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61)
Investing activities include receiving cash dividends from investments in other companies' stocks.
A)
True
B)
False
62)
Investing activities include: (a) the purchase and sale of long-term assets, (b) lending and collecting
on notes receivable, and (c) the purchase and sale of short-term investments in the securities of
other entities, other than cash equivalents and trading securities.
A)
True
B)
False
63)
Financing activities include receiving cash from issuing debt and receiving cash dividends from
investments in other companies' stocks.
A)
True
B)
False
64)
Financing activities include receiving cash from issuing debt and paying cash dividends to
shareholders.
A)
True
B)
False
65)
The payment of cash dividends never changes the balance of retained earnings.
A)
True
B)
False
66)
Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.
This implies that $40,000 cash was received from the sale.
A)
True
B)
False
67)
Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of
$10,000. This implies that $30,000 cash was received from the sale.
A)
True
B)
False
68)
A spreadsheet can help organize the information needed to prepare a statement of cash flows.
A)
True
B)
False
69)
On a spreadsheet used to prepare the operating activities section of the statement of cash flows,
depreciation expense does not require an entry in the Analysis of Changes columns because it is a
noncash item.
A)
True
B)
False
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.
A)
True
B)
False
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.
A)
True
B)
False
72)
Depreciation expense is not reported on a statement of cash flows prepared under the direct
method.
A)
True
B)
False
73)
The FASB requires a reconciliation of net income to net cash provided or used by operating
activities when the direct method is used (which can be reported in the notes).
A)
True
B)
False
74)
The gain or loss from retirement of debt is reported under cash flows from operating activities on
the statement of cash flows using the direct method.
A)
True
B)
False
75)
The statement of cash flows reports:
A)
Cash inflows and cash outflows for an accounting period.
B)
Changes in equity.
C)
Equity, net income, and dividends.
D)
Assets, liabilities, and equity.
E)
Revenues, gains, expenses, and losses.
76)
The statement of cash flows reports all but which of the following:
A)
Cash flows from operating activities.
B)
The financial position of the company at the end of the accounting period.
C)
Cash flows from investing activities.
D)
Cash flows from financing activities.
E)
Significant noncash financing and investing activities.
77)
The statement of cash flows is:
A)
A financial statement that lists the types and amounts of the revenues and expenses of a
business for an accounting period.
B)
Another name for the statement of financial position.
C)
A financial statement that lists the types and amounts of assets, liabilities, and equity of a
business on a specific date.
D)
A financial statement that presents information about changes in equity during a period.
E)
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.
78)
A cash equivalent is:
A)
Another name for cash.
B)
Generally within 12 months of its maturity date.
C)
An investment readily convertible to a known amount of cash.
D)
Is not considered highly liquid.
E)
Close to its maturity date but its market value may still be affected by interest rate changes.
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)
Operating activity.
B)
Cash equivalent.
C)
Short-term marketable equity security.
D)
Common stock.
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)
Direct activities.
B)
Indirect activities.
C)
Financing activities.
D)
Operating activities.
E)
Investing activities.
81)
The appropriate section in the statement of cash flows for reporting the purchase of equipment for
cash is:
A)
Schedule of noncash investing or financing activity.
B)
Financing activities.
C)
This is not reported on the statement of cash flows.
D)
Investing activities.
E)
Operating activities.
82)
Which of the following items is reported on the statement of cash flows under financing activities?
A)
Declaration of a stock dividend.
B)
Stock split.
C)
Payment of a cash dividend.
D)
Payment of a stock dividend.
E)
Declaration of a cash dividend.
83)
Investing activities do not include the:
A)
Sale of short-term investments other than cash equivalents.
B)
Sale of plant assets.
C)
Lending and collecting on notes receivable.
D)
Issuance of common stock.
E)
Purchase of plant assets.
84)
The appropriate section in the statement of cash flows for reporting the cash payment of wages is:
A)
This is not reported on the statement of cash flows.
B)
Operating activities.
C)
Schedule of noncash investing or financing activity.
D)
Financing activities.
E)
Investing activities.
85)
The appropriate section in the statement of cash flows for reporting the issuance of common stock
for cash is:
A)
Schedule of noncash investing or financing activity.
B)
Operating activities.
C)
This is not reported on the statement of cash flows.
D)
Financing activities.
E)
Investing activities.
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)
Investing activities.
B)
Direct activities.
C)
Operating activities.
D)
Indirect activities.
E)
Financing activities.
87)
The appropriate section in the statement of cash flows for reporting the receipt of cash dividends
from investments in securities is:
A)
Investing activities.
B)
Schedule of noncash investing or financing activity.
C)
Financing activities.
D)
Operating activities.
E)
This is not reported on the statement of cash flows.
88)
Which one of the following is representative of typical cash flows from operating activities?
A)
Repayment of principals on loans.
B)
Payments by a merchandiser to acquire equity securities of other companies.
C)
Proceeds from the issuance of bonds and notes payable.
D)
Receipts of cash sales.
E)
Proceeds from collecting the principal amounts of loans.
89)
Typical cash flows from investing activities include each of the following except:
A)
Proceeds from the sale of equipment.
B)
Payments to buy intangible assets.
C)
Payments to purchase property, plant and equipment or other productive assets (excluding
inventory).
D)
Payments to acquire held-to maturity securities of other entities, except cash equivalents.
E)
Proceeds from collecting the principal amount of accounts receivable arising from customer
sales.
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)
Financing activity.
C)
Investing activity.
D)
This is not reported in the statement of cash flows.
E)
Noncash investing and financing activity.
91)
Cash flows from selling trading securities are usually reported in the statement of cash flows as
part of:
A)
Financing activities.
B)
This is not reported in the statement of cash flows.
C)
Investing activities.
D)
Noncash activities.
E)
Operating activities.
92)
Which of the following is included in the cash flows from financing activities section of the
statement of cash flows?
A)
Interest expense.
B)
Sale of equipment.
C)
Interest revenue.
D)
Purchase of stock in another company.
E)
Purchase of treasury stock.
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)
This is not reported in the statement of cash flows.
D)
Noncash activities.
E)
Investing activities.
94)
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)
Materiality principle.
B)
Historical cost principle.
C)
Business entity principle.
D)
Full disclosure principle.
E)
Going concern principle.
95)
The appropriate section in the statement of cash flows for reporting the purchase of land in
exchange for common stock is:
A)
Investing activities.
B)
Reconciliation of cash balance.
C)
Operating activities.
D)
Schedule of noncash investing or financing activity.
E)
Financing activities.
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)
Financing activities.
B)
Investing activities.
C)
Schedule of noncash financing and investing activities.
D)
Operating 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 purchase of noncash assets in exchange for equity or debt securities.
B)
The retirement of debt by issuing equity stock.
C)
The leasing of assets in a transaction that qualifies as a capital lease.
D)
A transaction exchanging cash equivalents for cash.
E)
The purchase of long-term assets financed by a cash down payment and a note payable to the
seller for the balance.
98)
Noncash investing and financing activities may be disclosed in:
A)
The reconciliation of cash balance section.
B)
The financing activities section of the statement of cash flows.
C)
A note in the financial statements or a schedule attached to the statement of cash flows.
D)
The operating activities section of the statement of cash flows.
E)
The investing activities section of the statement of cash flows.
99)
Accounting standards:
A)
Require that companies omit the statement of cash flows from a complete set of financial
statements if the company has no investing activities.
B)
Allow companies to omit the statement of cash flows from a complete set of financial
statements if cash is an insignificant asset.
C)
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.
D)
Require that companies include a statement of cash flows in a complete set of financial
statements.
E)
Allow companies to omit the statement of cash flows from a complete set of financial
statements if the company has no financing activities.
100)
Common uses of the statement of cash flows include all but which of the following?
A)
Investor assessment of cash flows before buying and selling stock.
B)
Management prediction of future cash flows for decision making.
C)
Management determination of the specific sources and uses of cash.
D)
Creditor evaluation of a company's ability to generate cash to cover debt.
E)
Government assessment of whether company is able to pay taxes as they become due.
101)
The statement of cash flows helps analysts evaluate all but which of the following?
A)
Source of cash used for debt repayments.
B)
Differences between net income and net operating cash flow.
C)
Ability of the company to generate profit.
D)
Source of cash used to finance investing activities.
E)
Source of cash used for plant expansion.
102)
The statement of cash flows cannot help address questions such as:
A)
Why is cash flow from operations different from income?
B)
What is the source of cash for new plant assets?
C)
How much of the company's revenues have been retained as profit?
D)
How much cash is generated from or used in operations?
E)
How is the increase in investments financed?
103)
The cash flow on total assets ratio:
A)
Is the same as profit margin.
B)
Can be an indicator of earnings quality.
C)
Is highly affected by accounting principles of income recognition and measurement.
D)
Is the same as return on assets.
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 investing activities.
D)
Total cash flows divided by average total assets times 365.
E)
Dividing average total assets by total cash flows.
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) 646.9% B) 15.5% C) 83.9% D) 542.5% E) 18.4%
