69. 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. None of these. This is not reported in the statement of cash flows.
70. 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. Noncash activities.
E. None of these. This is not reported in the statement of cash flows.
71. 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.
72. 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. None of these. This is not reported in the statement of cash flows.
73. The accounting principle that requires important noncash 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.
74. 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.
75. 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.
76. An example of a transaction that must be disclosed as a noncash 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 noncash assets in exchange for equity or debt securities.
E. All of the choices are examples of noncash investing and financial activities.
77. 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.
78. 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.
79. 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 the choices are correct.
80. 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. The statement of cash flows helps to address all of the questions listed.
81. 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.
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82. 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.
83. 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%.
84. 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%.
85. Preparation of the statement of cash flows involves:
A. Computing the net increase or decrease in cash.
B. Computing and reporting net cash provided or used by operations.
C. Computing and reporting net cash provided or used by investing activities.
D. Computing and reporting net cash provided or used by financing activities.
E. All of the choices are included in the preparation of the statement of cash flows.
86. 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.
87. A statement of cash flows should reconcile the differences between the beginning and
ending balances of:
A. Net income.
B. Equity.
C. Cash and cash equivalents.
D. Working capital.
E. Cash, cash equivalents, and short-term investments.
88. 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.
89. 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.
90. The direct method of reporting operating cash flows:
A. Is recommended but not required by the FASB.
B. Must be used by all companies.
C. Is used by most companies.
D. Is considered supplementary disclosure.
E. Is not recommended by the FASB, but is commonly used.
91. 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.
92. 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 nonoperating items.
B. Revenues and expenses that did not provide or use cash.
C. Changes in noncash current assets and current liabilities related to operating activities.
D. Changes in current liabilities related to operating activities.
E. All of the options are correct.
93. 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.
94. The first line item in the operating activities section of a spreadsheet for a statement of
cash flows prepared using the indirect method is:
A. Cash.
B. Cash received from customers.
C. Increase (decrease) in accounts receivable.
D. Net income.
E. Adjustments to net income.
95. 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. Proceeds from the disposal of a long-term asset with no gain or loss.
D. An increase in prepaid expenses.
E. A decrease in accrued expenses payable.
96. A company’s Inventory balance at 12/31/13 was $188,000 and $200,000 at 12/31/12. Its
Accounts Payable balance at 12/31/13 was $84,000 and $80,000 at 12/31/12, and its cost of
goods sold for 2013 was $720,000. The company’s total amount of cash payments for
merchandise in 2013 equals:
A. $704,000.
B. $712,000.
C. $720,000.
D. $728,000.
E. $736,000.
97. 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 10,600
A. $157,400.
B. $163,800.
C. $168,000.
D. $172,200.
E. $174,400.
98. Use the following information about the current year’s operations of a company to
calculate the cash paid for merchandise.
Cost of goods sold……………………………….. $ 226,000
Merchandise inventory, January 1………………. 54,800
Merchandise inventory, December 31…………… 57,400
Accounts payable, January 1……………………. 54,400
Accounts payable, December 31……………….. 59,800
A. $218,000.
B. $223,200.
C. $220,000.
D. $228,800.
E. $234,000.
99. 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.
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100. 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.
A. $139,000.
B. $141,000.
C. $145,800.
D. $155,000.
E. $167,000.
101. Use the following information and the indirect method to calculate the net cash provided
or used by operating activities:
Net income $12,300
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Depreciation expense 12,000
Payment on mortgage payable 15,000
Gain on sale of land 7,500
Increase in merchandise inventory 2,050
Increase in accounts payable 6,150
Proceeds from sale of land 8,000
A. $12,700.
B. $13,900.
C. $20,900.
D. $28,400.
E. $35,900.
102. In preparing a company’s statement of cash flows for the most recent year on the indirect
method, the following information is available:
Net income for the year was $52,000
Accounts payable decreased by $18,000
Accounts receivable decreased by $25,000
Inventories increased by $ 5,000
Cash dividends paid were $14,000
Depreciation expense was $30,000
Net cash provided by operating activities was:
A. $120,000.
B. $44,000.
C. $70,000.
D. $84,000.
E. $30,000.
103. 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.
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104. 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.
105. 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.
106. 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
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A. $26,400.
B. $29,000.
C. $29,800.
D. $30,600.
E. $32,400.
107. 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.
108. 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.
109. 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:
Retained earnings balance at the beginning of the year $156,000
Cash dividends declared for the year $ 46,000
Proceeds from the sale of equipment $ 81,000
Gain on the sale of equipment $ 7,000
Cash dividends payable at the beginning of the year $ 18,000
Cash dividends payable at the end of the year $ 40,000
Net income for the year $ 92,000
What is the ending balance for retained earnings?
A. $276,000.
B. $202,000.
C. $254,000.
D. $248,000.
E. $174,000.