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.

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