1.
Under the direct method, cash payments to suppliers equals cost of goods sold:
A.
plus an increase in inventory and accounts payable.
B.
minus a decrease in inventory and accounts payable.
C.
minus an increase in inventory and plus a decrease in accounts payable.
D.
plus an increase in inventory and minus an increase in accounts payable.


2.
Tucker Co. provided the following information on selected transactions during 2012:
   Repayment of bond principal                                     $   450,000
   Proceeds from issuing common stock                              760,000
   Purchases of inventory                                                     940,000
   Proceeds from the sale of treasury stock                         120,000
   Purchase of 10% interest in stock of Handi Corp.          220,000
   Dividends paid to common & preferred stockholders       80,000
   Proceeds from issuing preferred stock                            150,000
   Proceeds from sale of land                                              280,000
The net cash provided (used) by investing activities during 2012 is
A.
$40,000.
B.
$60,000.
C.
$180,000.
D.
$(880,000).


3.
Tucker Co. provided the following information on selected transactions during 2012:
   Repayment of bond principal                                     $   450,000
   Proceeds from issuing common stock                              760,000
   Purchases of inventory                                                     940,000
   Proceeds from the sale of treasury stock                          120,000
   Purchase of 10% interest in stock of Handi Corp.           220,000
   Dividends paid to common & preferred stockholders        80,000
   Proceeds from issuing preferred stock                              150,000
   Proceeds from sale of land                                                280,000
The net cash provided (used) by financing activities during 2012 is
A.
$500,000.
B.
$380,000.
C.
$150,000.
D.
$(260,000).


4.
Acquiring land and a building by issuing common stock would be reported as:
A.
an investing activity.
B.
a financing activity.
C.
both an investing activity and a financing activity.
D.
a noncash investing and financing activity.


5.
Which of the following statements related to a work sheet used for preparation of the statement of cash flows is not correct?
A.
Accounts with debit balances are listed separately from those with credit balances in the balance sheet accounts section.
B.
Inflows of cash are entered as debits and outflows of cash are entered as credits in the reconciling columns.
C.
The reconciling items shown in the work sheet are entered in a journal and posted to appropriate accounts.
D.
All of the options are correct.


6.
The last step in the preparation of the statement of cash flows work sheet is to enter the:
A.
balance sheet accounts and their beginning balances in the balance sheet accounts section.
B.
balance sheet accounts and their ending balances in the balance sheet accounts section.
C.
data which explain the changes in the balance sheet accounts in the reconciling columns of the work sheet.
D.
increase or decrease in cash at the bottom of the work sheet.


7.
Which of the following statements is incorrect about cash flow accounting with respect to IFRS and U.S. GAAP treatments?
A.
IFRS requires that noncash investing and financing activities be excluded from the statement of cash flows.
B.
Similar to U.S. GAAP, the cash flow statement can be prepared using either the indirect or direct method under IFRS.
C.
IFRS encourages companies to disclose the aggregate amount of cash flows that are attributable to the increase in operating capacity separately from those cash flows that are required to maintain operating capacity.
D.
Both U.S. GAAP and IFRS consider bank overdrafts (in certain situations) to be part of cash and cash equivalents.


8.
The statement of cash flows is divided into four activities.
A. True
B. False


9.
Only the comparative balance sheet is needed to prepare the statement of cash flows.
A. True
B. False


10.
An increase in short-term notes receivable will be added to net income under the indirect method of preparing the statement of cash flows.
A. True
B. False


11.
Payment of a stock dividend is classified as a financing activity.
A. True
B. False


12.
The operating activities section of a statement of cash flows would include cash spent to acquire new equipment.
A. True
B. False


13.
The investing activities section of a statement of cash flows would include cash received from dividends on long-term investments in stocks.
A. True
B. False


14.
The financing activities section of a statement of cash flows would include interest paid on bonds and long-term notes payable.
A. True
B. False


15.
Under the direct method, a loss on the sale of long-term investments would be shown in the operating activities section.
A. True
B. False


16.
Depreciation expense is an adjustment to net income under the direct method.
A. True
B. False


17.
Unlike U.S. GAAP, IFRS does not specify that companies must classify cash flows as operating, investing, or financing.
A. True
B. False


18.
Which of the following is not one of the benefits that creditors and investors can derive from the statement of cash flows?
A.
Assess the effectiveness of management's borrowing policy.
B.
Assess the company's ability to generate future cash flows.
C.
Asses the company's ability to pay future cash dividends.
D.
Explain the difference between net income and net cash flow from operating activities.


19.
Which of the following is not one of the three activities classified on the statement of cash flows?
A.
Financing.
B.
Managing.
C.
Investing.
D.
Operating.


20.
Which method adjusts net income to net cash flows from operating activities?
A.
Direct.
B.
Adjustment.
C.
Accrual.
D.
Indirect.


21.
Caraway Company sold some of its plant assets during 2012. The original cost of the plant assets was $500,000 and the accumulated depreciation at date of sale was $310,000. The proceeds from the sale of the plant assets were $150,000. The information concerning the sale of the plant assets should be shown on Caraway's statement of cash flows (indirect method) for the year ended December 31, 2012, as a (n)
A.
subtraction from net income of $150,000 and a $190,000 increase in cash flows from financing activities.
B.
addition to net income of $40,000 and a $150,000 increase in cash flows from investing activities.
C.
subtraction from net income of $190,000 and a $150,000 increase in cash flows from investing activities.
D.
addition of $150,000 to net income.


22.
The payment of a cash dividend would be classified as a(n):
A.
operating activity.
B.
investing activity.
C.
financing activity.
D.
significant noncash transaction.


23.
Which of the following activities would be classified as an investing activity?
A.
Cash received from interest revenue.
B.
Cash paid on account.
C.
Cash received for dividends.
D.
Cash paid to purchase land to be held for future use.


24.
Which of the following is not needed in order to prepare a statement of cash flows?
A.
Comparative balance sheets.
B.
Last year's statement of cash flows.
C.
Current year's income statement.
D.
Selected transaction data.


25.
Which of the following is the first step in preparing the statement of cash flows?
A.
Determine the net cash flow from operating activities.
B.
Determine the net income.
C.
Determine the cash flow from investing activities.
D.
Determine the change in cash.


26.
Under the direct method of preparing the statement of cash flows, cash receipts from customers is equal to:
A.
Sales revenues – Decrease in accounts receivable.
B.
Net cash sales.
C.
Sales revenues + Increase in accounts receivable.
D.
Sales revenues – Increase in accounts receivable.


27.
If a plant asset is sold for cash and a loss results, which sections are affected in the statement of cash flows under the indirect method?
A.
Investing only.
B.
Financing only.
C.
Operating and investing.
D.
Operating and financing.



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