Question 1

On the statement of cash flows, business operations are classified as operating, investing, or financing activities.

Accepted Answer

A) True 
 B)False

Question 2

Non-cash investing and financing activities may be disclosed:

Accepted Answer

A)   In the investing section of the statement of cash flows.
B)   In a separate schedule attached to the bottom of the statement of cash flows.
C)   In the financing section of the statement of cash flows.
D)   In a note to the statement of cash flows.
E)   In a note to the statement of cash flows or in a separate schedule attached to the bottom of the statement of cash flows.F) A) and C)
G) A) and E)

Question 3

Transactions with the owners of a business or transactions with its creditors to borrow money or to repay the principal amounts of loans are called:

Accepted Answer

A)   Indirect activities.
B)   Financing activities.
C)   Direct activities.
D)   Investing activities.
E)   Operating activities.F) A) and E)
G) C) and D)

Question 4

Under the indirect method, an increase in income taxes payable is added to net income when preparing the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

Burton purchased equipment for $150,000 by paying $50,000 and signing a $100,000note payable. The entire transaction is disclosed to users on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

The sale of equipment increases investing cash flows.

Accepted Answer

A) True 
 B)False

Question 7

On the cash flow statement, which of the following would equal cash paid for salaries?

Accepted Answer

A)   Salaries Expense plus change in Salaries Payable
B)   Salaries Payable plus change in cash
C)   Salaries Expense plus beginning balance in salaries Payable
D)   Salaries Expense plus ending balance in Salaries PayableE) A) and B)
F) B) and C)

Question 8

Cash flows from cash dividends and interest received are reported in the statement of cash flows as:

Accepted Answer

A)   Investing activities.
B)   Financing activities.
C)   Operating activities.
D)   Noncash activities.
E)   Not reported.F) None of the above
G) C) and D)

Question 9

A calculation of the net cash provided or used by operating activities that lists the major classes of operating cash receipts, such as receipts from customers, and subtracts themajor classes of operating cash disbursements, such as cash paid for merchandise, is the:

Accepted Answer

A)   Direct method of calculating net cash provided or used)  by operating activities.
B)   Cash basis of accounting.
C)   Indirect method of calculating net cash provided or used)  by operating activities.
D)   Classified statement of cash flows.
E)   Net method of recording cash flows from operating activities.F) A) and E)
G) A) and B)

Question 10

The usual statement of cash flow activity category for the receipt of cash dividends from share investments is:

Accepted Answer

A)   Operating.
B)   Financing.
C)   Investing.
D)   Schedule of noncash investing or financing activity.
E)   Not reported on the statement of cash flows.F) B) and C)
G) B) and E)

Question 11

The purchase of non-current assets by issuing a note payable is reported on the statement of cash flows in the:

Accepted Answer

A)   Notes to the statement of cash flows.
B)   Investing section.
C)   Operating section.
D)   Financing section.
E)   Both financing and investing sections.F) A) and E)
G) A) and C)

Question 12

Investing activities include: a) the purchase and sale of non-current assets, b) lending and collecting on notes receivable, c) the purchase and sale of investments other than cash equivalents.

Accepted Answer

A) True 
 B)False

Question 13

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Accepted Answer

A) True 
 B)False

Question 14

The indirect method for preparation of the statement of cash flows calculates the net cash inflows outflows) from operating activities by adjusting accrual net income to a cash basis.

Accepted Answer

A) True 
 B)False

Question 15

Acquisitions of non-current assets:

Accepted Answer

A)   Have no impact on cash flows.
B)   Have no impact on cash flows and are investing activities.
C)   Are investing activities.
D)   Can involve cash outflows.
E)   Are investing activities and can involve cash outflows.F) B) and E)
G) A) and D)

Question 16

Does an overall increase in the Cash balance represent a favourable situation for a company? Explain.

Accepted Answer

An increase in cash does not always resu...

Question 17

The indirect 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 payments.
B)   Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.
C)   Separately lists each major item of operating cash receipts.
D)   Separately lists each major item of operating cash receipts and payments.
E)   All of these answers are correct.F) B) and D)
G) A) and E)

Question 18

Which of the following items is reported in the body of the statement of cash flows?

Accepted Answer

A)   Declaration of a share dividend.
B)   Share split.
C)   Distribution of a share dividend.
D)   Declaration of a cash dividend.
E)   Payment of a cash dividend.F) A) and B)
G) B) and C)

Question 19

Financing activities include receiving cash from issuing debt and receiving dividends from investments in other corporations.

Accepted Answer

A) True 
 B)False

Question 20

The direct method is required by IFRS because it provides greater detail regarding operating cash flows.

Accepted Answer

A) True 
 B)False

Exam 16: Reporting and Analyzing Cash Flows

The sale of equipment increases investing cash flows.

Correct AnswerverifiedShow Answer

Burton purchased equipment for $150,000 by paying $50,000 and signing a $100,000note payable. The entire transaction is disclosed to users on the statement of cash flows.

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

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On the statement of cash flows, business operations are classified as operating, investing, or financing activities.

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Investing activities include: a) the purchase and sale of non-current assets, b) lending and collecting on notes receivable, c) the purchase and sale of investments other than cash equivalents.

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Transactions with the owners of a business or transactions with its creditors to borrow money or to repay the principal amounts of loans are called:

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Financing activities include receiving cash from issuing debt and receiving dividends from investments in other corporations.

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The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

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Acquisitions of non-current assets:

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On the cash flow statement, which of the following would equal cash paid for salaries?

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A calculation of the net cash provided or used by operating activities that lists the major classes of operating cash receipts, such as receipts from customers, and subtracts themajor classes of operating cash disbursements, such as cash paid for merchandise, is the:

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Cash flows from cash dividends and interest received are reported in the statement of cash flows as:

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Under the indirect method, an increase in income taxes payable is added to net income when preparing the operating section of the statement of cash flows.

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The usual statement of cash flow activity category for the receipt of cash dividends from share investments is:

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The indirect method for preparation of the statement of cash flows calculates the net cash inflows outflows) from operating activities by adjusting accrual net income to a cash basis.

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Does an overall increase in the Cash balance represent a favourable situation for a company? Explain.

Correct AnswerverifiedAn increase in cash does not always resu...View AnswerShow Answer

The purchase of non-current assets by issuing a note payable is reported on the statement of cash flows in the:

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Non-cash investing and financing activities may be disclosed:

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Which of the following items is reported in the body of the statement of cash flows?

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The direct method is required by IFRS because it provides greater detail regarding operating cash flows.

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An increase in cash does not always resu...
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