The statement of cash flows is not one of the basic financial statements. True ANSWER: False DIFFICULTY: Easy Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows - Measurement BUSPROG: Analytic Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents. True False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic The statement of cash flows is an optional financial statement. True False ANSWER: False DIFFICULTY: Easy Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement ACCT.AICPA.FN.04 - Reporting BUSPROG: Analytic The statement of cash flows shows the effects on cash of a company's operating, investing, and financing activities. True False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01
ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Cash from financing activities, as part of the statement of cash flows, would include any payments for dividends. True False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Cash from investing activities, as part of the statement of cash flows, would include any payments for the purchase of treasury stock. True False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Cash from investing activities, as part of the statement of cash flows, would include any receipts from the issuance of bonds payable. True False ANSWER: DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: (1) the
True False ANSWER: DIFFICULTY: Easy Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic The declaration and issuance of a stock dividend would be reported on the statement of cash flows. True False ANSWER: False DIFFICULTY: Easy Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows from financing activities section of the statement of cash flows. True False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the cash flows from financing activities section of the statement of cash flows. True False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement
False ANSWER: True DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Cash paid to acquire treasury should be shown on the statement of cash flows under investing activities. True False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows. True False ANSWER: False DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section. True False ANSWER: DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic
Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows - Measurement BUSPROG: Analytic The statement of cash flows is not useful for planning future investing and financing activities determining a company’s ability to pay its debts determining a company’s ability to pay dividends calculating the net worth of a company ANSWER: d DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Cash receipts received from the issuance of a mortgage notes payable would be classified as a(n) investing activity operating activity noncash investing and financing activity financing activity ANSWER: d DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Which of the following would not be on the statement of cash flows? cash flows from investing activities cash flows from financing activities cash from operating activities cash from contingent activities ANSWER: d DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-01 - 16-01 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows
DIFFICULTY: Easy Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would increase by $48,000 decrease by $7,000 increase by $55,000 decrease by $27,000 ANSWER: a DIFFICULTY: Easy Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic On the statement of cash flows, the cash flows from financing activities section would include receipts from the sale of investments payments for the acquisition of investments receipts from a note receivable receipts from the issuance of capital stock ANSWER: d DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Cash dividends paid on capital would be reported in the statement of cash flows in the cash flows from financing activities section the cash from investing activities section a separate schedule the cash from operating activities section ANSWER: a DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02
ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows - Measurement BUSPROG: Analytic Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is a. $50,000 b. $40,000 c. $55,000 d. $35,000 ANSWER: b DIFFICULTY: Moderate Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic On the statement of cash flows, a $7,500 gain on the sale of fixed assets would be added to net income in converting the net income reported on the income statement to cash flows from operating activities deducted from net income in converting the net income reported on the income statement to cash flows from operating activities added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends ANSWER: b DIFFICULTY: Easy Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in a separate schedule the cash flows from financing activities section the cash flows from investing activities section the cash flows from operating activities section ANSWER: a DIFFICULTY: Easy Bloom’s: Remembering LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02
flows. (1) (2) Determine the following: If sales for the current year were $695,000 and accounts receivable decreased by $43,500 during the year, what was the amount of cash received from customers? If income tax expense for the current year was $56,000 and income tax payable decreased by $5,200 during the year, what was the amount of cash payments of income tax? ANSWER: (1) Sales $695,000 Plus decrease in accounts receivable balance 43,500 Cash received from customers $738,500 (2) Income tax expense $ 56,000 Plus decrease in income tax payable 5,200 Cash payments for income tax $ 61,200 DIFFICULTY: Moderate Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-04 - 16-04 ACCREDITING STANDARDS: - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Connor Designs Company has cash flows for operating activities of $425,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity. What is the free cash flow for Connor Designs? ANSWER: Cash flows from operating activities $425,000 Less cash paid to maintain current production levels of property, plant, and equipment 45,500* Free cash flow $379,500 *Property, plant, and equipment to maintain productive capacity: $65,000 × 70% = $45,500 DIFFICULTY: Moderate Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-04 - 16-04 ACCREDITING STANDARDS: ACBSP-APC-23 - Financial Statement Analysis ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. increase cash from operating activities decrease cash from operating activities increase cash from investing activities
decrease in accounts payable balance ANSWER: Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. Operating activities Financing activities Investing activities Schedule of noncash financing and investing DIFFICULTY: Remembering Easy LEARNING OBJECTIVES: ACCT.WARD.16.16-02 - 16-02 ACCT.WARD.16.16-04 - 16-04 ACCREDITING STANDARDS: ACCT.ACBSP.APC.24 - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Increase in income payable ANSWER: a Dividends received on investment ANSWER: a Sale of machinery held for use by the company ANSWER: Issuance of bond payable ANSWER: b Purchase of the stock of another company as investment ANSWER: Decrease in inventory ANSWER: a Exchange of land for note payable ANSWER: d