acct 253 ch 23

The primary purpose of the statement of the cash flows is to provide information about the
A. entity's ability to generate future cash flows
B. reasons for the difference between net income and net cash flow from operating activities
C. entity's cash receipts and cash payments during a period
D. entity's ability to pay dividends and meet obligations

Activities involving the cash effects of transactions that enter into the determination of net income are
A. financing activities
B. operating activities
C. investing activities
D. noncash investing and financing activities

The information to prepare the statement of cash flows come from all of the following sources except
A. comparative balance sheets
B. retained earnings statement
C. current income statement
D. selected transaction data

Net cash flow from operating activities is determined by eliminating
A. noncash expenses from net income
B. earned revenues from net income
C. incurred expenses from net income
D. noncash revenues and noncash expenses from net income

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
A. reconciliation method
B. direct method
C. indirect method
D. cash flow method

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
A. indirect method
B. income statement method
C. direct method
D. adjustment method

The reconciliation of net income to net cash flow from operating activities is reported under
A. the direct method only
B. the indirect method only
C. both the direct method and the indirect method
D. neither the direct method and the indirect method

All of the following adjustments are added to net income in computing net cash flow from operating activities except
A. amortization expense
B. an increase in prepaid expenses
C. a decrease in accounts receivable
D. an increase in accounts payable

All of the following adjustments would be deducted in determining net cash flow from operating activities except
A. decrease in deferred income tax liability
B. gain on sale of plant assets
C. amortization of bond premium
D. increase in accrued liabilities

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
B. minus an increase in inventory and plus a decrease in accounts payable
C. plus an increase in inventory and accounts payable
D. minus a decrease in inventory and accounts payable

Under the direct method, cash payments for operating expenses equals operating expenses
A. minus a decrease in prepaid expenses and plus a decrease in accrued expenses payable
B. plus a decrease in prepaid expenses and minus an increase in accrued expenses payable
C. minus a decrease in prepaid expenses and accrued expenses payable
D. plus an increase in prepaid expnese and accrued expenses payable

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
B. amortization expense
C. depreciation expense
D. amortization of bond discount

Acquiring assets by issuing equity securities would be reported as
A. a noncash investing acting and financing activity
B. both an investing activity and a financing activity
C. an investing activity
D. a financing activity

Which of the following statements related to a work sheet used for preparating of the statement of cash flows is not correct?
A. all of the options are correct
B. accounts with debit balances are listed separately from those with credit balances in the balance sheet accounts section
C. The reconciling items shown in the work sheet are entered in a journal and posted to appropriate accounts
D. inflows of cash are entered as debits and outflows are entered as credits in the reconciling columns

The last step in the preparation of the statement of cash flows work sheet to enter the
A. balance sheet accounts and their beginning balances in the balance sheet section
B. increase or decrease in cash at the bottom of the work sheet
C. data which explain the changes in the balance sheet accounts in the reconciling columns of the work sheet
D. balance sheet accounts and their ending balances in the balance sheet accounts section

It is an objective of the statement of cash flows to
A. disclose changes during the period in all asset and all equity accounts
B. provide information about the operating, investing, and financing activities of an entity during a period
C. disclose the change in working capital during the period
D. none of these

The primary purpose of the statement of cash flows is to provide information
A. that is useful in assessing cash flow prospects
B. about the entity's ability to meet its obligating, its ability to pay dividends, and its needs for external financing
C. about the cash receipts and cash payments of an entity during a period
D. about the operating, investing, and financing acitivities of an entity during a period

Of the following questions, which one would not be answered by the statement of cash flows?
A. What was the cash used for during the period?
B. Where did the cash come from during the period?
C. Were all the cash expenditutes of benefit to the company during the period?
D. What was the change in cash balance during the period

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
B. statements of cash flows
C. statements of retained earnings
D. income statements

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)
A. cash inflow from investing activities
B. addition adjustment to net income in the cash flows from operating activities section
C. cash inflow from financing activities
D. cash outflow from investing activities

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 all transactions that have no current or future effect on cash, such as depreciation, from the net income computation
B. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash
C. estimating the percentage of income transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions
D. re-recording all income statement transactions that directly affect cash in a separate cash flow journal

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

A statement of cash flows typically would not disclose the effects of
A. a purchase and immediate retirement of treasury stock
B. cash dividends paid
C. capital stock issued at an amount greater than par value
D. stock dividends declared

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

Which of the following would be classified as a financing activity on a statement of cash flows?
A. deposit to a bond sinking fund
B. declaration and distribution of a stock dividend
C. sale of a loan receivable
D. payment of interest to a creditor

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. investing activity
B. deduction from net income
C. financing activity
D. addition to net income

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. added to/added to
B. deducted from/deducted from
C. add to/deducted from
D. deducted from/added to

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. inventory purchased during the period was less than inventory sold resulting in a net cash increase
B. acquisition of inventory is an investing activity
C. cost of goods sold on an accrual basis is lower than on a cash basis
D. cash was increased while cost of goods sold was decreased

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
A. decrease/increase
B. increase/decrease
C. increase/increase
D. decrease/decrease

In determining net cash flow from operating activities, a decrease in accounts payable during a period
A. requires an increase adjustment to cost of goods sold under the direct method
B. requires an addition adjustment to net income under the indirect method
C. requires a decrease adjusmtment to cost of goods sold under the direct method
D. means that income on an accrual basis is less than income on a cash basis

Which of the following statement is correct?
A. the indirect method starts with income before extraordinary items
B. the direct method is more consistent with the primary purpose of the statement of cash flows
C. all of these
D. the direct method is known as the reconciliation method

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
A. be shown as cash inflow from investing activities
B. be shown as cash outflow from financing activities
C. not be shown
D. be shown as deduction from net income in the cash flows from operating activities section

How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?
A. They should be handled in a manner consistent with the transactions that affect cash flows.
B. Such transactions should be incorporated in the section (operating, financing, or investing) that is most representative of the major component of the transaction.
C. They should be incorporated in the statement of cash flows in a section labeled, "significant noncash transactions".
D. 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.