70) When using a spreadsheet to prepare the statement of cash flows, a decrease in accounts
payable is entered in the Analysis of Changes columns with a debit in the statement of cash
flows section and a credit in the balance sheet section.
71) When using a spreadsheet to prepare the statement of cash flows, an increase in accounts
payable is entered in the Analysis of Changes columns with a debit in the statement of cash
flows section and a credit in the balance sheet section.
72) Depreciation expense is not reported on a statement of cash flows prepared under the direct
method.
73) Using the direct method, operating cash receipts includes cash received from customers.
74) Applying the direct method, the gain or loss from retirement of debt is reported under cash
flows from operating activities on the statement of cash flows.
75) 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.
76) The statement of cash flows reports all but which of the following:
A) Cash flows from operating activities.
B) Cash flows from financing activities.
C) Cash flows from investing activities.
D) Significant noncash financing and investing activities.
E) The financial position of the company at the end of the accounting period.
77) 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.
78) A cash equivalent is:
A) An investment readily convertible to a known amount of cash.
B) Close to its maturity date but its market value may still be affected by interest rate changes.
C) Generally within 3 years of its maturity date.
D) Is not considered highly liquid.
E) Another name for cash.
79) 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 unaffected by interest rate changes is a(n):
A) Equity method investment.
B) Operating activity.
C) Common stock.
D) Cash equivalent.
E) Financing activity.
80) 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.
81) 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 noncash investing or financing activity.
E) This is not reported on the statement of cash flows.
82) Which of the following items is reported on the statement of cash flows under financing
activities?
A) Purchase of equipment for cash.
B) Payment of a cash dividend.
C) Payment for merchandise.
D) Payment of a stock dividend.
E) Stock split.
83) Investing activities do not include the:
A) Purchase of plant assets.
B) Loaning of money in exchange for notes receivable.
C) Issuance of common stock.
D) Sale of plant assets.
E) Sale of short-term investments other than cash equivalents.
84) 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 noncash investing or financing activity.
E) This is not reported on the statement of cash flows.
85) 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) This is not reported on the statement of cash flows.
86) 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.
87) 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 noncash investing or financing activity.
E) This is not reported on the statement of cash flows.
88) Which one of the following is an example of 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 to acquire equity securities of other companies.
E) Receipts of cash from sales.
89) Cash flows from investing activities include each of the following except:
A) Payments to purchase plant assets.
B) Proceeds from collecting accounts receivable that arise from customer sales.
C) Payments to buy intangible assets.
D) Payments to acquire long-term investments.
E) Proceeds from the sale of equipment.
90) 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) Noncash investing and financing activity.
E) This is not reported in the statement of cash flows.
91) Cash flows from collections on credit sales are usually reported in the statement of cash
flows as part of:
A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Noncash activities.
E) This is not reported in the statement of cash flows.
92) Which of the following is included in the cash flows from financing activities section of the
statement of cash flows?
A) Interest revenue.
B) Sale of equipment.
C) Interest expense.
D) Purchase of treasury stock.
E) Purchase of stock in another company.
93) 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) Noncash activities.
E) This is not reported in the statement of cash flows.
94) All of the following are examples of noncash financing and investing except:
A) Retirement of debt by issuing equity stock.
B) Purchase of equipment by issuing a note payable.
C) Purchase of inventory using cash.
D) Purchase of a building by issuing equity stock.
E) Conversion of preferred stock to common stock.
95) 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 noncash investing or financing activity.
E) Reconciliation of cash balance.
96) 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 noncash financing and investing activities.
E) Reconciliation of cash balance.
97) An example of a transaction that must be disclosed as a noncash investing and financing
activity includes all but which of the following?
A) The retirement of debt by issuing equity stock.
B) A transaction exchanging cash equivalents for cash.
C) The leasing of assets in a long-term lease transaction.
D) The purchase of noncash assets in exchange for equity or debt securities.
E) The purchase of long-term assets financed by issuing a note or bond.
98) Noncash 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.
99) All of the following are true regarding the statement of cash flows except:
A) Operating activities include transactions and events that affect net income.
B) Financing activities include transactions that affect long-term liabilities and equity.
C) Investing activities include transactions that affect issuance of common stock.
D) Investing activities include transactions and events that come from the purchase and sale of
long-term assets.
E) Noncash activities are investing and financing activities that do not affect cash flows.
100) Common uses of the statement of cash flows include all but which of the following?
A) Management prediction of future cash flows for decision making.
B) Investor assessment of cash flows before buying and selling stock.
C) Creditor evaluation of a company’s ability to generate cash to cover debt.
D) Government assessment of whether the company paid the correct amount of taxes.
E) Management determination of the specific sources and uses of cash.
101) The statement of cash flows helps analysts evaluate all but which of the following?
A) Ability of the company to generate profit.
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) Source of cash used for debt repayments.
102) The statement of cash flows cannot help 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) How much of the company’s revenues have been retained as profit?
E) Why is cash flow from operations different from income?
103) The cash flow on total assets ratio:
A) Is the same as return on assets.
B) Is the same as profit margin.
C) Can measure a company’s ability to meet its obligations.
D) Is highly affected by accounting principles of income recognition and measurement.
E) Is average net assets divided by cash flows from operations.
104) 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 financing activities.
D) Dividing average total assets by total cash flows.
E) Total cash flows divided by average total assets times 365.
105) A company had net cash flows from operations of $341,000, net income of $286,000 and
average total assets of $1,850,000. The cash flow on total assets ratio equals:
A) 83.9%
B) 542.5%
C) 15.5%
D) 18.4%
E) 646.9%
106) 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%.
107) A company had average total assets of $1,660,000, total cash flows of $1,320,000, cash
flows from operations of $205,000, and cash flows from financing of $750,000. The cash flow
on total assets ratio equals:
A) 45.2%.
B) 22.0%.
C) 11.65%.
D) 12.3%.
E) 79.5%.
108) Preparation of the statement of cash flows does not involve:
A) Computing the net increase or decrease in cash.
B) Computing and reporting net cash provided or used by operations.
C) Computing the profit compared to the net increase or decrease in cash.
D) Computing and reporting net cash provided or used by financing activities.
E) Computing and reporting net cash provided or used by investing activities.
109) The reporting of net cash provided or used by operating activities that lists the major items
of operating cash receipts, such as receipts from customers, and subtracts the major items of
operating cash disbursements, such as cash paid for merchandise, is referred to as the:
A) Direct method of reporting net cash provided or used by operating activities.
B) Cash basis of accounting.
C) Classified statement of cash flows.
D) Indirect method of reporting net cash provided or used by operating activities.
E) Net method of reporting cash flows from operating activities.
110) A statement of cash flows explains the differences between the beginning and ending
balances of:
A) Net income.
B) Equity.
C) Cash and cash equivalents.
D) Working capital.
E) Cash and short-term investments.
111) The direct 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 and cash payments.
B) Reports adjustments to reconcile net income to net cash provided or used by operating
activities in the statement.
C) Reports a different amount of cash flows from operations than if the indirect method is used.
D) Is required if the company is a merchandiser.
E) Is required by the FASB.