Question 1

A cash equivalent must be readily convertible to a known amount of cash,and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

Accepted Answer

A) True 
 B)False

Question 2

The direct method for the preparation of the operating activities section of the statement of cash flows:

Accepted Answer

A)  Separately lists each major item of operating cash receipts and cash payments.
B)  Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement.
C)  Reports a different amount of cash flows from operations than if the indirect method is used.
D)  Is required if the company is a merchandiser.
E)  Is required by the FASB.F) All of the above
G) A) and D)

Question 3

Define and discuss the differences between operating,investing,and financing activities.

Accepted Answer

Operating activities involve the day-to-...

Question 4

The direct method of reporting operating cash flows:

Accepted Answer

A)  Is recommended but not required by the FASB.
B)  Must be used by all companies.
C)  Is used by most companies.
D)  Is considered supplementary disclosure.
E)  Is not recommended by the FASB, but is commonly used.F) B) and C)
G) B) and E)

Question 5

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

Accepted Answer

A) True 
 B)False

Question 6

When preparing a statement of cash flows on the indirect method,each of the following should be classified as an operating activity cash flow except:

Accepted Answer

A)  An increase in accounts receivable.
B)  A decrease in accounts payable.
C)  Proceeds from the disposal of a long-term asset with no gain or loss.
D)  An increase in prepaid expenses.
E)  A decrease in accrued expenses payable.F) A) and B)
G) A) and C)

Question 7

Business activities that generate or use cash are classified as operating,investing,or financing activities on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 8

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

Accepted Answer

A)  $218,000.
B)  $223,200.
C)  $220,000.
D)  $228,800.
E)  $234,000.F) A) and E)
G) B) and E)

Question 9

To be classified as a cash equivalent,the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

Accepted Answer

A) True 
 B)False

Question 10

A company reported operating cash flows in Year 1 of $23,400 and $26,220 in Year 2.Its average total assets in Year 1 were $262,000 and $285,000 in Year 2.Calculate the cash flow on total assets ratio for both years.Comment on the results.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> Comment: The company had an increase in...

Question 11

The cash flow on total assets ratio is computed by dividing _____________ by ____________.

Accepted Answer

cash flows from oper...

Question 12

___________________ activities generally include those transactions and events that affect long-term assets.

Accepted Answer

The answer of ___________________ activities generally include those transactions and...

Question 13

On a spreadsheet used to prepare the operating activities section of the statement of cash flows,depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

Accepted Answer

A) True 
 B)False

Question 14

Receipts of cash dividends and interest earned on loans are classified as investing activities.

Accepted Answer

A) True 
 B)False

Question 15

_____________ activities include the cash effects of transactions and events that determine net income.

Accepted Answer

The answer of _____________ activities include the cash effects of...

Question 16

A company reported net income of $112,000,operating cash flows of $57,000,total cash flows of $97,000,and average total assets of $962,000.Calculate its cash flow on total assets ratio.

Accepted Answer

Cash Flow on Total Assets = Op...

Question 17

Since it is recommended by the FASB,the direct method of preparing the statement of cash flows is most frequently used.

Accepted Answer

A) True 
 B)False

Question 18

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the ______________ method is used.

Accepted Answer

The answer of The FASB requires a reconciliation of net...

Question 19

The cash flow on total assets ratio can be used as an indicator of earnings quality.

Accepted Answer

A) True 
 B)False

Question 20

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash,resulting in a loss of $3,000.The amount to be reported under cash flows from financing activities is:

Accepted Answer

A)  $ (3,000) .
B)  $ 60,000.
C)  $(57,000) .
D)  Zero.This is an operating activity.
E)  Zero.This is an investing activity.F) D) and E)
G) A) and D)

Exam 16: Reporting the Statement of Cash Flows

To be classified as a cash equivalent,the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

Correct AnswerverifiedShow Answer

A company reported net income of $112,000,operating cash flows of $57,000,total cash flows of $97,000,and average total assets of $962,000.Calculate its cash flow on total assets ratio.

Correct AnswerverifiedCash Flow on Total Assets = Op...View AnswerShow Answer

Receipts of cash dividends and interest earned on loans are classified as investing activities.

Correct AnswerverifiedShow Answer

A company reported operating cash flows in Year 1 of $23,400 and $26,220 in Year 2.Its average total assets in Year 1 were $262,000 and $285,000 in Year 2.Calculate the cash flow on total assets ratio for both years.Comment on the results.

Correct Answerverified Comment: The company had an increase in...View AnswerShow Answer

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the ______________ method is used.

Correct AnswerverifiedShow Answer

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

Correct AnswerverifiedShow Answer

When preparing a statement of cash flows on the indirect method,each of the following should be classified as an operating activity cash flow except:

Correct AnswerverifiedShow Answer

The direct method of reporting operating cash flows:

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The direct method for the preparation of the operating activities section of the statement of cash flows:

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Define and discuss the differences between operating,investing,and financing activities.

Correct AnswerverifiedOperating activities involve the day-to-...View AnswerShow Answer

Since it is recommended by the FASB,the direct method of preparing the statement of cash flows is most frequently used.

Correct AnswerverifiedShow Answer

On a spreadsheet used to prepare the operating activities section of the statement of cash flows,depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

Correct AnswerverifiedShow Answer

___________________ activities generally include those transactions and events that affect long-term assets.

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Business activities that generate or use cash are classified as operating,investing,or financing activities on the statement of cash flows.

Correct AnswerverifiedShow Answer

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash,resulting in a loss of $3,000.The amount to be reported under cash flows from financing activities is:

Correct AnswerverifiedShow Answer

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

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_____________ activities include the cash effects of transactions and events that determine net income.

Correct AnswerverifiedShow Answer

A cash equivalent must be readily convertible to a known amount of cash,and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

Correct AnswerverifiedShow Answer

The cash flow on total assets ratio can be used as an indicator of earnings quality.

Correct AnswerverifiedShow Answer

The cash flow on total assets ratio is computed by dividing _____________ by ____________.

Correct Answerverifiedcash flows from oper...View AnswerShow Answer

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Cash Flow on Total Assets = Op...
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Comment: The company had an increase in...
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Operating activities involve the day-to-...
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The cash flow on total assets ratio is computed by dividing _ by .

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cash flows from oper...
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