Answer 8

purchases of plant and equipment for cash.

Question 9

A corporation received $80,000 in cash when it sold common stock and used the proceeds to pay $60,000 in bonds payable. As a result, the statement of cash flows would report

$20,000 as the net cash used in financing activities.
$20,000 as the net cash provided by investing activities.
$20,000 as the net cash used in investing activities.
$20,000 as the net cash provided by financing activities.

Answer 9

$20,000 as the net cash provided by financing activities.

Question 10

Cash and cash equivalents, as used on the statement of cash flows, consist of

only currency and bank accounts.
only bank accounts.
currency, bank accounts, and all investments.
currency, bank accounts and short-term, highly liquid investments.

Answer 10

currency, bank accounts and short-term, highly liquid investments.

Question 11

An example of an investing activity is

the issue of preferred stock.
the resale of treasury stock.
the issue of bonds and notes payable.
the purchase of property, plant, or equipment for cash.

Answer 11

the purchase of property, plant, or equipment for cash.

Question 12

The retirement of bonds with cash by a company is reported under which of the following?

Operating Activities
Investing Activities
Financing Activities
Disclosures

Answer 12

Financing Activities

Question 13

When the net cash provided by operating activities is determined, the amortization of bond premium

should be added to the net income.
should be subtracted from the net income.
should not be used in the calculation.
should be subtracted from the net cash amount after other calculations have been made.

Answer 13

should be subtracted from the net income.

Question 14

When the net cash provided by operating activities is determined, an increase in income taxes payable should

be subtracted from the net cash amount after other calculations have been made.
be subtracted from the net income.
not be used in the calculation.
be added to the net income.

Answer 14

be added to the net income.

Question 15

Bastion Corporation paid $15,600 on its mortgage loan. The principal portion was $5,000 and the interest was $10,600. The $5,000 constitutes what on the Statement of Cash Flows?

an outflow of cash under the financing activities section
an outflow of cash under the operating activities section
an outflow of cash under the investing activities section
a disclosure of the interest paid

Answer 15

an outflow of cash under the financing activities section

Question 16

Usually, there is a difference between the net income reported on the income statement and the net cash from operating activities shown on the statement of cash flows.
True
False

Answer 16

T

Question 17

The starting point for analyzing cash flows from operating activities is the beginning balance of cash.
True
False

Answer 17

F

Net incomeからスタートする

Question 18

The cash received from issuing common stock would not be reported on the statement of cash flows.
True
False

Answer 18

F

Financing Activitiesでレポートされる

Question 19

The resale of treasury stock is classified as a cash inflow from financing activities.
True
False

Answer 19

T

Question 20

When the net income is reconciled with the net cash provided by operating activities, depreciation expense is added to the net income.
True
False

Answer 20

T

Question 21

Current assets and current liabilities are often referred to as operating assets and liabilities.
True
False

Answer 21

T

Question 22

The statement of cash flows provides information about cash flows from operating activities, investing activities, and financing activities.
True
False

Answer 22

T

Question 23

A sale of used equipment for cash produces a cash inflow from investing activities.
True
False

Answer 23

T

Question 24

If the income statement reflects a net loss for the year, the loss is not reported under cash flows from operating activities in the statement of cash flows.
True
False

Answer 24

F