Chapter 5

Question 1

The statement of cash flows replaces the
- balance sheet
- Statement of financial position
- income statement
- None of these

Answer 1

None of these

Question 2

A statement of cash flows
- is a required statement only for those companies using cash basis accounting
- provides a connecting link between two consecutive income statements
- Is intended primarily to provide necessary information for assessing the profitability of an entity
- summarizes, all cash, inflows and outflows of an entity for a given period of time

Answer 2

Summarizes, all cash flows, and outflows of an entity for given time

Question 3

Which of the following is not a purpose of the statement of cash flows?
- it measures the profitability of an entity
- it provides information about an entities, cash receipts, and payments over a period of time
- Highlights changes in managerial strategy regarding investments and finances
- it provides investors with information about investing and financing activities of an entity

Answer 3

It measures the profitability of an entity

Question 4

Which of the following statements is not true?
- the statement of cash flow shed some light on a companies ability to generate income in the future
- the statement of cash flows includes transactions that are not reflected in the balance sheet and income statement
- the statement of cash flow does the income statement
- the statement of cash flows provides details as to how the cash account changed during a period

Answer 4

The statement of cash flows includes transactions that are not already reflected in the balance sheet and income statement

Question 5

Significant non-cash financing and investing transactions are
- Converted to cash equivalence
- Listed in the body of a statement of cash flows
- Reported under the financing and investing activities section
- Reported in a narrative or in a separate schedule

Answer 5

Reported in a narrative or in a separate schedule

Question 6

Which of the following would be classified as an investing activity on a statement of cash flows?
- Cash paid for interest
- Cash used to repay principal amount borrowed
- Cash received from the sale of a land
- Cash received from dividends

Answer 6

Cash received from the sale of the land

Question 7

The exchange of debt for equipment would
- be shown as a supplementary disclosure
- be shown on a statement of cash flows as operating activity
- be shown on a statement of cash flows as an investing activity
- be shown on a statement of cash flows as a financing activity

Answer 7

Be shown as a supplementary disclosure

Question 8

Which of the following would be reported as a financing activity on a statement of cash flows?
- Proceeds from the sale of land
- Payment of interest
- Receipt of a dividend
- Purchase of treasury stock

Answer 8

Purchase of treasury stock

Question 9

Which of the following would not be included in the operating activity section of the statement of cash flows?
- Dividends paid
- interest paid
- Dividends received
- interest received

Answer 9

Dividends paid

Question 10

Yucca company had a beginning cash balance of $1875. In addition, yucca company reported the following items from its cash flow statement:
Operating activities of $6450
Investing activities -$4735
Financing activities -$1200.

Given this information, yucca companies ending cash balance is
- $2390
- $2480
- $3590
- $515

Answer 10

$2390

Ending cash balance; $1875 plus $6450 -$4735 -$1200 equals $2390

Question 11

Avondale Inc. the following cash transactions during 2012:
Sales receipts $2,000,000
Inventory payments $1,500,000
Interest payments 20,000
Wage payments 120,000
Dividend receipts 10,000
Interest receipts 6000
Equipment purchased 150,000
Stock of Canton co purchased 50,000
Stock issued 300,000
Repaid a note (non-operating)100,000

What was Avondale‘s net cash provided by (used in in) operating activities?
- $376,000
- $516,000
- $2,016,000
- $360,000

Answer 11

$376,000

Question 12

Avondale had the following cash transactions during the 2012:

Sales receipts $2,000,000
Inventory payments $1,500,000
Interest payments 20,000
Wage payments 120,000
Dividend receipts 10,000
Interest receipts 6,000
Equipment purchased 150,000
Stock of Canton co purchased 50,000
Stock issued 300,000
Repaid a note (non-operating)100,000

What was Avondale’s net increase in cash for the year?
- $266,000
- $376,000
- $306,000
- $576,000

Answer 12

$376,000

($2,000,000 - $1,500,000 - $20,000 - $120,000 + $10,000 + $6,000 - $150,000 - $50,000 + $300,000 - $100,000 = $376,000

Question 13

The following financial information is available for the year 2012:
Operating activities $309,800
Investing activities -$118,000
Financing activities -$190,000
Ending cash balance $5600

Given this information, what is the beginning cash balance ?
- $3800
- $1800
- $112,400
- $72,600

Answer 13

$3800

X + $309,800 - $118,000 - $190,000 = $5600. X= $3800.

Question 14

Avondale Inc. had the following cash transactions during 2012:

Sales receipts $2,000,000
Inventory payments $1,500,000
Interest payments 20,000
Wage payments 120,000
Dividend receipts 10,000
Interest receipts 6000
Equipment purchased 150,000
Stock of Canton co purchased 50,000
Stock issued 300,000
Repaid a note (non-operating)100,000

What was Avondale’s total net increase in cash for the year provided by (used in) financing activities?

• $200,000
• $300,000
• $150,000
• $100,000

Answer 14

$200,000

($300,000 -$100,000 equals $200,000)

Question 15

Which of the following would be subtracted from net income on a statement of cash flows prepared by the indirect method?
- A gain from the sale of equipment
- depreciation expense
- a decrease in accounts receivable
- an increase in accounts payable

Answer 15

A gain from the sale of equipment

Question 16

Chaffy coffee financial statements show Ann net loss of $180,000. The following items also appear on Chaffey’s balance sheet:
Depreciation expense $84,000
Accounts receivable $120,000
Inventory decrease $48,000
Accounts payable $24,000
Accrued liabilities increase $36,000

What is chappy’s net cash flow from operating activities? The company uses the indirect method.
- $84,000
- -$156,000
- $348,000
- -$180,000

Answer 16

-$156,000

(-$180,000 plus $84,000 -$120,000 plus $48,000 -$24,000 + $36,000 equals ($156,000)

Question 17

The indirect method of preparing a statement of cash flows
- Results in the same net cash flow from operating activities as the direct method
- Is the method most often used in practice
- Involves the net income figure for any non-cash expenses
- Does all of these items?

Answer 17

Does all of these items?

Question 18

The approach to preparing a statement of cash flows that adjust net income to cash flows from operations is the
- direct method
- Indirect method
- All financial resources method
- worksheet method

Answer 18

Indirect method

Question 19

The purchase of inventory on account would increase
- Cash from operating activities
- Cash from financing activities
- working capital
- None of these are correct

Answer 19

None of these are correct