acct 253 ch 23

  1. The primary purpose of the statement of the cash flows is to provide information about the



    C. entity's cash receipts and cash payments during a period
  2. Activities involving the cash effects of transactions that enter into the determination of net income are



    D. operating activities
  3. The information to prepare the statement of cash flows come from all of the following sources except



    C. retained earnings statement
  4. Net cash flow from operating activities is determined by eliminating



    D. noncash revenues and noncash expenses from net income
  5. The method of calculating net cash flow from operating activities that result in the presentation of a condensed cash receipts and cash dispursements statement is the



    D. direct method
  6. The method of calculating net cash flow from operating activities that adjusts net income for items that affected reported net income but not cash is the



    D. indirect method
  7. The reconciliation of net income to net cash flow from operating activities is reported under



    C. both the direct method and the indirect method
  8. All of the following adjustments are added to net income in computing net cash flow from operating activities except



    A. an increase in prepaid expenses
  9. All of the following adjustments would be deducted in determining net cash flow from operating activities except



    D. increase in accrued liabilities
  10. Under the direct method, cash payments to suppliers equals cost of goods sold



    A. plus an increase in inventory and minus an increase in accounts payable
  11. Under the direct method, cash payments for operating expenses equals operating expenses



    C. minus a decrease in prepaid expenses and plus a decrease in accrued expenses payable
  12. Which of the following adjustments would be deducted in computing net cash flow from operating activities?



    A. a net increase in the investment account when the equity method is used
  13. Acquiring assets by issuing equity securities would be reported as



    A. a noncash investing and financing activity
  14. Which of the following statements related to a work sheet used for preparating of the statement of cash flows is not correct?



    B. The reconciling items shown in the work sheet are entered in a journal and posted to appropriate accounts
  15. The last step in the preparation of the statement of cash flows work sheet to enter the



    D. increase or decrease in cash at the bottom of the work sheet
  16. It is an objective of the statement of cash flows to



    A. provide information about the operating, investing, and financing activities of an entity during a period
  17. The primary purpose of the statement of cash flows is to provide information



    D. about the cash receipts and cash payments of an entity during a period
  18. Of the following questions, which one would not be answered by the statement of cash flows?



    B. Were all the cash expenditutes of benefit to the company during the period?
  19. The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements?



    • A. balance sheets
    • &
    • d. statements of retained earnings
  20. A company borrows $10,000 and signs a 90 day nontrade note payable. In preparing a statement of cash flows (indirect method), this event would be reflected as a(n)



    B. cash inflow from financing activities
  21. To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by



    A. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash
  22. An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconcillation method) as a(n)
    a addition to net income in arriving at net cash flow from operating activities
    b. deduction from net income in arriving at net cash flow from operating activities
    c. cash outflow from investing activities
    d. cash outflow from financing activities
    b. deduction from net income in arriving at net cash flow from operating activities
  23. A statement of cash flows typically would not disclose the effects of



    B. stock dividends declared
  24. Declaration of a cash dividend on common stock affects cash flows from operating activities under the direct and indirect methods as follows:
    Direct/indirect
    a. outflow/inflow
    b. inflow/inflow
    c. outflow/outflow
    d. no effect/no effect
  25. Which of the following would be classified as a financing activity on a statement of cash flows?



    D. deposit to a bond sinking fund
  26. The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n)



    A. deduction from net income
  27. Crabbe Compay reported $80,000 of selling and administrative expenses on its income statement for the past year. The company had depreciation expenses and an increase in prepaid expenses associated with the selling and administrative expenses for the year. Assuming use of the direct method, how would these items be handled in converting the accrual based selling and administrative expenses to the cash basis?
    depreciation/increase in prepaid expenses



    A. deducted from/added to
  28. When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because



    A. cost of goods sold on an accrual basis is lower than on a cash basis
  29. When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in determining cash flow from operating activities
    direct/indirect



    D. increase/increase
  30. In determining net cash flow from operating activities, a decrease in accounts payable during a period



    C. requires an increase adjustment to cost of goods sold under the direct method
  31. Which of the following statement is correct?



    C. the direct method is more consistent with the primary purpose of the statement of cash flows
  32. Riley Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Wood Co. during the current year, even though no dividends were declared or paid by Wood during the year. On Riley's statement of cash flows (indirect method), the $25,000 should



    C. be shown as deduction from net income in the cash flows from operating activities section
  33. How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?



    • B. These noncash transactions are not to be incorporated in the
    • statement of cash flows. The may be summarized in a separate schedule at
    • the bottom of the statement or appear in a separate supplementary
    • schedule of the financials.
Author
wsrdpc
ID
31646
Card Set
acct 253 ch 23
Description
acct 253 ch 23
Updated