86) Freeman Company’s accounting records include the following information:
Payments to suppliers
$
50,000
Collections on accounts receivable
90,000
Cash sales
20,000
Income taxes paid
5,000
Equipment purchased
15,000
What is the amount of net cash provided by operating activities indicated by these transactions?
A) $40,000.
B) $45,000.
C) $55,000.
D) $60,000.
Cash
Accounts payable
Income taxes payable
Accounts receivable
Sales revenue
87) Which of the following causes a change in cash?
A) Accrual of interest payable.
B) Recording of depreciation expense.
C) Write-off of an uncollectible account.
D) Payment of a cash dividend declared in the previous fiscal year.
88) In preparing its cash flow statement for the year ended December 31, 2018, Green Co.
gathered the following data:
Gain on sale of land
$
12,000
Proceeds from sale of land
20,000
Purchase of Black, Inc., bonds (face value $200,000)
360,000
Amortization of bond discount
4,000
Cash dividends declared
90,000
Cash dividends paid
76,000
Proceeds from sales of Green Co. common stock
150,000
In its December 31, 2018, statement of cash flows, what amount should Green report as net cash
from financing activities?
A) $40,000.
B) $54,000.
C) $60,000.
D) $74,000.
89) During 2018, T Company engaged in the following activities:
Distribution of cash dividends declared in 2017
$
48
Fair value of shares issued in a stock dividend
220
Payment to retire bonds
452
Proceeds from the sale of treasury stock (cost: $52)
60
In T’s statement of cash flows, what were net cash outflows from financing activities for 2018?
A) $392.
B) $440.
C) $560.
D) $732.
90) Which of the following is reported as a financing activity in the statement of cash flows?
A) The sale of securities classified as available for sale.
B) The acquisition of stock for the purpose of retiring it.
C) The payment of interest on bonds payable.
D) The receipt of dividend revenue.
91) Which of the following is reported as a financing activity in the statement of cash flows?
A) The amortization of a patent.
B) The exchange of common stock for a building.
C) The acquisition of long-term investments.
D) The repayment of bonds issued at face value.
92) Which of the following is not classified as an operating activity?
A) Interest paid on long-term debt.
B) Dividends received on common stock.
C) Dividends paid on common stock.
D) Payments on accounts payable.
93) When treasury stock is sold at an amount less than its cost, the sale is classified as:
A) A financing activity.
B) An operating activity.
C) A financing activity and an operating activity.
D) An investing activity.
94) Of the following, which is not an investing activity?
A) Purchasing a new computer.
B) Buying treasury stock.
C) Selling a parcel of land.
D) Purchasing short-term investments.
95) Which of the following would not be a cash inflow from financing activities?
A) Cash from issuing common stock.
B) Cash from issuing bonds.
C) Cash from issuing preferred stock.
D) Cash from the sale of stock of a supplier.
96) The purchase of treasury stock is:
A) Reported as a financing activity in the statement of cash flows.
B) Reported as an investing activity in the statement of cash flows.
C) Reported as an operating activity in the statement of cash flows.
D) None of these answer choices are correct.
97) Melanie Corporation declared cash dividends of $13,500 during the current year. The
beginning and ending balances in dividends payable were $450 and $750, respectively. What
was the amount of cash paid for dividends?
A) $12,750.
B) $13,800.
C) $12,900.
D) $13,200.
98) A statement of cash flows and its related disclosure note typically do not report:
A) An acquisition of the use of a building with a finance lease agreement.
B) The purchase of treasury stock.
C) Stock dividends.
D) Notes payable issued for a tract of land.
99) Property dividends distributed are reported in connection with a statement of cash flows as:
A) A financing activity.
B) An investing activity.
C) A noncash activity.
D) Not reported in the statement of cash flows.
100) Acquiring land with a long-term note is:
A) Reported as an investing activity in the statement of cash flows.
B) Reported as a financing activity in the statement of cash flows.
C) Reported as a noncash investing and financing activity.
D) None of these answer choices are correct.
101) Rampart Inc. recorded the following transaction:
Land
15 million
Notes payable
12 million
Cash
3 million
In the statement of cash flows, this would be reported as a:
A) $3 million outflow from investing activities.
B) $15 million outflow from investing activities.
C) $3 million outflow from investing activities and $12 million noncash investing and financing
activity.
D) None of these answer choices are correct.
102) Like U.S. GAAP, International Financial Reporting Standards (IFRS) also require a
statement of cash flows. Consistent with U.S. GAAP, cash flows are classified as operating,
investing, or financing activities. However, with regard to interest and dividend inflows and
outflows, the international standard for cash flow statements:
A) Allows companies to report cash outflows from interest payments as either operating or
investing cash flows.
B) Allows companies to report cash inflows from interest and dividends as either operating or
investing cash flows.
C) Allows companies to report dividends paid as either investing or operating cash flows.
D) Designates cash outflows for interest payments and cash inflows from interest and dividends
received as operating cash flows.
103) Interest payments and interest received must be reported as operating cash flows using:
A) U.S. GAAP.
B) IFRS.
C) Both U.S. GAAP and IFRS.
D) Neither U.S. GAAP nor IFRS.
104) Companies may report interest received and dividends received as investing activities
using:
A) U.S. GAAP.
B) IFRS.
C) Both U.S. GAAP and IFRS.
D) Neither U.S. GAAP nor IFRS.
105) Selected information from Large Corporation’s accounting records and financial
statements for 2018 is as follows ($ in millions):
Cash paid to acquire a patent
$
28
Treasury stock purchased for cash
25
Proceeds from sale of land and buildings
45
Gain from the sale of land and buildings
26
Investment revenue received
5
Cash paid to acquire office equipment
40
Large prepares its financial statements in accordance with IFRS. In its statement of cash flows,
Large most likely reports net cash outflows from investing activities of:
A) $18 million.
B) $28 million.
C) $38 million.
D) $68 million.
Cash paid to acquire a patent
(28
)
Cash paid to acquire office equipment
(40
)
Proceeds from sale of land and buildings
Investment revenue received
106) In a statement of cash flows:
A) Operating activities are the same activities as reported in the income statement.
B) The two primary reporting classifications of cash flows are inflows and outflows.
C) No noncash transactions are reported in the statement itself or the related footnote.
D) Inflows and outflows for cash equivalents are reported as operating activities.
107) In a statement of cash flows:
A) Operating activities can be reported by either the direct method or the operating method.
B) One of the three primary reporting classifications of cash flows is financing activities.
C) Investing activities can be reported by either the direct method or the indirect method.
D) Financing activities can be reported by either the direct method or the financing method.
108) Sales revenue is $100,000. Accounts receivable increased by $2,000. Cash received from
customers is:
A) $98,000.
B) $100,000.
C) $102,000.
D) indeterminable from the information provided.
109) Cash flows from investing activities do not include cash payments to:
A) acquire equipment.
B) purchase securities of another company.
C) buy land.
D) repay debt.
110) Cash flows from financing activities do not include cash received from:
A) issuing common stock.
B) issuing bonds.
C) selling used equipment.
D) a bank loan.
111) When reporting operating activities by the indirect method in a statement of cash flows:
A) increases in operating assets are added back to net income.
B) increases in operating liabilities are subtracted from net income.
C) gains are added back to net income.
D) amortization is added back to net income.
112) When reporting operating activities in a statement of cash flows, depreciation is:
A) added back to net income in the direct method.
B) ignored in the indirect method.
C) added back to net income in the indirect method.
D) subtracted from net income in the indirect method.
113) Cost of goods sold is $100,000. Accounts payable increased by $2,000. Inventory
increased by $5,000. Cash paid to suppliers is:
A) $93,000.
B) $100,000.
C) $103,000.
D) $107,000.
114) Under U.S. GAAP, cash flows from investing activities do not include:
A) cash payments to acquire equipment.
B) cash received from selling investments in securities of another company.
C) investment revenue in cash.
D) cash paid to buy land.
115) Cash flows from financing activities do not include:
A) cash received from issuing preferred stock.
B) cash paid for treasury stock.
C) declaration of a cash dividend.
D) repayment of a bank loan.
116) On January 1, Jim Shorts Corporation issued $300 million face value bonds for $580
million. During the same year, $1,500,000 of the bond premium was amortized. On a statement
of cash flows prepared by the indirect method, Jim Shorts Corporation should report:
A) An addition to net income of $1,500,000.
B) An investing activity of $580 million.
C) A financing activity of $300 million.
D) A deduction from net income of $1,500,000.
117) Jim Sox Company owns debt securities classified as available for sale which were acquired
in 2016 at face value of $17 million. During 2018, the fair value of those securities increased by
$220,000. What effect did this increase have on Sox’s 2018 statement of cash flows?
A) Cash flows from operating activities increased.
B) Cash flows from investing activities increased.
C) Cash flows from financing activities increased.
D) No effect.
118) Ilene South Company owns 40% of the outstanding common stock of Ilene Wright
Company. During the year, South received a $150 million cash dividend from Wright. What
effect does this dividend have on South’s statement of cash flows for the year?
A) Cash flows from operating activities increased.
B) Cash flows from investing activities increased.
C) Cash flows from financing activities increased.
D) No effect.
119) When using the indirect method to determine cash flows from operating activities,
adjustments to net income should not include:
A) An addition for amortization expense.
B) An addition for bond discount amortization.
C) An addition for a gain.
D) An addition for a loss.
120) The net income for Howie Doohan Corporation was $280 million for the year ended
December 31, 2018. Related information follows:
Sale of common stock for cash, $34 million.
Amortization of trademark, $2 million.
Cash dividends paid, $28 million.
Decrease in salaries payable, $2 million.
Depreciation expense, $40 million.
Increase in accounts payable, $18 million.
Increase in bonds payable, $26 million.
Net cash flows from operating activities during 2018 should be reported as:
A) $302 million.
B) $338 million.
C) $342 million.
D) $364 million.
121) A statement of cash flows and its related disclosure note typically do not report:
A) Stock dividends.
B) The purchase of treasury stock.
C) A finance lease.
D) Notes payable issued for a building.
122) Hugh Morris Comics sold for $110,000 cash a 3D printer that cost $334,000 with
accumulated depreciation of $221,000. This transaction would be reported as:
A) An operating activity.
B) An investing activity.
C) A financing activity.
D) None of these answer choices are correct.
123) When using the indirect method to determine cash flows from operating activities, an
increase in prepaid expenses should be reported as:
A) An addition to net income in determining cash flows from operating activities.
B) A deduction from net income in determining cash flows from operating activities.
C) An investing activity.
D) Not reported.
124) When using the indirect method to determine cash flows from operating activities, an
increase in held-to-maturity securities that does not arise from the interest component of the debt
should be reported as:
A) A deduction from net income in determining cash flows from operating activities.
B) An addition to net income in determining cash flows from operating activities.
C) An investing activity.
D) A financing activity.
125) If sales revenue is $80 million and accounts receivable increased by $12 million, the
amount of cash received from customers:
A) was $52 million.
B) was $68 million.
C) was $80 million.
D) depends on the mix of cash sales and credit sales.
126) If bond interest expense is $300,000, bond interest payable decreased by $4,000 and bond
premium decreased by $1,000, cash paid for bond interest is:
A) $295,000.
B) $300,000.
C) $303,000.
D) $305,000.
Premium on bond
Interest expense
Bond interest payable
Cash
127) Sales revenue for Hy Marx Tutoring was $220,000. The following data are from the
accounting records of Marx:
Accounts receivable, January 1
$
66,000
Accounts receivable, December 31
55,000
The cash received from customers was:
A) $165,000.
B) $209,000.
C) $220,000.
D) $231,000.
Cash
231
Accounts receivable
Sales revenue
128) Selected information from Isadore Bell Corporation’s accounting records and financial
statements for 2018 is as follows ($ in millions):
Cash paid to acquire equipment
$
120
Cash paid to acquire land
54
Treasury stock acquired with cash and then retired
75
Dividend revenue received
66
Gain from the sale of buildings
78
Proceeds from sale of buildings
135
In its statement of cash flows, Isadore Bell should report net cash outflows from investing
activities of:
A) $39 million.
B) $69 million.
C) $114 million.
D) $117 million.
129) Selected information from Jacklyn Hyde Corporation’s accounting records and financial
statements for 2018 is as follows ($ in millions):
Cash paid to retire notes
$
90
Common shares acquired for treasury
150
Proceeds from issuance of preferred stock
210
Proceeds from issuance of subordinated bonds
270
Cash dividends paid on preferred stock
75
Cash interest paid to bondholders
105
In its statement of cash flows, Jacklyn Hyde should report net cash inflows from financing
activities of:
A) $60 million.
B) $165 million.
C) $210 million.
D) $315 million.