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CHAPTER 12: THE STATEMENT OF CASH FLOWS
1. Which of the following statements is true?
a. If a company reports net income on its income statement, it should report an increase in cash on
its statement of cash flows.
b. If a company reports a net loss on its income statement, it should report a decrease in cash on its
statement of cash flows.
c. If a company uses the accrual basis of accounting, it will improve its cash position if it reports net income
for the same period.
d. If a company uses the accrual basis of accounting, its cash balance can increase even if it reports a net loss.
2. Which of the following statements is false?
a. A balance sheet reports a company's cash balance at a specific date.
b. An income statement reports the amounts of revenue and expense on an accrual basis, not the amount
of cash received from revenues or paid for expenses.
c. A statement of retained earnings reports the amount of cash received from operating activities and
the amount of cash paid for dividends.
d. A statement of cash flows explains the changes in cash from operating, investing, and financing activities.
3. Nordic Exports Inc. reported net income of $150,000 for 2015, but its cash balance decreased $40,000. Which
financial statement should Nordic Exports’ management refer to for an explanation of this situation?
a. Balance Sheet
b. Income Statement
c. Statement of Retained Earnings
d. Statement of Cash Flows
4. Cuero Co. reported a net loss of $30,000 for 2015, yet its cash balance increased during the year. Which
financial statement should Cuero’s management refer to for an explanation of this situation?
a. Balance sheet
b. Income statement
c. Statement of Retained Earnings
d. Statement of Cash Flows
5. Planet & Co. reported net income for the current year. Which of the following business transactions would
cause cash from operating activities to be higher than the amount of net income?
a. Cash dividends were paid to stockholders during the year.
b. Depreciation expense was recorded for the year.
c. A bank loan was repaid during the year.
d. Equipment was purchased for cash during the year.
Chapter 12: The Statement of Cash Flows
6. Which of the following statements regarding the statement of cash flows is true?
a. The statement of cash flows analyzes the changes in consecutive balance sheets in conjunction with
the income statement.
b. The statement of cash flows is organized as cash inflows less cash outflows.
c. The statement of cash flows analyzes only the changes in current assets and current liabilities.
d. The statement of cash flows is an optional financial statement.
7. The primary purpose of the statement of cash flows is to provide information about
a. the financial position of the company.
b. the profitability of the company.
c. the investing and financing activities of the company.
d. the cash inflows and outflows of the company.
8. The statement of cash flows
a. along with the balance sheet and income statement is prepared on the accrual basis.
b. along with the balance sheet and statement of retained earnings is dated as of a specific year end date.
c. along with the balance sheet is used to analyze liquidity.
d. ties the balance sheet to the statement of retained earnings.
9. Which of the following is not a current reporting requirement for a statement that reports changes in cash over
a period of time?
a. This statement must classify cash flows into three categories: operating, investing, and financing activities.
b. Cash equivalents must be combined with cash in preparing this statement.
c. Working capital may be used as a substitute for cash in preparing this statement.
d. The title for this statement is "Statement of Cash Flows."
10. Which of the following items would be considered a cash equivalent if it was held at the balance sheet date?
a. U.S. Treasury bill purchased when there were 90 days until maturity.
b. Commercial paper with a 6-month maturity which was purchased at the issue date.
c. The common stock of a company traded on the New York Stock Exchange which was purchased 30
days before the balance sheet date.
d. U.S. Treasury note which matures 2 years after it is issued and which was purchased 4 months before
the balance sheet date.
Chapter 12: The Statement of Cash Flows
11. Which of the following statements is true?
a. Investments in commercial paper or U.S. Treasury bills must be treated as cash equivalents.
b. Investments in stock cannot be treated as cash equivalents because they are not convertible into a known
amount of cash.
c. Investments which are convertible into a known amount of cash and mature within three months after the
balance sheet date are treated as cash equivalents.
d. Investments in money market accounts cannot be treated as cash equivalents because they do not have a
specific maturity date.
12. Which of the following items is treated as a cash equivalent?
a. Commercial paper with a 6-month maturity when purchased and 4 months until maturity at the balance sheet
date.
b. Investment in corporate stocks which management intends to sell within 3 months after the balance sheet
date.
c. Money market funds which can be obtained overnight from a bank or brokerage firm.
d. Investments in corporate bonds which have 5 years until maturity when they are purchased.
13. Which of the following items is not a cash equivalent?
a. Commercial paper
b. A three-year Treasury note purchased two months before its maturity
c. Money market funds
d. A corporate bond investment which has 5 years until maturity when they are purchased
14. Which of the following statements is false?
a. Cash equivalents are included in cash on the balance sheet and on the statement of cash flows.
b. Investments in cash equivalents and investments in stock have the same economic effect--assets increase
and decrease by the same amount.
c. An investment is a cash equivalent if it is convertible into a known amount of cash and has an
original maturity of 3 months or less when purchased.
d. Investments in stock are reported as a financing activity on the statement of cash flows.
15. Cash flows from acquiring and selling products are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. distribution activities.
Chapter 12: The Statement of Cash Flows
16. Cash flows from acquiring and disposing of long-term assets are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. purchasing activities.
17. Cash flows from borrowing and paying off a 90-day bank loan are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. purchasing activities.
18. Cash flows from issuing and repurchasing stock or issuing and repaying (retiring) debt are classified as
a. operating activities.
b. investing activities.
c. financing activities.
d. borrowing activities.
19. Which of the following is not an operating activity?
a. Cash collections from credit customers.
b. Cash payments for operating expenses.
c. Cash receipts for interest earned.
d. Cash payments for dividends to stockholders.
20. Which of the following is not an investing activity?
a. Purchase of investments for cash.
b. Purchase of equipment for cash.
c. Sale of merchandise for cash.
d. Sale of land for cash.
21. Which of the following is not a financing activity?
a. Issuing bonds for cash.
b. Selling an investment in IBM stock for cash.
c. Purchasing a company's own stock (treasury stock) for cash.
d. Making a cash payment to repay a bank loan.
Chapter 12: The Statement of Cash Flows
22. Below is information for Toronto Imports Corp. for 2015 and 2016:
Bonds payable, December 31, 2015
$500,000
Bonds payable, December 31, 2016
800,000
Loss on bond retirement—2016
15,000
Interest expense on bonds—2016
45,000
At the end of 2016, Toronto issued bonds at par value for $800,000 cash. The proceeds from these bonds
were used to retire the $500,000 bond issue outstanding at the end of 2015 (before their maturity date). All
interest expense was paid in cash during 2016.
The following statements describe how Toronto reported the cash flow effects of the items described above
on its 2016 statement of cash flows. The indirect method is used to prepare the operating activities section.
Which of the following has been reported incorrectly by Toronto?
a. Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in the financing
activities section.
b. The loss on bond retirement of $15,000 was added to net income in the operating activities section.
c. Payments of $560,000 were reported as a cash outflow in the investing activities section.
d. Interest expense of $45,000 was not reported separately because it is included in net income in the
operating activities section.
23. Which of the following should be classified as an investing activity on the statement of cash flows?
a. interest on notes payable
b. payment to suppliers for inventory
c. payment of dividends
d. None of these
24. In 2015, Valencia Company purchased equipment for $363,000 and also sold some special purpose machinery
with a book value of $155,000 for $182,000. In its statement of cash flows for 2015, Valencia should report
the following with respect to the above transactions:
a. $363,000 cash used by operating activities; $182,000 cash provided by financing activities.
b. $181,000 net cash used by investing activities.
c. $181,000 net cash used by investing activities; $27,000 net cash provided by operating activities.
d. $363,000 net cash used by investing activities.
Chapter 12: The Statement of Cash Flows
25. Below are the transactions for the Louisville Company:
Proceeds from issuance of bonds payable
$635,000
Payment to purchase equipment
$275,000
Payment of wages
$115,000
Payment of dividends
$155,000
Payment to pay off notes payable
$195,000
Based on these transactions, what is the net cash flow from financing activities?
a. $285,000 net cash provided by financing activities.
b. $275,000 net cash used for financing activities.
c. $0, because cash inflows equal cash outflows from financing activities.
d. $440,000 net cash provided by financing activities.
26. Operating, investing, and financing activities affect certain balance sheet accounts. Which of the following
statements is true?
a. Operating activities primarily involve transactions which affect noncurrent assets.
b. Investing activities primarily involve U.S. government securities and long-term productive assets.
c. Financing activities primarily involve transactions which affect current liabilities.
d. Different balance sheet accounts are affected depending on whether the direct or indirect method is used.
27. Which balance sheet accounts are most affected by operating activities?
a. Current assets and current liabilities
b. Long-term assets
c. Long-term liabilities
d. Stockholders' equity
28. Which balance sheet accounts are most affected by investing activities?
a. Current assets and current liabilities
b. Long-term assets
c. Long-term liabilities
d. Stockholders’ equity
Chapter 12: The Statement of Cash Flows
29. Which balance sheet accounts are most affected by financing activities?
a. Current assets
b. Current liabilities
c. Long-term assets
d. Longterm liabilities and stockholders’ equity
30. Turtle Island Music Store reported net income of $200,000. Cash from operations
a. will be more than $200,000.
b. will be less than $200,000.
c. will be equal to $200,000.
d. cannot be determined without more information.
31. Carson City Saloon purchased a $25,000 truck for catering from its restaurant. It made a down payment of one-
fourth of the price. What combination of amounts would affect the income statement and statement of cash
flows for the purchase of the truck?
Income Statement
a. $25,000
Cash Flow Statement
$ -0-
b. $ -0-
($25,000)
c. $25,0000
($6,250)
d. $ -0-
($ 6,250)
32. Upon review of Young’s Garden Center statement of cash flows, the following was noted:
Cash flows from operating activities
$ 15,000
Cash flows from investing activities
80,000
Cash flows from financing activities
(60,000)
From this information, the most likely explanation is that Young’s is
a. using cash from operations and selling long-term assets to pay back debt.
b. using cash from operations and borrowing to purchase long-term assets.
c. using its profits to expand growth.
d. using cash from investors to provide for operations
Chapter 12: The Statement of Cash Flows
33. Upon review of Jerry’s Canoe Gallery statement of cash flows, the following was noted:
Cash flows from operating activities
$ 75,000
Cash flows from investing activities
(135,000)
Cash flows from financing activities
125,000
From this information, the most likely explanation is that Jerry is
a. using cash from operations and selling long-term assets to pay back debt.
b. using cash from operations and borrowing to purchase long-term assets.
c. using its profits to expand growth.
d. using cash from investors to provide for operations.
34. Upon review of Jan’s Lakeside Resort statement of cash flows, the following was noted:
Cash flows from operating activities
$ 35,000
Cash flows from investing activities
75,000
Cash flows from financing activities
(125,000)
From this information, the most likely explanation is that Jan is
a. using cash from operations and selling long-term assets to pay back debt
b. using cash from operations and borrowing to purchase long-term assets.
c. using its profits to expand growth.
d. using cash from investors to provide for operations.
35. Eduardo’s Texas Cantina had the following results for December 31, 2015 and 2016, respectively:
2015
2016
Cash
$ 42,000
$ 49,000
Noncash current assets
162,000
175,000
Cash flows from financing activities
313,000
Cash flows from operating activities
72,000
What was the amount of cash flows from investing activities for 2016?
a. Cash inflow of $378,000
b. Cash outflow of $378,000
c. Cash outflow of $7,000
d. Cash outflow of $391,000
Chapter 12: The Statement of Cash Flows
36. Dino’s Italian Grille purchased $6,000 of napkins for its business. Onefourth of the bill is unpaid. Upon
review of the napkins still on hand, 20% were still available. What combination of amounts would affect the
income statement and statement of cash flows?
Statement of Cash Flow
a. ($6,000)
Income Statement
($6,000)
b. ($4,500)
($6,000)
c. ($4,500)
($4,800)
d. ($6,000)
($4,800)
37. A mortgage incurred in exchange for an office building would be reported in the statement of cash flows in
a. the cash flows from financing activities section
b. the cash flows from investing activities section
c. a separate schedule
d. the cash flows from operating activities section
38. Which method of preparing the operating activities section of a statement of cash flows adjusts net income
to remove the effects of deferrals and accruals for revenues and expenses?
a. The direct method
b. The indirect method
c. Both the direct and indirect methods
d. Neither the direct method nor the indirect method
39. Which method of preparing the operating activities section of a statement of cash flows reports major classes
of gross cash receipts and cash payments for revenues and expenses?
a. The direct method
b. The indirect method
c. Both the direct method and the indirect method
d. Neither the direct method nor the indirect method
Chapter 12: The Statement of Cash Flows
40. Which of the following statements is true?
a. The method of preparing the operating activities section of a statement of cash flows which adjusts net
income to remove the effects of deferrals and accruals for revenues and expenses is the direct method.
b. The method of preparing the operating activities section of a statement of cash flows which reports
major classes of gross cash receipts and cash payments for revenues and expenses is the indirect method.
c. The FASB prefers the indirect method of preparing the operating activities section of the statement of
cash flows.
d. Most companies use the indirect method of preparing the operating activities section of the statement of
cash flows.
41. Which of the following statements is false?
a. The method of preparing the operating activities section of a statement of cash flows which adjusts net
income to remove the effects of deferrals and accruals for revenues and expenses is the indirect method.
b. The method of preparing the operating activities section of a statement of cash flows which reports
major classes of gross cash receipts and cash payments for revenues and expenses is the direct method.
c. The FASB prefers the direct method of preparing the operating activities section of the statement of cash
flows.
d. Most companies use the direct method of preparing the operating activities section of the statement of
cash flows.
42. Presented below is the operating activities section of the statement of cash flows for Golden Consulting for
2016:
Operating activities:
Net income
$ 92,000
Add: Depreciation
20,000
Decrease in accounts receivable
8,000
$120,000
Deduct: Decrease in accounts payable
(6,000)
Net cash inflow from operating activities
$114,000
Which method of preparing the operating activities section has Golden Consulting used?
a. The direct method.
b. The indirect method.
c. Either method.
d. Cannot be determined without further information.
Chapter 12: The Statement of Cash Flows
43. Presented below is the operating activities section of the statement of cash flows for Feline Friends Corp. for
2016:
Operating activities:
Cash collected from customers
$165,000
Cash payments for merchandise
(83,000)
Cash payments for operating expenses
(58,000)
Net cash inflow from operating activities
$ 24,000
Which method of preparing the operating activities section has Feline used?
a. The direct method
b. The indirect method
c. Either method
d. Cannot be determined without further information
44. The following items were reported on the balance sheets and income statement for Carlton Co.:
Accounts receivable, December 31, 2015
$185,000
Accounts receivable, December 31, 2016
178,000
Sales—2016
850,000
What amount would be reported in the operating activities section of the statement of cash flows for
collections from customers under the direct method assuming that all sales are on credit?
a. $850,000
b. $857,000
c. $843,000
d. Cannot be determined without further information.
45. The following items were reported on the balance sheets and income statement for Centerton Inc., a
service company:
Accounts payable, December 31, 2015
$ 64,000
Accounts payable, December 31, 2016
48,000
Operating expenses—2016
170,000
What amount would be reported in the operating activities section of the statement of cash flows for payments
for operating expenses under the direct method?
a. $186,000
b. $154,000
c. $180,000
d. $170,000
Chapter 12: The Statement of Cash Flows
46. The following items were reported on the balance sheets and income statement for the Flying Mullet Company:
Accounts receivable, December 31, 2015
$ 85,000
Accounts receivable, December 31, 2016
98,000
Sales—2016
750,000
How would the change in accounts receivable be reported in the operating activities section of the statement
of cash flows under the indirect method?
a. As an addition to sales
b. As a deduction from sales
c. As an addition to net income
d. As a deduction from net income
47. The following items were reported on the balance sheets and income statement for Bezos Corp.:
Accounts payable, December 31, 2015
$ 42,000
Accounts payable, December 31, 2016
48,000
Operating expenses
286,000
How would the change in accounts payable be reported in the operating activities section of the statement of
cash flows under the indirect method?
a. As an addition to operating expenses
b. As a deduction from operating expenses
c. As an addition to net income
d. As a deduction from net income
48. During 2015, the accounts receivable balance of Dickerson Corp. increased. Which of the following
statements is true?
a. This indicates that Dickerson sold more than it collected in cash during the period.
b. This increase is added to net income in the operating activities section of a statement of cash flows
prepared under the indirect method.
c. This increase is added to sales recognized on the income statement to determine the cash collections
from customers during the period.
d. This increase is considered only when the operating activities section of a statement of cash
flows is prepared under the indirect method.
Chapter 12: The Statement of Cash Flows
49. During 2016, the accounts payable balance of Andreas Corp. decreased. Which of the following statements is
true?
a. This decrease indicates that Andreas paid less during the period than it recognized as expenses
on the income statement.
b. This decrease is added to net income in the operating activities section of a statement of cash flows
prepared under the indirect method.
c. This decrease is deducted from net income in the operating activities section of a statement of cash
flows prepared under the indirect method.
d. This decrease is considered only when the operating activities section of a statement of cash
flows is prepared under the direct method.
50. Occasionally, companies engage in important investing and financing activities which do not affect cash.
If the amount of the transaction is significant, how should it be disclosed when financial statements are
prepared?
a. In the investing section if the amount of investing activities are greater than the financing activities amount.
b. In the financing section if the amount of financing activities are greater than the investing activities amount.
c. In a note to the financial statements or in a supplemental schedule.
d. The transaction does not need to be disclosed.
51. Klein Corp. acquired land by issuing its common stock. How should this transaction be disclosed when a
statement of cash flows is prepared?
a. In a supplemental schedule of noncash investing and financing activities or in a note.
b. The acquisition of land should be reported as an investing activity and the issuance of the stock
as a financing activity.
c. Using the master T-account approach.
d. The transaction does not need to be disclosed.
52. Which of the following transactions is a significant noncash investing and financing activity?
a. Land is purchased for cash.
b. Bonds are issued for cash.
c. Cash equivalents are purchased.
d. Equipment is acquired by issuing a long-term note.
53. Each of the following transactions would be classified as either an investing or a financing activity except
a. investments in stock are purchased.
b. a bank loan is obtained.
c. stock is issued to acquire land.
d. dividends are paid.
Chapter 12: The Statement of Cash Flows
54. When using the direct method, how is depreciation expense recorded on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Not reported on the statement of cash flows
55. When using the direct method, how is the purchase of equipment for cash shown on the statement of cash
flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
56. When using the direct method, how is the collection of cash from customers shown on the statement of cash
flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
57. When using the direct method, how is the issuance of stock for cash shown on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
58. When using the direct method, how is the retirement of bonds payable at their maturity date shown on
the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
Chapter 12: The Statement of Cash Flows
59. When using the direct method, how is the payment of a cash dividend shown on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
60. When using the direct method, how are salaries paid to employees reported on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
61. When using the direct method, how is the sale of long-term investments for cash reported on the statement of
cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
62. When using the indirect method, how is depreciation expense recorded on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
63. When using the indirect method, how is the purchase of equipment for cash shown on the statement of cash
flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
Chapter 12: The Statement of Cash Flows
64. When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Non cash investing and financing activity
65. When using the indirect method, how is the receipt of cash from the sale of long-term investments treated
on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing or financing activity
66. When using the indirect method, how is an increase in accounts receivable during the year shown on the
statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
67. When using the indirect method, how would the retirement of bonds payable at their maturity date be shown
on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
68. When using the indirect method, how would the declaration and payment of cash dividends be shown on
the statement of cash flows?
a. Operating activities
b. Investing activities
c. Financing activities
d. Noncash investing and financing activity
Chapter 12: The Statement of Cash Flows
69. When using the indirect method, how is the decrease in accounts payable shown on the statement of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing and financing activity
70. When using the indirect method, the gain from selling a long-term investment is recognized in which of
the following?
a. In the operating activity section and the investing activity section of the statement of cash flows.
b. In the financing activity section of the statement of cash flows.
c. In the noncash investing or financing activity supplemental section of the statement of cash flows.
d. Gains are not recognized in the statement of cash flows under the indirect method.
71. When using the indirect method, how is the issuance of stock to retire a long-term debt shown on a statement
of cash flows?
a. Operating activity
b. Investing activity
c. Financing activity
d. Noncash investing or financing activity
72. Blecher Co. reported the following information at the end of 2015 and 2016:
2015
2016
Land
$ 35,000
$ 100,000
Common stock
200,000
265,000
An analysis of Blecher’s records indicated that there were no cash flow effects resulting from the changes in
the two accounts presented above. How should Blecher report the changes in these accounts on a statement
of cash flows?
a. Blecher should report $65,000 for the acquisition of land as an investing activity and $65,000 for the
issuance of stock as a financing activity.
b. Blecher should report $65,000 as a noncash investing and financing activity for the acquisition of
land by issuing common stock.
c. Blecher should report the issuance of common stock to acquire land in the financing activity section
with a net cash flow effect of zero.
d. Blecher should report the acquisition of land by issuing common stock in the investing activity section
with a net cash flow effect of zero
Chapter 12: The Statement of Cash Flows
73. Gaulle Company began the year with a balance of $6,000 in Accounts Receivable and ended the year with
$9,000 in the account. Revenues for the period amounted to $38,000. Under the direct method, Gaulle will
report cash collected from customers of:
a. $44,000
b. $35,000
c. $41,000
d. $47,000
74. Parks Company reported an increase of $370,000 in its accounts receivable during the year 2015. The
company's statement of cash flows for 2015 reported $1 million of cash received from customers. What
amount of net sales must Parks have recorded in 2015?
a. $370,000
b. $1,000,000
c. $1,370,000
d. $630,000
75. Rent expense in Volusia Company's 2016 income statement is $420,000. If Prepaid Rent was $70,000 at
December 31, 2015, and is $95,000 at December 31, 2016, the cash paid for rent during 2016 is:
a. $480,000
b. $445,000
c. $395,000
d. $420,000
76. At the end of the first year of operations, the balance sheet of West Palm Beach Industries had the following
balances: Accounts Receivable, $5,000; Accounts Payable, $6,000; Inventory, $3,000; and Unexpired
Insurance, $2,000. The corporation reported net income of $79,000 for the year, including depreciation
expense of $5,000, and uses the indirect method of computing net cash flow from operating activities. Based
on this information, net cash flow from operating activities is:
a. $82,000
b. $78,000
c. $80,000
d. $77,000
77. O’Bryan Company began the year with a balance of $18,000 in Salaries and Wages Payable and ended the
year with $11,000 in the account. Salaries and Wages Expense for the period amounted to $91,000. Under
the direct method, O’Bryan will report cash payments for salaries and wages of:
a. $84,000
b. $102,000
c. $109,000
d. $98,000
Chapter 12: The Statement of Cash Flows
78. Use the equation presented below to answer the question that follows:
Cash = CL + LTL + CS + RE – NCCA – LTA
where: CL = Current liabilities
LTL = Long-term liabilities
CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets
LTA = Long-term assets
Which of the following activities results in a cash outflow?
a. Decreases in noncash current assets (NCCA)
b. Decreases in long-term assets (LTA)
c. Increases in long-term liabilities (LTL)
d. Decreases in retained earnings (RE)
79. Use the equation presented below to answer the question that follows:
Cash = CL + LTL + CS + RE – NCCA – LTA
where: CL = Current liabilities
LTL = Long-term liabilities
CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets
LTA = Long-term assets
Which of the following activities results in a cash inflow?
a. Increases in noncash current assets (NCCA)
b. Decreases in current liabilities (CL)
c. Increases in common stock (CS)
d. Decreases in retained earnings (RE)
80. Which of the following financing activities results in a cash inflow?
a. Buying treasury stock
b. Issuing bonds
c. Repaying a bank loan
d. Paying cash dividends
Chapter 12: The Statement of Cash Flows
81. Which of the following operating activities results in a cash outflow?
a. Paying creditors for merchandise
b. Collecting accounts receivable
c. Making cash sales
d. Receiving deposits recorded as unearned revenue
82. Which of the following activities is most likely to have a cash flow effect?
a. Investing in money market funds
b. Declaring cash dividends
c. Reissuing treasury stock
d. Issuing stock to acquire a patent
83. Tara Corp. reported the following information for 2015 and 2016.
Accounts receivable, December 31, 2015
$ 67,000
Accounts receivable, December 31, 2016
63,000
Sales (all on credit)—2016
745,000
How much cash was collected from customers during 2016?
a. $741,000
b. $745,000
c. $749,000
d. $753,000
84. Goldman Corp. reported the following information for 2015 and 2016.
Accounts payable, December 31, 2015
$ 51,000
Accounts payable, December 31, 2016
46,000
Purchases—2016
467,000
How much cash was paid for merchandise purchases during 2016?
a. $421,000
b. $462,000
c. $467,000
d. $472,000
