Question 1

Snowberry Corporation had a net increase in Retained Earnings of $182,000 for the year.The corporation also paid $56,000 of cash dividends that had been declared in the previous year.This year,the corporation declared $50,400 of dividends but has not paid them as of year-end.Given this information,the net income for the current year must have been:

Accepted Answer

A)  $176,400
B)  $238,000
C)  $182,000
D)  $232,400E) B) and D)
F) B) and C)

Question 2

Match between columns
                        Premises: Increase in Prepaid Expenses
Decrease in Accounts Payable
Increase in Accumulated Depreciation
Increase in Interest Payable
Decrease in Unearned Income
Increase in Long-Term Notes Payable
Decrease in Prepaid Insurance
Increase in Inventory
Increase in Accrued Expenses
Decrease in Accounts Receivable

Accepted Answer

The Answer of No adjustment necessary and Add item to is...

Question 3

Emerald Co.owned equipment with a book value of $72,000 that was sold during this accounting period for $18,300 in cash,and purchased new equipment for cash of $88,800.Emerald Co.would record a debit of:

Accepted Answer

A)  $88,800 and a credit of $18,300 to the cash account for a net cash inflow of $70,500.
B)  $88,800 and a credit of $53,700 to the cash account for a net cash inflow of $35,100.
C)  $18,300 and a credit of $88,800 to the cash account for a net cash outflow of $70,500.
D)  $53,700 and a credit of $88,800 to the cash account for a net cash outflow of $35,100.E) C) and D)
F) None of the above

Question 4

A ski resort with a calendar year-end 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 - 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 - March) .E) B) and C)
F) A) and D)

Question 5

Match each term with the appropriate definition.Not all definitions will be used.
-Cash Outflow

Accepted Answer

A)  Results from activities such as purchases of goods and assets,payment of debt,payment of cash dividends,and payment of taxes.
B)  The starting point for calculating operating cash flows with the direct method.
C)  The percent of a company's net cash flow that comes from investing and financing activities.
D)  A balance sheet that shows the starting and ending balance of the different accounts;it is used to calculate the net cash flow provided by operating activities.
E)  Purchases and sales of this are classified as operating activities.F) Reported as supplement disclosures or in the notes section to the financial statements rather than within the body of the statement of cash flows.G) Cash flows from operations in excess of amount paid to replace property,plant and equipment and to pay cash dividends to stockholders.H) Cash flows in excess of net income.I) Purchases and sales of this are classified as investing activities.J) Results from activities such as sales of goods and assets,receipt of cash dividends,and receipts of interest.K) A financial statement that tracks the flow of cash into and out of a company according to the three types of activities that generate the flows.L) An adjustment made when using the indirect method of calculating cash flows from operating activities.M) Cash a company receives that is not subject to income tax.N) The starting point for calculating operating cash flows with the indirect method.O) I) and L)
P) A) and G)

Question 6

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.E) B) and C)
F) A) and D)

Question 7

A company loaned $1,000,000 with interest at 7% to another company.The interest revenue from this loan would be reported on the statement of cash flows as a:

Accepted Answer

A)  cash inflow from operating activities.
B)  cash inflow from investing activities.
C)  cash inflow from financing activities.
D)  noncash investing and/or financing activity.E) A) and B)
F) A) and C)

Question 8

Assume a company uses the direct method to prepare its statement of cash flows.If the company's Accounts Receivable increase during the accounting period,the change in Accounts Receivable is:

Accepted Answer

A)  added to the change in the Cash account to calculate cash collected from customers.
B)  subtracted from Sales Revenue to calculate the cash collected from customers.
C)  added to Sales Revenue to calculate the cash collected from customers.
D)  subtracted from the change in the Cash account to calculate cash collected from customers.E) All of the above
F) B) and C)

Question 9

Which of the following statements about the statement of cash flows is not correct?

Accepted Answer

A)  GAAP requires every company to report a statement of cash flows.
B)  The statement of cash flows is contained in the notes to the financial statements.
C)  The statement of cash flows is needed because the income statement and balance sheet do not provide adequate information about the changes in cash.
D)  The statement of cash flows provides information about how each major type of business activity causes a company's cash to change.E) C) and D)
F) B) and C)

Question 10

Which of the following is the best measure of a company's profitability?

Accepted Answer

A)  Cash-based net income
B)  Accrual-based net income
C)  Accounts Receivable
D)  Sales RevenueE) A) and D)
F) A) and C)

Question 11

Match each term with the appropriate definition.Not all definitions will be used.
-Operating Activities

Accepted Answer

A)  A measure of the amount by which current assets exceed current liabilities.
B)  Cash inflows and outflows related to the sale or purchase of investments and long-lived assets.
C)  Include assets that are very liquid and are purchased by the entity within three months of maturity.
D)  These activities include only purchases made with borrowed funds.
E)  Must include cash paid for interest and income tax in a separate schedule.F) Measures the ability of a company to finance its interest payments with its operating cash flow before taxes and interest.G) Cash inflows and outflows related to financing sources external to the company (owners and lenders) .H) These activities include money lent by a company as well as money borrowed by a company.I) Reports the components of cash flows from operating activities as gross receipts and gross payments.J) This ratio uses net income instead of operating cash flow to analyze a company's ability to finance the cost of its debt.K) Cash inflows and outflows related to components of net income.L) Presents the operating activities section of the cash flow statement by adjusting net income to compute cash flows from operating activities.M) A) and E)
N) I) and K)

Question 12

Marion Manufacturing had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.   Cash receipts from issuance of stock 60,000 Bonds payable issued at face value 250,000 Cash dividends received from long-term investments 4,500 Cash paid for wages 20,000 Cash paid for dividends 5,000 Cash received from customers 42,500 Cash paid for other operating expenses 19,500 Cash paid to purchase equipment 100,000\begin{array}{lr}	ext { Cash receipts from issuance of stock } & 60,000 \	ext { Bonds payable issued at face value } & 250,000 \	ext { Cash dividends received from long-term investments } & 4,500 \	ext { Cash paid for wages } & 20,000 \	ext { Cash paid for dividends } & 5,000 \	ext { Cash received from customers } & 42,500 \	ext { Cash paid for other operating expenses } & 19,500\	ext { Cash paid to purchase equipment }&100,000\end{array} Cash receipts from issuance of stock  Bonds payable issued at face value  Cash dividends received from long-term investments  Cash paid for wages  Cash paid for dividends  Cash received from customers  Cash paid for other operating expenses  Cash paid to purchase equipment ​60,000250,0004,50020,0005,00042,50019,500100,000​  If the cash balance at the beginning of the current year was $0,what is the amount of cash at the end of the year?

Accepted Answer

A)  $56,250
B)  $212,500
C)  $368,750
D)  $155,750 E) None of the above
F) B) and D)

Question 13

When the net cash flows from operating,investing,and financing activities are combined to arrive at the overall net change in cash,a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance.

Accepted Answer

A) True 
 B)False

Question 14

Assume that the indirect method is used to determine net cash provided by (used in) operating activities and that Accounts Receivable balance decreased by $10 million during the year.That $10 million should be:

Accepted Answer

A)  added to net income.
B)  subtracted from net income.
C)  added to investing activities.
D)  subtracted from investing activities.E) B) and D)
F) None of the above

Question 15

Negative operating cash flow may indicate all of the following except:

Accepted Answer

A)  the company may not be able to replace property,plant and equipment.
B)  stockholders may not receive a dividend.
C)  the company may be in the introductory phase of its life cycle.
D)  the company did not earn a profit from its core business activity.E) C) and D)
F) B) and C)

Question 16

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 17

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.E) B) and C)
F) A) and C)

Question 18

ABC Company issued 30,000 shares of common stock in January.In August,the company repurchased 5,000 shares for the treasury.When reporting these transactions in the statement of cash flows,ABC Company ________ combine them into one transaction in the ________ activities section.

Accepted Answer

A)  can;financing
B)  cannot;financing
C)  cannot;investing
D)  can;investingE) A) and B)
F) All of the above

Question 19

The following information is taken from the income statement of Olympic,Inc.:   Depreciation Expense $90,000 Amortization Expense 15,000 Loss on Sale of Equipment 9,000 Gain on Sale of Building 27,000 Net Income 315,000\begin{array}{lr}	ext { Depreciation Expense } & \$ 90,000 \	ext { Amortization Expense } & 15,000 \	ext { Loss on Sale of Equipment } & 9,000 \	ext { Gain on Sale of Building } & 27,000\	ext { Net Income }&315,000\end{array} Depreciation Expense  Amortization Expense  Loss on Sale of Equipment  Gain on Sale of Building  Net Income ​$90,00015,0009,00027,000315,000​  Based on this information,what is the amount of net cash flow provided by operating activities?

Accepted Answer

A)  $447,000
B)  $420,000
C)  $438,000
D)  $402,000 E) None of the above
F) A) and B)

Question 20

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.E) A) and D)
F) C) and D)

Exam 12: Statement of Cash Flows

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Correct Answer
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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:

Correct Answer
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Assume that the indirect method is used to determine net cash provided by (used in) operating activities and that Accounts Receivable balance decreased by $10 million during the year.That $10 million should be:

Correct Answer
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When the net cash flows from operating,investing,and financing activities are combined to arrive at the overall net change in cash,a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance.

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Cash Outflow

Correct Answer
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Which of the following is the best measure of a company's profitability?

Correct Answer
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Assume a company uses the direct method to prepare its statement of cash flows.If the company's Accounts Receivable increase during the accounting period,the change in Accounts Receivable is:

Correct Answer
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A company loaned $1,000,000 with interest at 7% to another company.The interest revenue from this loan would be reported on the statement of cash flows as a:

Correct Answer
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Emerald Co.owned equipment with a book value of $72,000 that was sold during this accounting period for $18,300 in cash,and purchased new equipment for cash of $88,800.Emerald Co.would record a debit of:

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

Correct Answer
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Which of the following statements about the statement of cash flows is not correct?

Correct Answer
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Match each item with the correct letter below to indicate how each revenue or expense account on the income statement is adjusted when using the direct method to determine net cash flow provided by operating activities.

A ski resort with a calendar year-end is likely to have:

Correct Answer
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ABC Company issued 30,000 shares of common stock in January.In August,the company repurchased 5,000 shares for the treasury.When reporting these transactions in the statement of cash flows,ABC Company combine them into one transaction in the activities section.

Correct Answer
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Match each term with the appropriate definition.Not all definitions will be used. -Operating Activities

Correct Answer
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Cash flows from investing activities include:

Correct Answer
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Negative operating cash flow may indicate all of the following except:

Correct Answer
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Exam 12: Statement of Cash Flows

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

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:

Correct AnswerverifiedShow Answer

Assume that the indirect method is used to determine net cash provided by (used in) operating activities and that Accounts Receivable balance decreased by $10 million during the year.That $10 million should be:

Correct AnswerverifiedShow Answer

When the net cash flows from operating,investing,and financing activities are combined to arrive at the overall net change in cash,a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance.

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Cash Outflow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is the best measure of a company's profitability?

Correct AnswerverifiedShow Answer

Assume a company uses the direct method to prepare its statement of cash flows.If the company's Accounts Receivable increase during the accounting period,the change in Accounts Receivable is:

Correct AnswerverifiedShow Answer

A company loaned $1,000,000 with interest at 7% to another company.The interest revenue from this loan would be reported on the statement of cash flows as a:

Correct AnswerverifiedShow Answer

Emerald Co.owned equipment with a book value of $72,000 that was sold during this accounting period for $18,300 in cash,and purchased new equipment for cash of $88,800.Emerald Co.would record a debit of:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following statements about the statement of cash flows is not correct?

Correct AnswerverifiedShow Answer

Match each item with the correct letter below to indicate how each revenue or expense account on the income statement is adjusted when using the direct method to determine net cash flow provided by operating activities.

A ski resort with a calendar year-end is likely to have:

Correct AnswerverifiedShow Answer

ABC Company issued 30,000 shares of common stock in January.In August,the company repurchased 5,000 shares for the treasury.When reporting these transactions in the statement of cash flows,ABC Company ________ combine them into one transaction in the ________ activities section.

Correct AnswerverifiedShow Answer

Match each term with the appropriate definition.Not all definitions will be used. -Operating Activities

Correct AnswerverifiedShow Answer

Cash flows from investing activities include:

Correct AnswerverifiedShow Answer

Negative operating cash flow may indicate all of the following except:

Correct AnswerverifiedShow Answer

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ABC Company issued 30,000 shares of common stock in January.In August,the company repurchased 5,000 shares for the treasury.When reporting these transactions in the statement of cash flows,ABC Company combine them into one transaction in the activities section.

Correct Answer
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