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53 Cards in this Set

  • Front
  • Back
The statement of cash flows helps analysts evaluate the:

A. Source of cash used for debt repayments.
B. Source of cash used for plant expansion.
C. Differences between net income and net operating cash flow.
D. Source of cash used to finance investing activities.
E. All of these.
E
The statement of cash flows helps address questions such as

A. How is the increase in investments financed?
B. What is the source of cash for new plant assets?
C. How much cash is generated from or used in operations?
D. Why is cash flow from operations different from income?
E. All of these.
E
The cash flow on total assets ratio:

A. Is the same as return on assets.
B. Is the same as profit margin.
C. Can be an indicator of earnings quality.
D. Is highly affected by accounting principles of income recognition and measurement.
E. Is average net assets divided by cash flows from operations
C
The cash flow on total assets ratio is calculated by:

A. Dividing cash flows from operations by average total assets.
B. Dividing total cash flows by average total assets.
C. Dividing average total assets by cash flows from investing activities.
D. Dividing average total assets by total cash flows.
E. Total cash flows divided by average total assets times 365.
A
A company had net cash flows from operations of $120,000, cash flows from financing of $330,000, total cash flows of $500,000, and average total assets of $2,500,000. The cash flow on total assets ratio equals:

A. 4.8%.
B. 5.0%.
C. 20.0%.
D. 20.8%.
E. 24.0%.
A
A company had average total assets of $1,760,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $850,000. The cash flow on total assets ratio equals:

A. 1.33%.
B. 8.58%.
C. 11.65%.
D. 15.5%.
E. 75%.
C
A company had average total assets of $2,316,000, total cash flows of $1,320,000, cash flows from operations of $455,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:

A. 17.33%.
B. 20.97%.
C. 53.53%.
D. 34.47%.
E. 19.65%.
E
The statement of cash flows reports:

A. Assets, liabilities, and equity.
B. Revenues, gains, expenses, and losses.
C. Cash inflows and cash outflows for an accounting period.
D. Equity, net income, and dividends.
E. Changes in equity.
C
The statement of cash flows reports:

A. Cash flows from operating activities.
B. Cash flows from financing activities.
C. Cash flows from investing activities.
D. Significant non-cash financing and investing activities.
E. All of these.
E
The statement of cash flows is:

A. Another name for the statement of financial position.
B. A financial statement that presents information about changes in equity during a period.
C. A financial statement that reports the cash inflows and cash outflows for an accounting
period, and that classifies those cash flows as operating activities, investing activities, or
financing activities.
D. A financial statement that lists the types and amounts of assets, liabilities, and equity of a
business on a specific date.
E. A financial statement that lists the types and amounts of the revenues and expenses of a
business for an accounting period.
C
A cash equivalent is an investment that:

A. Is readily convertible to a known amount of cash.
B. Is sufficiently close to its maturity date so its market value is unaffected by interest rate
changes.
C. Generally is within 3 months of its maturity date.
D. Is highly liquid.
E. All of these.
E
An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n):

A. Short-term marketable equity security.
B. Operating activity.
C. Common stock.
D. Cash equivalent.
E. Financing activity.
D
Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

A. Financing activities.
B. Investing activities.
C. Operating activities.
D. Direct activities.
E. Indirect activities.
C
The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Schedule of non-cash investing or financing activity.
E. None of these. This is not reported on the statement of cash flows.
C
Which of the following items is reported on the statement of cash flows under financing activities?

A. Declaration of a cash dividend.
B. Payment of a cash dividend.
C. Declaration of a stock dividend.
D. Payment of a stock dividend.
E. Stock split.
B
Investing activities include the:

A. Purchase of plant assets.
B. Lending and collecting on notes receivable.
C. Sale of short-term investments other than cash equivalents.
D. Sale of plant assets.
E. All of these.
E
The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Schedule of non-cash investing or financing activity.
E. None of these. This is not reported on the statement of cash flows.
A
The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Schedule of noncash investing or financing activity.
E. None of these. This is not reported on the statement of cash flows.
B
A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from:

A. Operating activities.
B. Investing activities.
C. Financing activities.
D. Direct activities.
E. Indirect activities.
C
The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Schedule of non-cash investing or financing activity.
E. None of these. This is not reported on the statement of cash flows.
A
Which one of the following is representative of typical cash flows from operating activities?

A. Proceeds from collecting the principal amounts of loans.
B. Repayment of principals on loans.
C. Proceeds from the issuance of bonds and notes payable.
D. Payments by a merchandiser to acquire equity securities of other companies.
E. Receipts of cash sales.
E
Typical cash flows from investing activities include:

A. Payments to purchase property, plant and equipment or other productive assets (excluding inventory).
B. Proceeds from collecting the principal amount of notes receivable arising from customer
sales.
C. Proceeds from collecting the principal amount of notes receivable arising from
inter-company transactions.
D. Payments to acquire held-to maturity securities of other entities, except cash equivalents.
E. Proceeds from the sale of equipment.
B
If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

A. Operating activity.
B. Investing activity.
C. Financing activity.
D. Non-cash investing and financing activity.
E. None of these. This is not reported in the statement of cash flows.
A
Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Non-cash activities.
E. None of these. This is not reported in the statement of cash flows.
A
Cash flows from interest received on loans are reported in the statement of cash flows as part of:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Non-cash activities.
E. None of these. This is not reported in the statement of cash flows.
A
The accounting principle that requires important non-cash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

A. Historical cost principle.
B. Materiality principle.
C. Full disclosure principle.
D. Going concern principle.
E. Business entity principle.
C
The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Schedule of non-cash investing or financing activity.
E. Reconciliation of cash balance.
D
The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Schedule of non-cash financing and investing activities.
E. Reconciliation of cash balance
D
An example of a transaction that must be disclosed as a non-cash investing and financing activity includes:

A. The retirement of debt by issuance of equity.
B. The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance.
C. The leasing of assets in a transaction that qualifies as a capital lease.
D. The purchase of non-cash assets in exchange for equity or debt securities.
E. All of these.
E
Non-cash investing and financing activities may be disclosed in:

A. A note in the financial statements or a schedule attached to the statement of cash flows.
B. The operating activities section of the statement of cash flows.
C. The investing activities section of the statement of cash flows.
D. The financing activities section of the statement of cash flows.
E. The reconciliation of cash balance section.
A
Accounting standards:

A. Allow companies to omit the statement of cash flows from a complete set of financial
statements if cash is an insignificant asset.
B. Require that companies omit the statement of cash flows from a complete set of financial
statements if the company has no investing activities.
C. Require that companies include a statement of cash flows in a complete set of financial statements.
D. Allow companies to include the statement of cash flows in a complete set of financial
statements if the cash balance makes up more than 50% of the current assets.
E. Allow companies to omit the statement of cash flows from a complete set of financial
statements if the company has no financing activities.
C
The indirect method for the preparation of the operating activities section of the statement of cash flows:

A. Separately lists each major item of operating cash receipts.
B. Separately lists each major item of operating cash payments.
C. Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.
D. Is required if the company is a merchandiser.
E. Must not be used in all circumstances.
C
Of the following, which one affects cash during a period?

A. The declaration of a stock dividend.
B. Writing off an uncollectible account receivable.
C. The declaration of a cash dividend.
D. An adjusting entry recognizing the expiration of prepaid insurance.
E. The payment of interest expense accrued in a previous accounting period.
E
When using the indirect method to calculate and report the net cash provided or used by operating activities, net income is adjusted for:

A. Gains and losses from non-operating items.
B. Revenues and expenses that did not provide or use cash.
C. Changes in non-cash current assets and current liabilities related to operating activities.
D. Changes in current liabilities related to operating activities.
E. All of these.
E
When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from net income?

A. Decrease in income taxes payable.
B. Depreciation expense.
C. Amortization of intangible assets.
D. Bad debts expense.
E. Decrease in merchandise inventory.
A
When preparing a statement of cash flows on the indirect method, each of the following should be classified as an operating activity cash flow except:

A. An increase in accounts receivable.
B. A decrease in accounts payable.
C. A gain from disposal of a long-term asset
D. An increase in prepaid expenses.
E. A decrease in accrued expenses payable.
C
A company's Inventory balance at 12/31/11 was $188,000 and $200,000 at 12/31/10. Its Accounts Payable balance at 12/31/11 was $84,000 and $80,000 at 12/31/10, and its cost of goods sold for 2011 was $720,000. The company's total amount of cash payments for merchandise in 2011 equals:

A. $704,000.
B. $712,000.
C. $720,000.
D. $728,000.
E. $736,000.
A
Use the following information to calculate cash paid for wages and salaries:

Salaries expense $168,000
Salaries payable January 1 $6,400
Salaries payable December 31 $6,400

A. $157,400.
B. $163,800.
C. $168,000.
D. $172,200.
E. $174,400.
B
When preparing a statement of cash flows on the indirect method, which of the following is correct?

A. Proceeds from the sale of equipment should be added to net income in the operating
activities section.
B. A loss on the sale of land should be added to net income in the operating activities section.
C. The declaration of a cash dividend should be a use of cash in the financing activities
section.
D. The issuance of a stock dividend should be a use of cash in the financing activities section.
E. The purchase of land and a building by issuing a long-term note payable should be a source of cash in the financing activities section.
B
A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000; and gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

Calculate the net cash provided or used by operating activities.

A. $139,000.
B. $141,000.
C. $145,800.
D. $155,000.
E. $167,000.
B
Trenton reports net income of $230,000 for the year ended December 31, Year 2. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the new cash provided (used) in operating activities using the indirect method.

A. $376,450.
B. $351,450.
C. $356,450.
D. $319,950.
E. $263,750.
B
Castine reports net income of $305,000 for the year ended December 31, Year 2. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, and a $100,000 decrease in notes payable. Calculate the new cash provided (used) in operating activities using the indirect method.

A. $461,800.
B. $371,400.
C. $381,400.
D. $351,000.
E. $361,000.
C
A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

A. $50,000.
B. $5,000.
C. $45,000.
D. Zero. This is an operating activity.
E. Zero. This is a financing activity.
A
A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

A. $(3,000).
B. $(60,000).
C. $(57,000).
D. Zero. This is an operating activity.
E. Zero. This is an investing activity.
B
Becker Corporation paid cash dividends totaling $75,000 during its most recent fiscal year. How should this information be reported on Becker's statement of cash flows?

A. In operating activities as a source of funds.
B. In investing activities as a source of funds.
C. In investing activities as a use of funds.
D. In financing activities as a source of funds.
E. In financing activities as a use of funds.
E
Use the following information to calculate cash received from dividends:

Dividends revenue $29,800
Dividends receivable January 1 $2,600
Dividends receivable December 31 $3,400

A. $26,400.
B. $29,000.
C. $29,800.
D. $30,600.
E. $32,400.
B
Analysis reveals that a company had a net decrease in cash of $4,000 for the current year. Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the year-end cash balance is $21,000, the beginning cash balance was:

A. $3,000.
B. $7,000.
C. $17,000.
D. $25,000.
E. $39,000.
D
Stojko Corporation had a net decrease in cash of $10,000 for the current year. Net cash used in investing activities was $52,000 and net cash used in financing activities was $38,000. What amount of cash was provided (used) in operating activities?

A. $100,000 provided.
B. $(100,000) used.
C. $80,000 provided.
D. $(80,000) used.
E. $(10,000) used.
C
The accountant for Robinson Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

What is the ending balance for retained earnings?

A. $276,000.
B. $202,000.
C. $254,000.
D. $248,000.
E. $174,000.
B
The accountant for Robinson Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:

The amount of cash dividends paid during the year would be:

A. $70,000.
B. $46,000.
C. $22,000.
D. $39,000.
E. $24,000.
E
In preparing a company's statement of cash flows for the most recent year, the following information is available:

Net cash flows from investing activities for the year were:

A. $134,000 of net cash used by investing activities.
B. $134,000 of net cash provided by investing activities.
C. $120,000 of net cash used by investing activities.
D. $252,000 of net cash used by investing activities.
E. $221,000 of net cash provided by investing activities.
A
In preparing a company's statement of cash flows for the year just ended, the following information is available:

A. $130,000 of net cash used by financing activities.
B. $165,000 of net cash used by financing activities.
C. $222,000 of net cash used by financing activities.
D. $88,000 of net cash used by financing activities.
E. $206,000 of net cash used by financing activities.
D
Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold for its book value in Year 2. The following selected information is available for Sebring Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

December Year 1 Year 2
Equipment $610,000 $750,000
Accum, Dep. Equip. $428,000 $500,000

A. $72,000.
B. $68,000.
C. $28,000.
D. $40,000.
E. $36,000.
C