Question 1

An outdoor water park that has a calendar year-end and is located in an area of the country that has warmer weather during April through September and colder weather during the rest of the year is likely to have:

Accepted Answer

A)   unpredictable fluctuations in cash flow from quarter to quarter.
B)   the largest cash inflow from operating activities in the second and third quarters (April through September) .
C)   a fairly stable cash flow across all four quarters.
D)   the largest cash inflow from operating activities in the fourth and first quarters (October through March) .E) B) and C)
F) All of the above

Question 2

A corporation prepared its statement of cash flows for the year. The following information is taken from that statement:  What is the cash balance at the beginning of the year?

Accepted Answer

A)   $5,600
B)   $2,800
C)   $6,300
D)   $15,400E) A) and C)
F) A) and B)

Question 3

When the indirect method is used, if accounts receivable increases during the accounting period, the change in accounts receivable is:

Accepted Answer

A)   added to the change in the cash account.
B)   subtracted from net income.
C)   added to net income.
D)   subtracted from the change in the cash account.E) C) and D)
F) All of the above

Question 4

Subtracting a decrease in Unearned Revenue from net income eliminates the effect of recording revenue that:

Accepted Answer

A)   increased net income, but did not impact cash this period.
B)   decreased net income, but did not impact cash this period.
C)   increased net income and increased cash flow this period.
D)   decreased net income and decreased cash flow this perioD.Subtracting decreases in current liabilities eliminates the effects of transactions that increased net income but did not affect cash. For example, a company decreases Unearned Revenue and increases net income in the current period when it fulfills its prior obligations to provide services, but cash is not affecteD.E) A) and C)
F) All of the above

Question 5

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows. When Accrued Liabilities increase, it means that the company:

Accepted Answer

A)   paid more cash than it recorded as operating expenses.
B)   paid less cash than it recorded as operating expenses.
C)   prepaid the operating expenses before they were incurred or recorded.
D)   paid for the operating expenses as they were recordeD.When expenses are recorded, the balance in Accrued Liabilities increases. When payments are made, Accrued Liabilities decreases. When Accrued Liabilities increase, it means the company paid that much less cash than it recorded as operating expenses. This amount must be subtracted when computing cash paid to employees and service suppliers for operating expenses.E) B) and C)
F) None of the above

Question 6

Almost all U.S. companies have used the indirect method of preparing the statement of cash flows:

Accepted Answer

A)   because most users of the financial statements do not understand the direct method.
B)   in spite of the FASB's stated preference for the direct method.
C)   because it usually requires less space in the annual report.
D)   so that stockholders cannot determine how much cash was spent on executives' salaries.E) None of the above
F) All of the above

Question 7

If operating cash flows are calculated using the indirect method, which of the choices below correctly states the direction of adjustments to convert net income into net cash provided by or used in operations?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) A) and C)
F) A) and B)

Question 8

Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows.  What is the net cash provided by (used in)  operating activities?

Accepted Answer

A)   $15,000
B)   $6,000
C)   ($4,000) 
D)   ($75,000) E) B) and C)
F) A) and B)

Question 9

Penman Corporation showed Salaries and Wages Expense of $488,000 on its income statement. If the Salaries and Wages Payable account was $54,000 at the beginning of the year and $37,000 at the end of the year, how much cash was paid to employees?

Accepted Answer

A)   $434,000
B)   $451,000
C)   $505,000
D)   $471,000E) A) and D)
F) A) and C)

Question 10

Cash flows from investing activities include:

Accepted Answer

A)   changes in Accounts Receivable.
B)   sale of land.
C)   paying principal to lenders.
D)   cash dividends paiD.Sale of land is an investing activity. A change in Accounts Receivable relates to operating activities. Paying principal to lenders and cash dividends paid are financing activities.E) None of the above
F) A) and B)

Question 11

Which of the following statements about preparation of the statement of cash flows is correct?

Accepted Answer

A)   GAAP allows the indirect method only.
B)   GAAP allows the direct method only.
C)   GAAP allows either the indirect or direct method.
D)   Although GAAP allows either method for the preparation of the operating activities section of the statement of cash flows, the indirect method must be used to prepare the investing activities section of the statement of cash flows.E) All of the above
F) B) and C)

Question 12

If interest revenue for the period is $14,000 and the beginning and ending interest receivable balances are $1,320 and $5,900, respectively, cash received for interest is:

Accepted Answer

A)   $14,000.
B)   $9,420.
C)   $18,500.
D)   $8,100.E) None of the above
F) A) and B)

Question 13

In general, the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows

Accepted Answer

A) True 
 B)False

Question 14

The Viviana Co. uses the indirect method to determine its cash flow from operations. Which of the following items will be subtracted from net income to find its cash flow from operations?

Accepted Answer

A)   Decrease in Supplies
B)   Increase in Accounts Payable
C)   Depreciation Expense
D)   Increase in Accounts Receivable.E) A) and B)
F) A) and C)

Question 15

When the indirect method is used to determine net cash provided by (used in)  operating activities, adding an increase in Interest Payable to net income eliminates the effect of recording expenses that:

Accepted Answer

A)   increased net income, but did not impact cash.
B)   decreased net income, but did not impact cash.
C)   increased net income and increased cash flow.
D)   decreased net income and decreased cash flow.E) A) and B)
F) A) and C)

Question 16

The difference between net income and cash flow may be due to all of the following except:

Accepted Answer

A)   use of the direct method of presenting cash flows from operating activities.
B)   the company being brand new.
C)   fraudulent financial reporting.
D)   seasonal variations in a company's operating activities.E) A) and D)
F) A) and C)

Question 17

The advantages of the direct method include all of the following except:

Accepted Answer

A)   it allows for more detailed analysis of operating cash flows.
B)   it provides more information than the indirect method to relate cash inflows and outflows.
C)   it allows for more reliable prediction of future cash flows.
D)   comparisons between companies are facilitated since most U.S. companies use the direct methoD.Most U.S. companies use the indirect methoD.E) A) and B)
F) A) and C)

Question 18

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $35,000 cash.
Required:
Part a. Prepare the journal entry to record this transaction.
Part b. Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.

Accepted Answer

Part a

Part b
The loss on disposal in t...

Question 19

Consider the following information:  Required:
Use the indirect method to compute the amount of net cash flows provided by (used in) operating activities.

Accepted Answer

The answer of Consider the following information:  Required:
Use the...

Question 20

Which of the following would not be added to net income in calculating cash flows from operating activities on a statement of cash flows prepared using the indirect method?

Accepted Answer

A)   Amortization Expense
B)   A decrease in Accounts Receivable
C)   An increase in Salaries and Wages Payable
D)   A gain on sale of equipmentE) A) and B)
F) A) and D)

Exam 12: Statement of Cash Flows

An outdoor water park that has a calendar year-end and is located in an area of the country that has warmer weather during April through September and colder weather during the rest of the year is likely to have:

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When the indirect method is used, if accounts receivable increases during the accounting period, the change in accounts receivable is:

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Cash flows from investing activities include:

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Flynn Corporation had the following cash flows for the current year. The company uses the direct method in preparing the statement of cash flows. What is the net cash provided by (used in) operating activities?

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Which of the following would not be added to net income in calculating cash flows from operating activities on a statement of cash flows prepared using the indirect method?

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If operating cash flows are calculated using the indirect method, which of the choices below correctly states the direction of adjustments to convert net income into net cash provided by or used in operations?

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Subtracting a decrease in Unearned Revenue from net income eliminates the effect of recording revenue that:

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Almost all U.S. companies have used the indirect method of preparing the statement of cash flows:

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When the indirect method is used to determine net cash provided by (used in) operating activities, adding an increase in Interest Payable to net income eliminates the effect of recording expenses that:

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Consider the following information: Required: Use the indirect method to compute the amount of net cash flows provided by (used in) operating activities.

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If interest revenue for the period is $14,000 and the beginning and ending interest receivable balances are $1,320 and $5,900, respectively, cash received for interest is:

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A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $35,000 cash. Required: Part a. Prepare the journal entry to record this transaction. Part b. Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.

Correct AnswerverifiedPart a Part bThe loss on disposal in t...View AnswerShow Answer

Penman Corporation showed Salaries and Wages Expense of $488,000 on its income statement. If the Salaries and Wages Payable account was $54,000 at the beginning of the year and $37,000 at the end of the year, how much cash was paid to employees?

Correct AnswerverifiedShow Answer

In general, the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows

Correct AnswerverifiedShow Answer

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows. When Accrued Liabilities increase, it means that the company:

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The difference between net income and cash flow may be due to all of the following except:

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Which of the following statements about preparation of the statement of cash flows is correct?

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The Viviana Co. uses the indirect method to determine its cash flow from operations. Which of the following items will be subtracted from net income to find its cash flow from operations?

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The advantages of the direct method include all of the following except:

Correct AnswerverifiedShow Answer

A corporation prepared its statement of cash flows for the year. The following information is taken from that statement: What is the cash balance at the beginning of the year?

Correct AnswerverifiedShow Answer

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Part a Part b
The loss on disposal in t...
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