Chapter 17—The Statement of Cash Flows Key
1. The main purpose of the statement of cash flows is:
2. Which of the following statements regarding the statement of cash flows is not true?
3. Which of the following is not a required external financial statement?
4. Which of the following is not one of the types of activities that is summarized on the statement of cash
flows?
5. Cash received from customers is classified in which section of the statement of cash flows?
6. Cash paid towards operating expenses is classified in which section of the statement of cash flows?
7. Cash received from the sale of long-term investments is classified in which section of the statement of cash
flows?
8. Cash paid to purchase long-term investments is classified in which section of the statement of cash flows?
9. Cash paid to purchase property, plant, and equipment is classified in which section of the statement of cash
flows?
10. Cash received from the sale of property, plant, and equipment is classified in which section of the statement
of cash flows?
11. Cash received from the issuance of capital stock is classified in which section of the statement of cash
flows?
12. Cash received from the borrowing on a note payable is classified in which section of the statement of cash
flows?
13. Cash paid to stockholders as a dividend is classified in which section of the statement of cash flows?
14. Which of the following items would not be classified as either cash or a cash equivalent for purposes of the
statement of cash flows?
15. Nelson Corporation has the following information available for 2009:
Cash balance on 1/1/2009
$3,000
Cash balance on 12/31/2009
5,000
Net cash provided by operating activities
75,000
Net cash utilized by investing activities
80,000
The financing activity section of Nelson’s statement of cash flows would show:
16. BTE Corporation has the following information available for 2009:
Cash balance on 1/1/2009
$10,000
Cash balance on 12/31/2009
4,000
Net cash provided by operating activities
90,000
Net cash utilized by investing activities
80,000
The financing activity section of BTE’s statement of cash flows would show:
17. Justine Inc. has the following information available for 2009:
Cash balance on 1/1/2009
$ 6,000
Cash balance on 12/31/2009
10,000
Net cash provided by investing activities
25,000
Net cash provided by financing activities
8,000
The operating activity section of Justine’s statement of cash flows would show:
18. Which type of transaction is required by generally accepted accounting principles to be disclosed in either a
separate schedule at the bottom of the statement of cash flows or in a footnote to the financial statements?
19. Generally accepted accounting principles allows which of the following methods to be used when preparing
the statement of cash flows?
20. Given the following events, which ones affect cash flows from operating activities?
1.
payments of taxes
2.
payments to suppliers
3.
collections from customers
4.
collection from the sale of property, plant, and equipment
21. Given the following events, which ones affect cash flows from investing activities?
1.
collection from issuing capital stock
2.
payment of a dividend
3.
purchases of property, plant, and equipment
4.
collection from the sale of property, plant, and equipment
22. Given the following events, which ones affect cash flows from financing activities?
1.
collection from issuing capital stock
2.
payment of a dividend
3.
purchases of property, plant, and equipment
4.
collection from the sale of property, plant, and equipment
23. Which of the following statements is true about the indirect method of preparing the operating activities
section on a statement of cash flows?
24. Burke Inc.’s accounts receivable balance increased during the year from $300,000 to $360,000. Based on
this information, which of the following statements is true?
25. The direct and indirect methods affect which section(s) on a statement of cash flows?
26. Paxton Inc. had the following information related to last year’s sales:
Cash sales
$ 75,000
Credit sales
140,000
Accounts receivable – beginning
15,000
Accounts receivable – ending
28,000
What amount would be reported as “cash collections from customers” on the statement of cash flows using the direct method?
27. Culpepper Inc. had the following information related to last year’s sales:
Cash sales
$490,000
Credit sales
300,000
Accounts receivable – beginning
43,000
Accounts receivable – ending
30,000
What amount would be reported as “cash collections from customers” on the statement of cash flows using the direct method?
28. Pomander Inc. had the following information related to last year’s sales:
Cash sales
$215,000
Credit sales
500,000
Accounts receivable – beginning
20,000
Accounts receivable – ending
28,000
What amount would be reported as “cash collections from customers” on the statement of cash flows using the direct method?
29. Jazzy Inc. reported sales revenue of $300,000 on their income statement for 2009. From the beginning until
the end of 2009, accounts receivables increased by a net amount of $40,000. How much “cash collections from
customers” should Jazzy report for 2009 on their statement of cash flows?
30. Chatham Corp. reported sales revenue of $850,000 on their income statement for 2009. From the beginning
until the end of 2009, accounts receivables decreased by a net amount of $100,000. How much “cash collections
from customers” should Chatham report for 2009 on their statement of cash flows?
31. Felton Inc. had the following information related to last year’s purchases:
Cost of goods sold
$600,000
Accounts payable – beginning
25,000
Accounts payable – ending
40,000
What amount would be reported as “cash outflows for purchases” on the statement of cash flows using the direct method?
32. Crenshaw Inc. had the following information related to last year’s purchases:
Cost of goods sold
$425,000
Accounts payable – beginning
18,000
Accounts payable – ending
10,000
What amount would be reported as “cash outflows for purchases” on the statement of cash flows using the direct method?
33. Haley Inc. had the following information related to last year’s purchases:
Cost of goods sold
$190,000
Accounts payable – beginning
6,000
Accounts payable – ending
10,000
What amount would be reported as “cash outflows for purchases” on the statement of cash flows using the direct method?
34. Caldwell Corp. reported cost of goods sold of $700,000 on their income statement for 2009. From the
beginning until the end of 2009, accounts payable decreased by a net amount of $75,000. How much “cash
outflows for purchases” should Caldwell report for 2009 on their statement of cash flows?
35. Simmons Inc. reported cost of goods sold of $900,000 on their income statement for 2009. From the
beginning until the end of 2009, accounts payable increased by a net amount of $30,000. How much “cash
outflows for purchases” should Simmons report for 2009 on their statement of cash flows?
36. McClintock Inc. had the following information available from its 2009 balance sheet and income statement:
Insurance expense
$40,000
Prepaid insurance – beginning
2,000
Prepaid insurance – ending
3,200
What amount would be reported as cash outflows for insurance on the statement of cash flows for 2009 using the direct method?
37. Peter Piper Inc. had the following information available from its 2009 balance sheet and income statement:
Insurance expense
$55,000
Prepaid insurance – beginning
8,000
Prepaid insurance – ending
5,000
What amount would be reported as cash outflows for insurance on the statement of cash flows for 2009 using the direct method?
38. Tuffet Corporation had the following information available from its 2009 balance sheet and income
statement:
Interest expense
$25,000
Interest payable – beginning
3,000
Interest payable – ending
1,000
What amount would be reported as cash outflows for interest on the statement of cash flows for 2009 using the direct method?
39. Lineberger Corporation had the following information available from its 2009 balance sheet and income
statement:
Interest expense
$68,000
Interest payable – beginning
4,500
Interest payable – ending
8,000
What amount would be reported as cash outflows for interest on the statement of cash flows for 2009 using the direct method?
40. When using the indirect method of preparing a statement of cash flows, which of the following items would
need to be added to net income in order to reconcile to cash provided by operating activities?
41. When using the indirect method of preparing a statement of cash flows, which of the following items would
need to be deducted from net income in order to reconcile to cash provided by operating activities?
42. When using the indirect method of preparing a statement of cash flows, which of the following items would
need to be deducted from net income in order to reconcile to cash provided by operating activities?
43. The collection of interest revenue will be depicted on the statement of cash flows as a:
44. The payment of interest expense will be depicted on the statement of cash flows as a:
45. The payment of a cash dividend will be depicted on the statement of cash flows as a:
46. Burrows Inc. had an outstanding loan at the beginning of 2009 totaling $10,000. During 2009, $11,400 was
paid out related to this loan broken down as follows: $10,000 towards principal and $1,400 in interest. Which of
the following statements is correct regarding how the $11,400 payment should be depicted on the statement of
cash flows?
47. Clyde’s Clothing Inc. comparative balance sheets and income statements showed the following information
for 2008 and 2009:
Inventory – 12/31/08
$ 60,000
Inventory – 12/31/09
75,000
Accounts payable – 12/31/08
18,000
Accounts payable – 12/31/09
20,000
Cost of goods sold – 2009
400,000
Clyde’s accounts payable balances are composed solely of amounts due to suppliers for purchases of inventory. What is the amount of cash payments
for inventory that Clyde should report on its 2009 statement of cash flows assuming that the direct method is used?
48. Skipper’s Souvenir Shop had comparative balance sheets and income statements that showed the following
information for 2008 and 2009:
Inventory – 12/31/08
$100,000
Inventory – 12/31/09
85,000
Accounts payable – 12/31/08
20,000
Accounts payable – 12/31/09
15,000
Cost of goods sold – 2009
700,000
Skipper’s accounts payable balances are composed solely of amounts due to suppliers for purchases of inventory. What is the amount of cash
payments for inventory that Skipper should report on its 2009 statement of cash flows assuming that the direct method is used?
49. Gregson Company had the following noncash current asset and current liabilities balances at the end of
2008 and 2009:
2008
Accounts receivable
$ 60,000
Inventory
230,000
Prepaid insurance
15,000
Accounts payable
20,000
Net income for 2009 was $750,000 and depreciation expense was $40,000. All sales and all purchases are on account. Gregson uses the indirect
method for preparing the statement of cash flows.
Net cash flows from operating activities for 2009 would be: