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    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2

Information about cash flows can influence decision makers in important ways.
Which of the following questions could be answered by the statement of cash flows?
(Check all that apply.)
 
How does a company spend its cash?
Can the company pay its debts?

 
Which of the following statements about the statement of cash flows are correct? (Check all that apply.)
 
The purpose is to report cash receipts and cash payments during a period.
It is a detailed disclosure of cash flows.
   
A company's cash receipts and cash payments are recorded in the cash account in its general ledger.
Identify which of the following could not be determined by analyzing the cash account?
 
Payment for land by issuing a note
   
A company reported total assets at the end of the previous year of $95,000; including cash of $35,000, accounts
receivable of $20,000, and inventory of $40,000. It reported total assets at the end of the current year of $110,000;
including cash of $44,000; accounts receivable of $29,000, and inventory of $37,000.
Compute the net increase or decrease in cash for the current year.
 
Increase of $9,000
   
The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items
that do not affect cash.
 
indirect
   
Both the direct and indirect methods of operating activities report which of the following items?
 
Net cash inflows (outflows)
   
Which of the following items would not be adjusted to net income when computing cash flows from operating
activities, using the indirect method?
 
Cash received from sale of building
   
Which of the following items would be adjusted to net income when computing cash flows from operating
activities, using the indirect method? (Check all that apply.)
 
Depreciation expense
Gain on sale of building
Loss on sale of investment
   
Which of the following items would be added to net income when reporting cash flows from operating activities,
using the indirect method? (Check all that apply.)
 
Increase in unearned fees
Increase in accounts payable
   
Which of the following items would not be a correct adjustment to net income to arrive at cash flows from
operating activities, using the indirect method?
 
Subtract increase in taxes payable
   
A company's cash receipts and cash payments are recorded in the cash account in its general ledger.
Which of the following can be determined by analyzing the cash account? (Check all that apply.)
 
Cash payments for equipment
Cash receipts from customers
Cash payments on notes
   
The information needed to prepare a statement of cash flows could come from all of the following sources,
except the:
 
statement of retained earnings.
   
When analyzing the noncash accounts to assist in preparing the statement of cash flows, the changes in liabilities,
equity and noncash asset accounts are analyzed along with the
 
income statement accounts
   
Accounts receivable had a debit balance of $4,000 at the beginning of the period, and a debit balance of $6,000 at
the end of the period. Based on this information, the adjustment to net income for the period will be reported as:
 
an increase of $2,000 which will be subtracted from net income
   
Sheldon Company's balance in prepaid insurance at the beginning and end of the year was $2,500 and $1,000,
respectively. This will be reported on the statement of cash flows using the indirect method as:
 
a decrease of $1,500 which will be added to net income
   
Inventory at the beginning of the period had a debit balance of $7,000, and a debit balance of $10,000 at the
end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:
 
an increase of $3,000 which will be subtracted from net income
   
A net cash ______ occurs when the payments in a category exceed the receipts.
 
outflow
   
Does the company have the resources to pursue opportunities?
The statement of cash flows explains the difference between beginning and ending balances of cash
and cash equivalents. A cash equivalent must exhibit all of the following criteria, except:
 
be held at a local institution.
   
The information needed to prepare a statement of cash flows could come from which of the following sources?
(Check all that apply.)
 
Cash account
Income statement
Comparative balance sheets
   
In addition to analyzing the cash account, a second approach to preparing the statement of cash
flows is to explain changes in cash by analyzing changes in
 
noncash asset accounts
equity accounts
liability accounts
   
The presentation of the _____ section is shown differently depending on if the statement of cash
flows is reported using the direct or indirect method.
 
Operating
   
Information on the statement of cash flows helps users answer all of the following questions except:
 
Why did the company invest in long-term assets?
   
Information about cash flows can influence decision makers in important ways.
Which of the following questions could be answered by the statement of cash flows? (Check all that a
 
Does the company have the resources to pursue opportunities?
Does the company have the ability to pursue opportunities?
   
The statement of cash flows explains the difference between the beginning and ending balances of
cash and cash equivalents. A cash equivalent must exhibit all of the following criteria except:
 
Be held at a local institution
   
A net cash _________ occurs when the receipts in a category exceed the payments.
Inflow
   
A net cash ______ occurs when the payments in a category exceed the receipts.
 
outflow
   
Lakeview, Inc.'s statement of cash flows reports financing activities with payments that exceed receipts.
This means that Lakeview had a net cash _____________ from financing activities.
 
outflow
   
There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.
 
1. compute the net increase or decrease in cash.
2. Compute net cash from or for operating activities
3. Compute net cash for investing
4. Compute net cash from or for financing activties
5. Compute the net cash from all sources; then prove it by adding it to the begging cash to get ending cash
   
The format of a statement of cash flows includes reporting cash flows from three activities including:
 
financing
operating
   
Which of the following is not one of the five important steps to preparing a statement of cash flows?
Compute the net income
   
A(n) _____________ activity includes those transactions and events that determine net income,
including the purchase of merchandise, the sale of goods and services to customers, and expenditures
to operate the business
 
Operating
   
To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:
 
Interest Payable
   
Red Co.'s beginning Common Stock balance was $110,000 and their ending Common Stock
balance was $125,000. This will be reported as _____ in the statement of cash flows.
 
an increase of $15,000 in the financing activities section
   
The three-step analysis to determine cash provided or used by investing activities includes:
 
determining the cash effects using T-accounts and reconstructed entries
reporting the cash flow effects
identifying changes in investing-related accounts
   
Cash flows from financing activities identifies cash receipts and cash payments related to which
of the following types of accounts? (Check all that apply.)
 
Bonds Payable
Common Stock
   
The three-step analysis to determine cash provided or used by financing activities includes:
 
reporting the cash flow effects
identifying changes in financing-related accounts
determine the cash effects using T-accounts and reconstructed entries
   
The three-step process to determine cash provided or used by financing activities includes all of the following steps except:
 
identify an increase or decrease in cash.
   
Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000.
This will be reported as _____ on the statement of cash flows.
 
an increase of $5,000 in the cash flows from financing activities section
   
At the beginning of the period, a company reported $100,000 of common stock, $10 par; and
$50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000
of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $
 
$50,000
   
Which of the following items are classified as noncash investing and financing activities?
(Check all that apply.)
 
Conversion of preferred stock to common stock

 
Retirement of debt by issuing stock


Lease of assets in a long-term lease transaction
   
Which of the following would not be reported under financing activities on the statement of cash flows?
 
Cash received from sale of plant assets
   
Which of the following transactions would not be classified as an operating activity on the statement of cash flows?
 
Cash Dividends paid to shareholders.
   
_________ activities include those transactions and events that affect long-term liabilities and equity,
such as obtaining cash from issuing debt and distributing cash to owners.
 
Financing
   
_______ activities include those transactions and events such as lending and collecting money for
notes receivable and cash receipts from sale of short-term investments.
 
Investing
   
LiveLife Company had a credit balance of $10,000 in accounts payable at the beginning of the
period, and a credit balance of $6,000 at the end of the period. Based on this information, the
adjustment to net income for the period will be reported as:
 
a decrease of $4,000 which will be subtracted from net income
   
Reid Company's balance in prepaid insurance at the beginning and end of the year was $1,000 and
$1,200, respectively. This will be reported on the statement of cash flows using the indirect method as:
 
an increase of $200 which will be subtracted from net income
   
Emerald Jewelery Store had a credit balance in interest payable of $200 at the beginning of the
period, and a credit balance of $50 at the end of the period. Based on this information, the
adjustment to net income for the period will be reported as:
 
a decrease of $150 which will be subtracted from net income
   
Accounts receivable had a debit balance of $10,000 at the beginning of the period, and a debit
balance of $6,000 at the end of the period. Based on this information, the adjustment to net
income for the period will be reported as:
 
a decrease of $4,000 which will be added to net income
   
Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $7,000
at the end of the period. Using the indirect method, this will be reported in the operating section of
the statement of cash flows as:
 
a decrease of $2,000 which will be added to net income
   
Which of the following items would be reported under financing activities on the statement of cash flows?
(Select all that apply).
 
Cash received from issuing notes payable
Cash dividends paid to shareholders
Cash paid to repay debt
   
Current liabilities _____ operations, including short-term notes payable and dividends payable are
categorized as financing activities.
 
unrelated to
   
Sunshine Company had a credit balance of $4,000 in accounts payable at the beginning of the period,
and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net
income for the period will be reported as:
 
an increase of $2,000 which will be added to net income
   
The Coffee Cup Company had a credit balance of $500 in interest payable at the beginning of the period,
and a credit balance of $600 at the end of the period. Based on this information, the adjustment to net
income for the period will be reported as:
 
an increase of $100 which will be added to net income
   
Accountants can use a three-step process to determine cash provided (or used) by investing activities.
Which of the following steps is not part of this process?
 
Identify adjustments to net income.
   
Investing activities are affected by
changes in long term assets
   
Identify which of the following items is a noncash investing and financing activity that must be reported
in a note to the statement of cash flows. (Check all that apply.)
 
Retirement of debt by issuing stock
Lease of an asset in a long-term lease transaction
   
The statement of cash flows reports noncash investing and financing transactions in
a note or separate schedule
   
Activities include those transactions and events that affect long-term liabilities and equity, such as
obtaining cash from issuing debt and distributing cash to owners.
 
financing
   
_______ activities include those transactions and events that affect long-term assets, such as lending
and collecting money for notes receivable and cash receipts from sale of long-term plant assets.
 
investing
   
Which of the following would not be reported under financing activities on the statement of cash flows?
 
Cash paid for interest owed
   
Which of the following items would be reported under financing activities on the statement of cash flows?
 
Cash paid to repay cash loans
Cash dividends paid to shareholders
Cash received from issuing notes payable
   
A company reported total assets at the end of 2017 of $95,000; including cash of $35,000, accounts
receivable of $20,000, and inventory of $40,000. It reported total assets at the end of 2018 of $110,000;
including cash of $44,000; accounts receivable of $29,000, and inventory of $37,000.
Compute the net increase or decrease in cash in 2018.
 
Increase of $9,000
   
Collecting money for notes receivable would be reported on the statement of cash flows as a(n)
 
investing
   
Which of the following transactions would not be classified as an operating activity on the statement
of cash flows?
 
Cash dividends paid to shareholders
   
Which of the following transactions would be reported under investing activities in the statement
of cash flows? (Check all that apply.)
 
Cash paid to purchase investments in securities
Cash paid to purchase plant assets
   
Click and drag on elements in order There are five important steps to preparing a statement of cash flows.
Rank the steps in order from first to last.
 
1. Compute the net increase or decrease in cash.
2. Compute and report the net cash provided or used by operating activities.
3. Compute and report the net cash provided or used by investing activities.
4. Compute and report the net cash provided or used by financing activities.
5. Compute the net cash flow by combining net cash provided or used by operating, investing, and financing activities and prove the change.
   
A company's cash receipts and cash payments are recorded in the cash account in its general ledger.
Which of the following can be determined by analyzing the cash account? (Check all that apply.)
 
Cash payments for equipment
Cash receipts from customers
Cash payments on notes
   
The _______ method of reporting the statement of cash flows reports net income and then
adjusts it for items necessary to obtain net cash provided or used by operating activities.
 
indirect
   
Which of the following would be included in the operating section when preparing the statement of cash flows using the indirect method?
 
Net income
   
A loss from the sale of an investment would be ____________ to (from) net income when
computing cash flows from operations, using the indirect method.
 
added
   
Which of the following items would be adjusted to net income when computing cash flows from
operating activities, using the indirect method? (Check all that apply.)
 
Gain on sale of building
Loss on sale of investment
Depreciation expense
   
Which of the following items would be correct adjustments to net income to arrive at cash flows
from operating activities, using the indirect method?
 
Add increase in accounts payable; subtract increase in inventory
   
An increase in accounts receivable would be________ to (from) net income, when computing
cash flows from operations using the indirect method
 
Subtracted
   
Which of the following transactions would not be reported under investing activities in
the statement of cash flows?
 
Cash paid for interest on long-term notes
   
Which of the following questions could not be answered from the statement of cash flows?
 
What are the earnings-per-share of common stock?
   
A cash ___________ must satisfy two criteria: (1) be readily convertible to a known amount of cash
and (2) be sufficiently close to maturity so its market value is unaffected by interest rate changes
 
equivalent
   
A(n) _______ occurs when the receipts in a category exceed the payments.
 
net cash inflow
   
_______________ activities include those transactions and events that determine net income.
 
Subtracted
   
In a statement of cash flows, cash received from the sale of a building would be classified
under "cash flows from BLANK activities."
 
investing
   
Which of the following is not one of the five important steps to preparing a statement of cash flows?
 
Compute the net income
   
Which of the following items would be added to net income when reporting cash
flows from operating activities, using the indirect method? (Check all that apply.)
 
Increase in unearned fees
Increase in accounts payable
   
Depreciation expense is (added/subtracted) to net income, when computing cash flows from
operations, using the indirect method.
 
added
   
To compute cash flows from financing activities, accountants normally analyze changes in all of the
following Common stock, retained earnings, bond payable, notes payable BUT NOT
 
interest payable
   
Identify which of the following items is not a noncash investing and financing activity that must be
reported in a note to the statement of cash flows.
 
Repayment of a note with cash
Purchase of a plant asset with cash
   
Which section of the statement of cash flows is affected by choosing to report using the direct method?
 
Operating Activities
   
Net cash provided by operating activities was $12,000. Net cash provided by investing activities
was $2,000. Net cash used in financing activities was $7,000. The cash balance at the beginning
of the year was $4,000. The cash balance at the end of the year is:
 
$11,000.
 
12,000 + 2,000 - 7,000 = 7,000
7,000 + 4,000 = 11,000
   
Which of the following items could be "other cash receipts"? Check all that apply.
 
Cash received from rent
Cash received from dividends
Cash received from interest
   
MRC Company reports the following information for 2018: total assets of $65,000 and total cash
provided from operations of $20,000; For 2017: total assets of $75,000 and cash provided from
operations of $5,000. Cash flow on total assets for 2018 is (round to the nearest tenth):
 
28.6%
 
20,000/[(65,000 + 75,000) / 2] = 0.2857 or 28.57% = rounded to 28.6%
   
It is important to analyze the sources and uses of cash because (select all that apply):
Creditors use this information to assist them in deciding whether to:
 
loan funds to them.
Investors use this information to decide if they will purchase their stock.
   
When a company's net income and cash flows from operations are significantly different,
it can sometimes indicate an issue with the (quantity/quality) of earnings.
 
quality
   
Other asset transactions affect a company's cash flows from investing activities including investment securities
 
Short-term notes receivable
   
The income statement shows Wages Expense of $4,000 for the period. The balance sheet indicates
that Wages Payable at the beginning of the year had a balance of $300 and at the end of the year
had a balance of $500. Cash paid for wages equals:
 
3,800
   
Reid Company's balance in prepaid insurance at the beginning and end of the year was $1,000
and $1,200, respectively. This will be reported on the statement of cash flows using the indirect
method as:
 
an increase of $200 which will be subtracted from net income
   
If all sales are for cash, the amount received from customers will equal the ______ reported
on the income statement.
 
sales
   
The information needed to prepare a statement of cash flows could come from all of the following sources,
except the:
 
statement of retained earnings.
   
Interest expense reported on the income statement was $1,000. The beginning balance in Interest
Payable was $150 and the ending balance was $50. Cash paid for interest during the period is equal to:
 
$1,100
   
The statement of cash flows does not report the following transactions
 
transactions between cash and cash equivalents
   
A net cash (inflow/outflow) occurs when the receipt's in a category exceed the payment
 
inflow
   
Retained earnings at the beginning and end of the year totaled $25,000 and $75,000, respectively.
Net income reported during the period was $70,000. Using this information, dividends paid will be
reported as _____ on the statement of cash flows.
 
a decrease of $20,000 in the financing activities section.
   
Net cash provided by operating activities was $12,000. Net cash provided by investing activities was
$2,000. Net cash used in financing activities was $7,000. The cash balance at the beginning of the year
was $4,000. The cash balance at the end of the year is:
 
11,000
   
The direct method of reporting operating cash flows begins with revenue and adjusts for changes in
related balance sheet accounts.
 
True
   
Cash received from customers = :
 
Net sales + Decrease in accounts receivable.
   
If all sales are for cash, the amount received from customers will equal the reported on the income statement.
 
sales
   
The formula used to compute the cash received from customers under the direct method is:
 
sales plus decrease in accounts receivable OR minus increase in accounts receivable
   
Dividends paid during a period totaled $5,000. This will be reported on the statement of cash flows as:
 
a decrease in the financing activities section
   
Accounts receivable had a debit balance of $4,000 at the beginning of the period, and a
debit balance of $3,000 at the end of the period. Credit sales for the period totaled $22,000.
Using this information, cash receipts for the period totaled:
 
$23,000
   
The three-step analysis to determine cash provided or used by investing activities includes:
 
explaining the changes using T-accounts and reconstructed entries reporting the cash flow effects identifying
changes in investing-related accounts
   
The __________ helps measure a company's ability to meet its obligations, pay dividends, expand operations,
and obtain financing. It is computed by taking cash flow from operations divided by average total assets.
 
cash flow on total assets
   
Which of the following items could be "other cash receipts"? (Check all that apply.)
 
Cash received from dividends
Cash received from rent
Cash received from interest
   
Which of the following items would not be considered an operating cash payment under the
direct method of reporting the statement of cash flows?
 
Cash paid for dividends
   
Income taxes expense reported on the income statement was $2,500. The beginning balance
in Income Taxes Payable was $1,000 and the ending balance was $1,500. Cash paid for taxes
during the period is equal to:
 
$2,000
   
Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $10,000
at the end of the period. Cost of goods sold for the period totaled $40,000. Using this information,
purchases for the period must have totaled:
 
$41,000
   
If rent receivable decreases during the period, cash received from renters is _____ rent revenue
reported on the income statement.
 
greater than
   
Reid Company pays for insurance policies in advance, recording the expenditure to Prepaid Insurance.
The balance in the prepaid insurance account at the beginning and end of the year was $1,000 and $1,200,
respectively. Insurance expense during this period totaled $10,000. Using this information, what is the total
cash paid for insurance during the period?
 
$10,200
   
Which of the following statements about the statement of cash flows are correct? (Check all that apply.)
 
The purpose is to report cash receipts and cash payments during a period.
It details the sources and uses of cash.
   
Which of the following questions could not be answered from the statement of cash flows?
 
What are the earnings-per-share of common stock?
   
Which of the following items would not be considered an operating cash payment under the
direct method of reporting the statement of cash flows
 
Cash paid for dividends
   
The statement of cash flows does not report activity for which of the following categories?
 
Purchases and sales of cash equivalents
   
Retained earnings at the beginning and end of the year totaled $10,000 and $55,000, respectively.
Net income reported during the period was $50,000. Using this information, dividends declared and paid are equal to:
 
$5000
   
The information needed to prepare a statement of cash flows could come from except which
of the following sources?
 
statement of retained earnings
   
Accountants can use a three-stage process to determine cash provided or used by investing
activities. Which of the following steps is not part of this process?
 
Identify adjustments to net income.

    Homework   1.1  1.2   2.1  2.2  3.1  3.2   4.1  4.2  5.1  5.2   6.1   6.2  7.1  7.2  8.1  8.2  9.1  9.2  10.1   10.2  11.1   11.2  12.1  12.2   13.1  13.2