Horngren’s Financial and Managerial Accounting, 6e (Miller-Nobles)
1) The balance sheet shows why cash increased or decreased.
2) The statement of cash flows shows where cash came from and how cash was spent.
3) The statement of cash flows is dated the same as the balance sheet.
4) A business’s cash receipts and cash payments for a specific period are reported on a(n) ________.
A) income statement
B) balance sheet
C) statement of cash flows
D) cash reconciliation statement
5) Which of the following is true of the statement of cash flows?
A) It indicates when long-term debt will mature.
B) It reports on the qualitative behavior of the company‘s performance.
C) It covers a span of time and is dated the same as the income statement.
D) It shows how the profits or losses of the company were generated.
6) The statement of cash flows explains why net income as reported on the income statement does not
equal the change in the cash balance.
7) Investors and management use the statement of cash flows to evaluate a firm’s profitability.
8) The statement of cash flows is the link between the accrual-based income statement and the cash
reported on the balance sheet.
9) The statement of cash flows helps users ________.
A) predict future net income
B) evaluate management decisions
C) evaluate the company’s earnings per share
D) predict the growth of a company’s assets
10) One of the purposes of the statement of cash flows is to ________.
A) determine the operating income of a business
B) calculate inventory turnover
C) evaluate the level of debt and leverage of a company
D) predict the ability of a company to pay debts and dividends
11) Which of the following statements accurately describes the statement of cash flows?
A) It shows the relative proportion of debt and assets.
B) It is the link between the accrual-based income statement and the cash reported on the balance sheet.
C) It indicates when long-term debt will mature.
D) It is the link between net income and earnings per share.
12) List and discuss three ways in which the statement of cash flows helps financial statement users.
13) The operating activities section of the statement of cash flows includes activities that create revenue or
expenses for the entity‘s business.
14) The financing activities section of the statement of cash flows includes paying dividends and making
payments on long-term liabilities.
15) The investing activities section of the statement of cash flows reports cash receipts and payments that
increase or decrease long-term liabilities.
16) The financing activities section of the statement of cash flows includes activities that affect current
assets and current liabilities.
17) The operating activities section of the statement of cash flows reflects the cash flows that affect current
assets and current liabilities.
18) The cash paid for the purchase of equipment will typically be shown in the investing activities section
of the statement of cash flows.
19) The three sections of the statement of cash flows report only activities that involve cash.
20) A company purchased machinery by issuing a long-term note payable. This is an example of a non-
cash investing and financing activity for the statement of cash flows.
21) Under IFRS, interest revenue and dividend income may be reported either as an operating activity or
an investing activity.
22) Which of the following describes the operating activities section of the statement of cash flows?
A) It reports cash receipts and cash payments that increase or decrease long-term assets.
B) It includes cash inflows and outflows related to long-term liabilities and equity.
C) It reports on activities that create revenue or expenses for the entity’s business.
D) It reports on how cash flows affect the total assets and total liabilities.
23) Which of the following describes the financing activities section of the statement of cash flows?
A) It includes increases and decreases in long-term assets.
B) It includes cash inflows and outflows related to long-term liabilities and equity.
C) It includes interest and dividend income and cash payments for interest expense.
D) It reports on activities that create revenue or expenses for the entity’s business.
24) The purchase of equipment financed by a long-term notes payable is an example of ________.
A) investing activity
B) financing activity
C) operating activity
D) non-cash investing and financing activity
25) The contribution of equipment by a stockholder in exchange for common stock is an example of
________.
A) investing activity
B) financing activity
C) operating activity
D) non-cash investing and financing activity
26) The ________ section of the statement of cash flows includes increases and decreases in long-term
assets.
A) investing activities
B) financing activities
C) operating activities
D) non-cash operating activities
27) Identify how each of the following items is shown on the statement of cash flows. Identify each as
operating (O), investing (I), financing (F), or non-cash investing and financing (N).
Item
(O), (I), (F), (N)
Cash payment for salaries
Purchase of equipment in
exchange for notes payable
Cash receipts for the sale of
equipment
Item
(O), (I), (F), (N)
Cash payment for salaries
O
Purchase of equipment in
exchange for notes payable
N
Cash receipts for the sale of
equipment
I
28) Identify how each of the following items is shown on the statement of cash flows. Identify each as
operating (O), investing (I), financing (F), or non-cash investing and financing (N).
Item
(O), (I), (F), (N)
Cash received for the collection
of long-term notes receivable
Cash purchase of treasury stock
Land received in exchange for
issuance of common stock
Item
(O), (I), (F), (N)
Cash received for the collection
of long-term notes receivable
I
Cash purchase of treasury stock
F
Land received in exchange for
issuance of common stock
N
29) Identify how each of the following items is shown on the statement of cash flows. Identify each as
operating (O), investing (I), financing (F), or non-cash investing and financing (N).
Item
(O), (I), (F), (N)
Cash payment of
dividend
Cash paid for income
tax expense
Land received in
exchange for issuance
of common stock
Item
(O), (I), (F), (N)
Cash payment of
dividend
F
Cash paid for income
tax expense
O
Land received in
exchange for issuance
of common stock
N
30) The indirect and direct methods use different computations but produce the same amount of net cash
provided by operating activities.
31) The operating and financing activities of the statement of cash flows are presented differently
between the indirect and direct methods.