Chapter 13—The Statement of Cash Flows
MULTIPLE CHOICE
1. The main purpose of the statement of cash flows is:
a.
to provide information about revenues and expenses for a period of time.
b.
to provide information about assets, liabilities, and stockholders’ equity at a point in time.
c.
to provide information about the changes in stockholders’ equity for a period of time.
d.
to provide information about cash inflows and outflows for a period of time.
2. Which of the following statements regarding the statement of cash flows is not true?
a.
The statement of cash flows reports the impact of a firm’s operating, investing, and
financing activities on cash flows during the accounting period.
b.
The statement of cash flows also discloses items that affect how the balance sheet
changed, but that do not show up on the income statement, such as issuance of stock.
c.
The statement of cash flows is not a required component of a company’s external financial
statements.
d.
The statement of cash flows explains how cash changed from the end of the previous year
to the end of the current year.
3. Which of the following is not a required external financial statement?
a.
Balance sheet
b.
Budgeted income statement
c.
Statement of cash flows
d.
Statement of changes in stockholders’ equity
4. Which of the following is not one of the types of activities that is summarized on the statement of cash
flows?
a.
Organizing
b.
Financing
c.
Investing
d.
Operating
5. Cash received from customers is classified in which section of the statement of cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
6. Cash paid towards operating expenses is classified in which section of the statement of cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
7. Cash received from the sale of long-term investments is classified in which section of the statement of
cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
8. Cash paid to purchase long-term investments is classified in which section of the statement of cash
flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
9. Cash paid to purchase property, plant, and equipment is classified in which section of the statement of
cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
10. Cash received from the sale of property, plant, and equipment is classified in which section of the
statement of cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
11. Cash received from the issuance of capital stock is classified in which section of the statement of cash
flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
12. Cash received from the borrowing on a note payable is classified in which section of the statement of
cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
13. Cash paid to stockholders as a dividend is classified in which section of the statement of cash flows?
a.
Operating
b.
Investing
c.
Financing
d.
Noncash
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?
a.
Money market account funds.
b.
Treasury bill that matures in three months.
c.
Treasury bill that matures in one year.
d.
Checking account funds.
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:
a.
Net cash provided by financing activities of $5,000.
b.
Net cash utilized by financing activities of $2,000.
c.
Net cash utilized by financing activities of $3,000.
d.
Net cash provided by financing activities of $7,000.
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:
a.
Net cash provided by financing activities of $16,000.
b.
Net cash utilized by financing activities of $16,000.
c.
Net cash utilized by financing activities of $4,000.
d.
Net cash provided by financing activities of $4,000.
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:
a.
Net cash provided by operating activities of $29,000.
b.
Net cash utilized by operating activities of $29,000.
c.
Net cash utilized by operating activities of $49,000.
d.
Net cash provided by operating activities of $49,000.
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?
a.
Significant cash transactions that are classified as operating activities.
b.
Significant cash transactions that are classified as investing activities.
c.
Significant cash transactions that are classified as financing activities.
d.
Significant noncash transactions.
19. Generally accepted accounting principles allows which of the following methods to be used when
preparing the statement of cash flows?
a.
The operating, investing, and financing methods.
b.
The accrual basis and cash basis of accounting methods.
c.
The direct and indirect methods.
d.
The cash flows and noncash flows methods.
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
a.
2 and 3
b.
3 and 4
c.
1, 2, and 3
d.
1, 2, 3, and 4
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
a.
1 and 2
b.
3 and 4
c.
2 and 4
d.
1, 2, 3, and 4
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
a.
1 and 2
b.
3 and 4
c.
2 and 4
d.
1, 2, 3, and 4
23. Which of the following statements is true about the indirect method of preparing the operating
activities section on a statement of cash flows?
a.
It adjusts cash basis net income to accrual basis net income.
b.
It adjusts accrual basis net income to cash provided by operating activities.
c.
It adjusts accrual basis net income to budgeted net income.
d.
It adjusts cash basis net income to budgeted net income.
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?
a.
Cash received from customers was greater than sales revenue recorded during the year.
b.
Cash received from customers was less than sales revenue recorded during the year.
c.
Cash received from customers was exactly equal to sales revenue recorded during the
year.
d.
Cash received from customers was higher than cash paid to suppliers during the year.
25. The direct and indirect methods affect which section(s) on a statement of cash flows?
a.
Operating activities section only
b.
Investing activities section only
c.
Both operating and investing activities
d.
Both investing and financing activities
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?
a.
$202,000
b.
$127,000
c.
$228,000
d.
$172,000
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?
a.
$833,000
b.
$863,000
c.
$803,000
d.
$777,000
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?
a.
$667,000
b.
$763,000
c.
$723,000
d.
$707,000
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?
a.
$300,000
b.
$340,000
c.
$260,000
d.
$ 40,000
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?
a.
$100,000
b.
$750,000
c.
$850,000
d.
$950,000
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?
a.
$615,000
b.
$585,000
c.
$665,000
d.
$535,000
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?
a.
$433,000
b.
$417,000
c.
$453,000
d.
$397,000
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?
a.
$174,000
b.
$194,000
c.
$206,000
d.
$186,000
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?
a.
$ 75,000
b.
$700,000
c.
$775,000
d.
$625,000
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?
a.
$ 30,000
b.
$870,000
c.
$900,000
d.
$930,000
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?
a.
$38,800
b.
$41,200
c.
$45,200
d.
$34,800
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?
a.
$68,000
b.
$58,000
c.
$42,000
d.
$52,000
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?
a.
$27,000
b.
$29,000
c.
$21,000
d.
$23,000
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?
a.
$71,500
b.
$80,500
c.
$64,500
d.
$55,500
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?
a.
Increase in accounts receivable
b.
Decrease in liabilities
c.
Depreciation expense
d.
Increase in notes payable
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?
a.
Increase in accounts payable
b.
Increase in accounts receivable
c.
Depreciation expense
d.
Increase in property, plant, and equipment
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?
a.
Gain on sale of property, plant, and equipment
b.
Decrease in prepaid insurance
c.
Depreciation expense
d.
Increase in salaries payable
Managerial ACCT Test Bank Chapter 13 11
43. The collection of interest revenue will be depicted on the statement of cash flows as a:
a.
source of cash from an operating activity.
b.
source of cash from an investing activity.
c.
use of cash from a financing activity.
d.
source of cash from a financing activity.
44. The payment of interest expense will be depicted on the statement of cash flows as a:
a.
source of cash from an operating activity.
b.
use of cash from an investing activity.
c.
use of cash from a financing activity.
d.
use of cash from an operating activity.
45. The payment of a cash dividend will be depicted on the statement of cash flows as a:
a.
source of cash from an operating activity.
b.
use of cash from an investing activity.
c.
use of cash from a financing activity.
d.
use of cash from an operating activity.
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?
a.
The entire $11,400 should be shown as a use of cash from financing activities.
b.
The entire $11,400 should be shown as a use of cash from investing activities.
c.
The $10,000 principal portion should be shown as a use of cash from financing activities,
and the $1,400 in interest should be shown as a use of cash from operating activities.
d.
The $10,000 principal portion should be shown as a use of cash from investing activities,
and the $1,400 in interest should be shown as a use of cash from operating activities.
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