ACC 206 Week 9 Quiz – Strayer New

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Quiz 7 Chapter17

THESTATEMENTOFCASHFLOWS

CHAPTERSTUDYOBJECTIVES

1.Indicatetheusefulnessofthestatementofcashflows.

2.Distinguishamongoperating,investing,andfinancingactivities.

3.Prepareastatementofcashflowsusingtheindirectmethod.

4.Analyzethestatementofcashflows.

5.Explainhowtouseaworksheettopreparethestatementofcashflowsusingtheindirectmethod.

6.Prepareastatementofcashflowsusingthedirectmethod.

TRUE-FALSESTATEMENTS

1.     Thestatementofcashflowsisarequiredstatementthatmustbepreparedalongwithan income statement,balancesheet,andretainedearningsstatement.

2.     Forexternalreporting,acompanymustprepareeitheranincomestatementora statementof cashflows,but notboth.

3.     Aprimaryobjectiveofthestatementofcashflowsistoshowtheincomeorlosson investingandfinancingtransactions.

4.     A statementofcashflows indicatesthe sourcesanduses of cashduringaperiod.

5.     Inpreparingastatementofcashflows,cashequivalentsaresubtractedfrom cashinorder tocomputethenetchangeincashduring a period.

6.     Cashequivalentsarehighly-liquidinvestmentsthathavematuritiesoflessthanthree months.

7.     The useofcashtopurchasehighlyliquidshort-terminvestments(cashequivalents)would be reportedonthestatement of cashflowsasaninvestingactivity.

8.     Inpreparingastatementofcashflows,theissuanceofdebtshouldbereported separately from theretirementof debt.

9.     Noncashinvestingandfinancingactivitiesmustbereportedinthebodyofastatementof cashflows.

10.     Thestatementofcashflowsclassifiescashreceiptsandpaymentsasoperating, nonoperating, financial,andextraordinaryactivities.

11.     Thesaleof landfor cashwouldbeclassifiedasacashinflowfroman investingactivity.

12.     Cashflowfrominvestingactivitiesisconsideredthemostimportantcategoryonthe statementof cashflowsbecauseit isconsideredthebestmeasureof expectedincome.

13.     Thereceiptofdividends fromlong-term investments instockisclassified asacashinflow frominvestingactivities.

TheStatementof Cash Flows       17-5

14.     Thepaymentofinterestonbondspayableisclassifiedasacashoutflowfromoperating activities.

15.     Anyitemthatappearsontheincomestatementwouldbeconsideredaseitheracash inflowor cashoutflowfromoperatingactivities.

16.     Theacquisitionofabuildingbyissuingbondswouldbeconsideredaninvestingand financing activity thatdidnot affectcash.

17.     Allmajorfinancingandinvestingactivitiesaffectcash.

18.     Cashprovidedbyoperationsisgenerallyequaltooperatingincome.

19.     Usingtheindirectmethod,anincrease inaccountsreceivable duringaperiod isdeducted fromnetincomeincalculatingcashprovidedbyoperations.

20.     Usingtheindirectmethod,anincreaseinaccountspayableduringaperiodisdeducted from netincomeincalculatingcashprovidedbyoperations.

21.     Alossonsaleofequipmentisaddedtonetincomeindeterminingcashprovidedby operationsundertheindirectmethod.

22.     Inpreparingastatementofcashflows,anincreaseintheCommonStockandTreasury Stockaccountsduringaperiodwouldbe an investingactivity.

23.     Cashprovidedby operatingactivitiesfailsto take intoaccountthatacompanymust invest in newfixedassetsjusttomaintainits currentlevelofoperations.

24.     Freecashflowequalscashprovidedbyoperationslesscapitalexpendituresandcash dividends.

a25.     Theuseof aworksheetto prepareastatementofcashflowsis optional.

a26.    Duringtheyear,IncomeTaxExpenseamountedto$30,000andIncomeTaxesPayable increasedby$3,000;therefore,thecashpaidforincometaxeswas$27,000.

a27.     Inpreparingnetcashflowfromoperatingactivitiesusingthedirectmethod,eachitemin theincomestatementisadjustedfromtheaccrualbasistothecashbasis.

a28.    Usingthedirectmethod,majorclassesofinvestingandfinancingactivitiesarelistedin theoperatingactivitiessection.

a29.    Duringaperiod,costofgoodssold+anincreaseininventory+anincreaseinaccounts payable =cashpaidtosuppliers.

a30.     Operatingexpenses+anincreaseinprepaidexpenses–adecreaseinaccrued expensespayable=cashpaymentsfor operatingexpenses.

17-6       

Additional True-FalseQuestions

31.     Thestatementofcashflowsclassifiescashreceiptsandcashpaymentsintotwo categories:operatingactivitiesand nonoperatingactivities.

32.     Financingactivitiesincludetheobtainingofcashfromissuingdebtandrepayingthe amounts borrowed.

33.     TheadjustedtrialbalanceistheonlyitemneededtopreparetheStatementofCash Flows.

34.     Undertheindirectmethod,retainedearningsisadjustedforitemsthataffectedreported netincomebutdidnot affect cash.

a35.    ThereconcilingentryfordepreciationexpenseinaworksheetisacredittoAccumulated DepreciationandadebittoOperating-DepreciationExpense.

a36.    Underthedirectmethod,theformulaforcomputingcashcollectionsfromcustomersis salesrevenuesplustheincreaseinaccountsreceivableorminusthedecreasein accounts receivable.

MULTIPLECHOICEQUESTIONS

37.     Thestatementofcashflowsshouldhelpinvestorsandcreditorsassesseachofthe followingexceptthe

a.entity'sabilitytogeneratefutureincome. b.entity'sabilityto paydividends.

c.reasonsforthedifferencebetweennetincomeandnetcashprovidedbyoperating activities.

d.cashinvestingandfinancingtransactionsduringtheperiod.

38.     Thestatementof cashflows

a.mustbepreparedona dailybasis.

b.summarizesthe operating,financing,andinvestingactivitiesofanentity. c.is anothernamefortheincomestatement.

d.isaspecialsectionof the incomestatement.

TheStatementof Cash Flows       17-7

39.     Whichoneofthefollowingitemsisnotgenerallyusedinpreparingastatementofcash flows?

a.Adjustedtrialbalance

b.Comparativebalancesheets c.Currentincomestatementd.Additionalinformation

40.     Theprimarypurposeofthestatementof cashflows is to

a.provideinformationabouttheinvestingandfinancingactivitiesduringaperiod. b.prove thatrevenuesexceedexpensesifthereis anetincome.

c.provideinformationaboutthecashreceiptsandcashpaymentsduringa period. d.facilitatebanking relationships.

41.     Ifa companyreportsanet loss,it

a.maystillhavea netincreasein cash. b.willnotbe abletopaycashdividends. c.will not beabletogeta loan.

d.willnotbeable tomakecapitalexpenditures.

42.     Inadditionto the three basicfinancialstatements,which ofthe following isalso arequired financialstatement?

a.the"CashBudget"

b.theStatementof CashFlows

c.theStatementof CashInflowsandOutflows d.the"CashReconciliation"

43.     Thestatementof cashflowswillnotreportthe

a.amountof checksoutstanding atthe endof theperiod. b.sourcesofcashinthecurrentperiod.

c.uses of cashin thecurrentperiod.

d.changeinthecash balanceforthecurrentperiod.

44.     Cashequivalentsdonotinclude a.short-termcorporatenotes. b.treasurybills.

c.moneymarketfunds.

d.2-yearcertificatesofdeposit.

45.     Whichofthefollowing characteristicsdoesnotapplyto cashequivalents? a.Short-term

b.Highly-liquid

c.Readilyconvertibleintocash

d.Sensitiveto interestratechanges

46.     Cashequivalentsaregenerally investmentswithmaturitiesof a.$1,000ormore.

b.threemonthsor less. c.atleastsixmonths.

d.oneyearorthe operatingcycle, whicheveris less.

17-8       

47.     The bestmeasureof acompany'sabilitytogeneratesufficientcashtocontinueasagoing concern is netcashprovidedby

a.financingactivities. b.       investingactivities. c.operatingactivities. d.processingactivities.

48.     Theacquisitionof landbyissuingcommonstockis

a.a noncashtransactionwhich is notreported inthebodyofastatementofcashflows. b.acashtransactionandwouldbereportedinthebodyof astatementofcashflows.

c.a noncashtransactionandwouldbereportedinthebodyofastatementof cashflows. d.onlyreportedif thestatement of cashflowsisprepared usingthedirectmethod.

49.     Theorderof presentationofactivitiesonthestatement of cashflowsis a.operating,investing,andfinancing.

b.operating,financing,andinvesting. c.financing, operating,andinvesting. d.financing,investing,andoperating.

50.     Financingactivitiesinvolve a.lendingmoney.

b.acquiringinvestments. c.issuingdebt.

d.acquiringlong-lived assets.

51.     Investingactivitiesinclude

a.collecting cash on loansmade. b.obtainingcashfromcreditors. c.obtainingcapitalfromowners.

d.repayingmoneypreviouslyborrowed.

52.     Generally,themostimportantcategoryonthestatementofcashflowsiscashflowsfrom a.operatingactivities.

b.investingactivities. c.financingactivities.

d.significantnoncash activities.

53.     Thecategorythat isgenerally consideredtobe thebestmeasure ofacompany'sability to continue asagoingconcernis

a.cashflowsfromoperatingactivities. b.cashflowsfrominvestingactivities. c.cashflowsfromfinancingactivities. d.usuallydifferentfromyear to year.

54.     Cashreceiptsfrom interestanddividendsareclassifiedas a.financingactivities.

b.investingactivities. c.operatingactivities.

d.eitherfinancingorinvestingactivities.

TheStatementof Cash Flows       17-9

55.     Eachof thefollowingisanexampleof asignificantnoncashactivityexcept a.conversionofbonds intocommonstock.

b.exchangesof plantassets.

c.issuanceof debtto purchaseassets. d.stockdividends.

56.     Ifacompanyhasbothaninflowandoutflowofcashrelatedtoproperty,plant,and equipment, the

a.twocasheffectscanbenettedandpresentedasoneitemintheinvestingactivities section.

b.cashinflowandcashoutflowshouldbereportedseparatelyintheinvestingactivities section.

c.twocasheffectscanbenettedandpresentedasoneiteminthefinancingactivities section.

d.cashinflowandcashoutflowshouldbereportedseparatelyinthefinancingactivities section.

57.     Of theitemsbelow,theonethatappearsfirst onthestatementof cashflows is a.noncashinvesting andfinancingactivities.

b.netincrease(decrease)incash. c.cash attheendof theperiod.

d.cash atthebeginningoftheperiod.

58.     Whichof thefollowingtransactionsdoesnotaffectcashduring aperiod? a.Write-offofanuncollectibleaccount

b.Collectionofanaccounts receivable c.Saleof treasurystock

d.Exerciseofthecalloptiononbondspayable

59.    Significantnoncashtransactionswouldnotinclude a.conversionofbonds intocommonstock.b.assetacquisitionthroughbondissuance.

c.treasurystockacquisition. d.exchangeof plantassets.

60.     Inpreparingastatementofcashflows,aconversionofbondsintocommonstockwillbe reported in

a.thefinancingsection.

b.the"extraordinary"section.

c.a separatescheduleornote tothefinancial statements. d.thestockholders'equitysection.

Usethefollowing informationforquestions61–64.

Foreachofthefollowingtransactions,indicatewhere,ifatall,itwouldbeclassifiedonthe statement of cashflows.Assumetheindirectmethodisused.

61.     Paidincometaxes.

a.Operatingactivitiessection b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

17-10

62.     Issuedcommonstockfor cash. a.Operatingactivitiessection b.Investingactivitiessectionc.Financingactivities section

d.Doesnotrepresentacashflow

63.     Purchasedlandforcash.

a.Operatingactivitiessection b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

64.     Purchasedlandandbuildingwithamortgage. a.Operatingactivitiessection

b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

Usethefollowing informationforquestions65–66.

JoyElle’sVegetableMarkethadthefollowingtransactionsduring 2008:

1.Issued$25,000of par valuecommonstockforcash.

2.Repaida 6yearnotepayableintheamountof$11,000.

3.Acquiredlandbyissuingcommonstockof parvalue$50,000. 4.Declaredandpaidacashdividendof$1,000.

5.Solda long-terminvestment(cost$3,000)forcashof$3,000. 6.Acquiredan investmentinIBMstockforcashof $6,000.

65.     Whatisthenetcash providedbyfinancingactivities? a.$13,000

b.$25,000 c.$14,000 d.$9,000

66.     Whatisthenetcash providedbyinvestingactivities? a.$6,000

b.$16,000 c.($3,000) d.$3,000

67.     MillerCompanypurchasedtreasurystockwithacostof$15,000during2008.Duringthe year,thecompanypaiddividendsof$20,000andissuedbondspayableforproceedsof $816,000.Cashflowsfromfinancingactivitiesfor2008total

a.$796,000net cashinflow. b.$811,000net cashinflow. c.$5,000netcashoutflow. d.$781,000net cashinflow.

TheStatementof Cash Flows       17-11

68.     ClineCompanyissuedcommonstockforproceedsof$186,000during2008.The companypaiddividendsof$33,000andissuedalong-termnotepayablefor$45,000in exchangeforequipment duringtheyear.Thecompanyalsopurchased treasurystockthat hadacostof$7,000.Thefinancingsectionofthestatementofcashflowswillreportnet cash inflowsof

a.$146,000. b.$202,000. c.$153,000. d.$179,000.

69.     InGentryCompany,landdecreased$120,000becauseofacashsalefor$120,000,the equipmentaccountincreased$40,000asaresultofacashpurchase,andBonds Payable increased$130,000fromissuanceforcashatfacevalue.Thenetcashprovidedby investingactivities is

a.$120,000. b.$210,000. c.$80,000. d.$90,000.

70.     Accounts receivablearisingfromsalestocustomersamountedto$80,000and$70,000at thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$240,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement of cashflowsis

a.$240,000. b.$250,000. c.$310,000. d.$230,000.

71.     Accounts receivablearisingfromsalestocustomersamountedto$35,000and$40,000at thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$120,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement of cashflowsis

a.$120,000. b.$125,000. c.$155,000. d.$115,000.

72.       WiltonCompa