Filters
Question type
Study Flashcards

Buffers, Inc., uses cash when buying and selling all of its investment assets. Which of the following statements regarding cash flows are true? (1) . When the investment asset accounts increase, net cash inflows have occurred. (2) . When the investment asset accounts increase, net cash outflows have occurred. (3) ) When the investment asset accounts decreased, net cash inflows have occurred. (4) . When the investment asset accounts decrease, net cash outflows have occurred.


A) Statements (1) and (3) are true.
B) Statements (2) and (4) are true.
C) Statements (1) and (4) are true.
D) Statements (2) and (3) are true.

E) C) and D)
F) None of the above

Correct Answer

verifed

verified

Given this information, what is the amount of cash collected from customers?


A) $130,000
B) $134,000
C) $126,000
D) $116,000

E) B) and C)
F) A) and D)

Correct Answer

verifed

verified

A company bought $250,000 of equipment with an expected life of ten years and no residual value. After six years the company sold the equipment for $94,000. If it uses straight-line depreciation and the indirect method is used to determine net cash flows from operating activities, which of the following reflects how the sale of the equipment would be reported in the statement of cash flows?


A) $94,000 is recorded as a cash inflow from investing activities and no other sections of the statement are affected.
B) $94,000 is recorded as a cash inflow from investing activities and $6,000 is added to convert net income to net cash flow from operating activities.
C) $94,000 is recorded as a cash inflow from investing activities and $6,000 is subtracted to convert net income to net cash flow from operating activities.
D) $94,000 is recorded as a cash inflow from operating activities.

E) A) and C)
F) All of the above

Correct Answer

verifed

verified

Almost all U.S. companies have used the indirect method of preparing the statement of cash flows:


A) because most users of the financial statements do not understand the direct method.
B) in spite of the Financial Accounting Standard Board's stated preference for the direct method.
C) because it usually requires less space in the annual report.
D) so that stockholders cannot determine how much cash was spent on executives' salaries.

E) A) and B)
F) B) and D)

Correct Answer

verifed

verified

When the direct method is used to determine the net cash flows from operating activities, which of the following adjustments must be made to income tax expense to determine total income tax payments?


A) Add all changes in income taxes and income taxes payable.
B) Add decreases in income taxes payable and subtract increases in income taxes payable.
C) Add increases in income taxes payable and subtract decreases in income taxes payable.
D) Subtract all changes in income taxes payable.

E) A) and B)
F) A) and C)

Correct Answer

verifed

verified

Interest and dividends from investments held by a company are reported as cash inflows from investing activities on the statement of cash flows.

A) True
B) False

Correct Answer

verifed

verified

Which of the following statements regarding quality of income ratio is NOT true?


A) A quality of income ratio will increase if a company's working capital management allows current assets such as inventory to increase out of control.
B) Variations in the ratio can be seasonal and are the result of sales fluctuations rather than reasons for alarm.
C) The quality of income ratio measures the portion of income that was generated in cash.
D) The quality of income ratio is useful when compared to industry competitors or to prior periods.

E) B) and D)
F) B) and C)

Correct Answer

verifed

verified

Which of the following items would be reported on a statement of cash flows using the indirect method, but not on a statement prepared using the direct method?


A) Cash paid for dividends.
B) Cash received from stock issuances.
C) Depreciation expense.
D) Cash paid for purchase of treasury stock.

E) A) and D)
F) B) and C)

Correct Answer

verifed

verified

A company has a net cash inflow from operating activities of $789,000, a net cash outflow of $50,000 from investing activities and a net cash inflow of $100,000 from financing activities. The company paid $124,000 in interest, $186,500 in income taxes, and $200,000 in dividends. Which of the following statements about the Statement of Cash Flows is NOT true:


A) Dividends of $200,000 will be reported as a cash outflow in the cash flow from investing activities section.
B) Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.
C) The Statement of Cash Flows will show a net increase to cash and cash equivalents of $839,000.
D) If the direct method is used, the $124,000 of interest paid and the $186,500 of income taxes paid will be reported in the cash flows from operating activities.

E) None of the above
F) All of the above

Correct Answer

verifed

verified

If Cost of goods sold is $145,000 and the beginning and ending Inventory balances are $18,000 and $13,000, respectively, the net purchases of inventory are:


A) $145,000
B) $140,000
C) $150,000
D) $132,000

E) B) and D)
F) A) and C)

Correct Answer

verifed

verified

Given this information, what is the amount of cash paid for inventory?


A) $77,000
B) $78,000
C) $80,000
D) $81,000

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

A

When the direct method is used to determine the net cash flow from operating activities, other operating expenses are converted into cash outflows by:


A) adding changes in prepaid expenses and accrued liabilities to other expenses.
B) subtracting increases in prepaid expenses and subtracting decreases in accrued liabilities from other expenses.
C) adding increases in prepaid expenses and adding decreases in accrued liabilities to other expenses.
D) subtracting changes in prepaid expenses and accrued liabilities from other expenses.

E) B) and C)
F) A) and B)

Correct Answer

verifed

verified

The repayment of the principal of a loan which had been used to finance the purchase of equipment should be reported on the statement of cash flows as a


A) cash outflow from investing activities.
B) cash outflow from operating activities.
C) cash outflow from financing activities.
D) noncash transaction in a supplemental disclosure.

E) None of the above
F) A) and D)

Correct Answer

verifed

verified

A gain or loss from selling equipment is reported under cash flows from operating activities using the direct method.

A) True
B) False

Correct Answer

verifed

verified

Assume a company uses the indirect method to prepare its statement of cash flows. If the supplies account decreases and accounts payable increases during an accounting period, what does the company do with the changes in these accounts to calculate net cash flows from operating activities?


A) Both are added to net income.
B) The change in accounts payable is added to net income; the change in supplies is subtracted.
C) Both are subtracted from net income.
D) The change in supplies is added to net income; the change in accounts payable is subtracted.

E) C) and D)
F) B) and C)

Correct Answer

verifed

verified

Given this information, what is the amount of cash paid for wages?


A) $34,000
B) $35,000
C) $36,000
D) $22,000

E) B) and D)
F) A) and B)

Correct Answer

verifed

verified

C

If the cash balance at the beginning of the current year was $0, what is the amount of cash at the end of the year?


A) $112,500
B) $425,000
C) $737,500
D) $311,500

E) A) and D)
F) B) and D)

Correct Answer

verifed

verified

In general, the cash flow from operating activities is considered by many to be the most important component of the Statement of Cash Flows.

A) True
B) False

Correct Answer

verifed

verified

True

Two years ago, your company bought $40,000 in bonds from another company. This month, it sold half of those bonds for $20,640 and lent $1,000 to an employee with a promissory note. On the statement of cash flows for this accounting period, your company would report a net cash:


A) outflow of $19,640 from investing activities.
B) inflow of $19,640 from investing activities.
C) cash inflow of $20,640 from investing activities.
D) cash outflow of $20,640 from investing activities.

E) A) and B)
F) All of the above

Correct Answer

verifed

verified

The reporting of financing activities is identical under the indirect and direct methods for the Statement of Cash Flows.

A) True
B) False

Correct Answer

verifed

verified

Showing 1 - 20 of 143

Related Exams

Exam 1

Business Decisions and Financial Accounting

135 Questions

Exam 2

Reporting Investing and Financing Results on the Balance Sheet

126 Questions

Exam 3

Reporting Operating Results on the Income Statement

137 Questions

Exam 4

Adjustments, Financial Statements, and Financial Results

138 Questions

Exam 5

Financial Reporting and Analysis

140 Questions

Exam 6

Internal Control and Financial Reporting for Cash and Merchandise Sales

131 Questions

Exam 7

Reporting and Interpreting Inventories and Cost of Goods Sold

138 Questions

Exam 8

Reporting and Interpreting Receivables, Bad Debt Expense, and Interest Revenue

140 Questions

Exam 9

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

141 Questions

Exam 10

Reporting and Interpreting Liabilities

133 Questions

Exam 11

Reporting and Interpreting Stockholders Equity

142 Questions

Exam 13

Measuring and Evaluating Financial Performance

143 Questions

Show Answer