Question 1

Sebring Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $140,000 was sold for a $5,000 gain in Year 2.The following selected information is available for Sebring Company from its comparative balance sheet.Compute the cash received from the sale of the equipment.

Accepted Answer

A)  $23,000.
B)  $33,000.
C)  $28,000.
D)  $40,000.
E)  $68,000.F) None of the above
G) A) and C)

Question 2

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n) :

Accepted Answer

A)  Short-term marketable equity security.
B)  Operating activity.
C)  Common stock.
D)  Cash equivalent.
E)  Financing activity.F) A) and B)
G) B) and D)

Question 3

The full disclosure principle requires that noncash investing and financing activities be disclosed in the financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 5

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

Accepted Answer

A)  Operating activities.
B)  Financing activities.
C)  Investing activities.
D)  Schedule of noncash investing or financing activity.
E)  None of these.This is not reported on the statement of cash flows.F) A) and B)
G) B) and E)

Question 6

Conversion of preferred stock to common stock is disclosed in the financing section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 7

If a company borrows money from a bank,the interest paid on this loan should be reported on the statement of cash flows as a(n) :

Accepted Answer

A)  Operating activity.
B)  Investing activity.
C)  Financing activity.
D)  Noncash investing and financing activity.
E)  None of these.This is not reported in the statement of cash flows.F) A) and D)
G) C) and E)

Question 8

The statement of cash flows is divided into three sections called the _____________,_____________,and _______________ sections.

Accepted Answer

answers c...

Question 9

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from investing activities generally affect:

Accepted Answer

A)  Net income, current assets, and current liabilities.
B)  Noncurrent assets.
C)  Noncurrent liability and equity accounts.
D)  Both noncurrent assets and noncurrent liabilities.
E)  Equity accounts only.F) B) and D)
G) A) and C)

Question 10

Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ______________________________.

Accepted Answer

The answer of Investments that are readily convertible to a...

Question 11

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 receipts.
B)  Separately lists each major item of operating cash payments.
C)  Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.
D)  Is required if the company is a merchandiser.
E)  Must not be used in all circumstances.F) A) and E)
G) All of the above

Question 12

The reporting of investing and financing activities is _________________ under the direct and indirect methods of preparing the statement of cash flows.

Accepted Answer

The answer of The reporting of investing and financing activities...

Question 13

Based on the information in the following income statement and balance sheet for Montego Bay Corporation,determine the cash flows from operating activities using the direct method.

Accepted Answer

The answer of Based on the information in the following...

Question 14

When using the indirect method to calculate and report net cash provided or used by operating activities,which of the following is subtracted from net income?

Accepted Answer

A)  Decrease in income taxes payable.
B)  Depreciation expense.
C)  Amortization of intangible assets.
D)  Bad debts expense.
E)  Decrease in merchandise inventory.F) B) and C)
G) A) and C)

Question 15

Information to prepare the statement of cash flows usually comes from (a)comparative balance sheets,(b)current income statement,and (c)additional information.

Accepted Answer

A) True 
 B)False

Question 16

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Accepted Answer

Noncash investing and financing activiti...

Question 17

The statement of cash flows helps analysts evaluate the:

Accepted Answer

A)  Source of cash used for debt repayments.
B)  Source of cash used for plant expansion.
C)  Differences between net income and net operating cash flow.
D)  Source of cash used to finance investing activities.
E)  All of the choices are correct.F) C) and E)
G) B) and E)

Question 18

The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income.

Accepted Answer

A) True 
 B)False

Question 19

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Accepted Answer

A)  Operating activities.
B)  Financing activities.
C)  Investing activities.
D)  Schedule of noncash investing or financing activity.
E)  None of these.This is not reported on the statement of cash flows.F) A) and D)
G) A) and C)

Question 20

Use the following information to calculate cash paid for wages and salaries:

Accepted Answer

A)  $157,400.
B)  $163,800.
C)  $168,000.
D)  $172,200.
E)  $174,400.F) B) and E)
G) None of the above

Exam 16: Reporting the Statement of Cash Flows

Conversion of preferred stock to common stock is disclosed in the financing section of the statement of cash flows.

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The reporting of investing and financing activities is _________________ under the direct and indirect methods of preparing the statement of cash flows.

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Use the following information to calculate cash paid for wages and salaries:

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When using the indirect method to calculate and report net cash provided or used by operating activities,which of the following is subtracted from net income?

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Sebring Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $140,000 was sold for a $5,000 gain in Year 2.The following selected information is available for Sebring Company from its comparative balance sheet.Compute the cash received from the sale of the equipment.

Correct AnswerverifiedShow Answer

Information to prepare the statement of cash flows usually comes from (a)comparative balance sheets,(b)current income statement,and (c)additional information.

Correct AnswerverifiedShow Answer

The full disclosure principle requires that noncash investing and financing activities be disclosed in the financial statements.

Correct AnswerverifiedShow Answer

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

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The statement of cash flows helps analysts evaluate the:

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Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.

Correct AnswerverifiedShow Answer

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n) :

Correct AnswerverifiedShow Answer

If a company borrows money from a bank,the interest paid on this loan should be reported on the statement of cash flows as a(n) :

Correct AnswerverifiedShow Answer

Based on the information in the following income statement and balance sheet for Montego Bay Corporation,determine the cash flows from operating activities using the direct method.

Correct AnswerverifiedShow Answer

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Correct AnswerverifiedShow Answer

The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income.

Correct AnswerverifiedShow Answer

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from investing activities generally affect:

Correct AnswerverifiedShow Answer

Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ______________________________.

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The statement of cash flows is divided into three sections called the _____________,_____________,and _______________ sections.

Correct Answerverified answers c...View AnswerShow Answer

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Correct AnswerverifiedNoncash investing and financing activiti...View AnswerShow Answer

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

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The statement of cash flows is divided into three sections called the _______,_,and _________ sections.

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answers c...
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Noncash investing and financing activiti...
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