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    Multiple Choice Use of Cash in Statement of Cash Flows

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    Statements of cash flows questions

    1.) Which of the following would be considered a "use" of cash for purposes of constructing a statement of cash flows?

    a decrease in bonds payable.

    an increase in common stock.

    a decrease in accounts receivable.

    an increase in accounts payable.

    2.) Which of the following would be considered a "source" of cash for purposes of constructing a statement of cash flows?

    an increase in accounts receivable.

    an increase in accounts payable.

    dividends paid to the company's own shareholders.

    a decrease in accrued liabilities.

    3.) (Appendix) Evita Corporation prepares its statement of cash flows using the indirect method. Evita's statement showed "Net cash provided by operating activities" to be $46,000. Under the direct method, this number would have been:

    $46,000.

    less than $46,000 but greater than $0.

    greater than $46,000.

    $0.

    4.) Under the indirect method, which item would be deducted from net income as part of the process of arriving at cash provided by operating activities on the statement of cash flows?

    Increase in accounts payable

    Decrease in accounts receivable

    Increase in prepaid expenses

    Patent amortization expense

    5.) A decrease in the prepaid expenses account of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:

    an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.

    an addition of $1,000 under financing activities.

    a deduction of $1,000 under financing activities.

    a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
    6.) An increase in the taxes payable account of $1,000 over the course of a year would be shown on the company's statement of cash flows prepared under the indirect method as:

    a deduction of $1,000 under financing activities.

    a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.

    an addition of $1,000 under financing activities.

    an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.

    7.) Luella Corporation prepares its statement of cash flows using the indirect method. Which of the following would be added to net income in the operating activities section of the statement?

    Depreciation Expense Loss on Sale of Equipment
    a.) Yes Yes
    b.) No No
    c.) No Yes
    d.) Yes No

    8.) Gioja Corporation prepares its statement of cash flows using the indirect method. Which of the following would be deducted from net income in the operating activities section of the statement?

    Increase in Taxes Payable Increase in Dividends Payable
    a.) Yes Yes
    b.) No Yes
    c.) Yes No
    d.) No No

    9.) In a statement of cash flows, all of the following would be classified as operating activities except:

    dividends received on stock in another company held as an investment.

    interest paid to creditors.

    interest received on a long-term note receivable.

    dividends paid to the company's own common stockholders.

    10.) Dividends paid to a company's own stockholders of $80,000 would be shown on the company's statement of cash flows prepared under the indirect method as:

    an addition of $80,000 under investing activities.

    a deduction of $80,000 under investing activities.

    a deduction of $80,000 under financing activities.

    an addition of $80,000 under financing activities.

    11.) Which of the following should be classified as a financing activity on a statement of cash flows?

    None of these

    an increase in deferred income taxes.

    cash used to retire bonds payable.

    cash dividends received on an investment in stock.

    both A and C above

    12.) Hanna Corporation's most recent balance sheet appears below:

    Comparative Balance Sheet
    Ending Beginning
    Balance Balance
    Assets:
    Cash and cash equivalents......................$31 $32
    Accounts receivable............................44 45
    Inventory..........................................68 69
    Plant and equipment............................626 510
    Accumulated depreciation....................(340) (303)
    Total assets......................................$429 $353

    Liabilities and stockholders' equity:
    Accounts payable.............................$39 $38
    Long-term debt................................311 300
    Common stock..................................61 60
    Retained earnings...............................18 (45)
    Total liabilities and stockholders' equity..$429 $353

    The net income for the year was $84. Cash dividends were $21. The net cash provided by (used by) financing activities for the year was:

    $11

    $1

    ($9)

    ($21)

    13.) Last year Martson Company sold equipment with a net book value of $110,000 for $130,000 in cash. This equipment was originally purchased for $200,000. What will be the net effect of this transaction on the net cash provided by or used by investing activities on the statement of cash flows?

    A net deduction of $20,000 from cash.

    A net deduction of $70,000 from cash.

    A net addition of $70,000 to cash.

    A net addition of $20,000 to cash.

    14.) The following transactions occurred last year at Jobb Company:
    Issuance of shares of the company's own common stock..........$100,000
    Dividends paid to the company's own shareholders....................$7,000
    Dividends received from investments in other companies' shares...$2,000
    Interest paid on the company's own bonds............................$25,000
    Repayment of principal on the company's own bonds..............$90,000
    Proceeds from sale of the company's used equipment................$9,000
    Purchase of land..........................................................$120,000

    Based solely on the above information, the net cash provided by financing activities for the year on the statement of cash flows would be:

    $3,000

    $(131,000)

    $353,000

    $(22,000)

    15.) Krech Corporation's comparative balance sheet appears below:
    Ending Beginning
    Balance Balance
    Assets:
    Current assets:
    Cash and cash eqivalents..............................$31,000 $28,000
    Accounts receivable.................................... 18,000 20,000
    Inventory..................................................70,000 66,000
    Total current assets........................................119,000 114,000
    Property, plant, and equipment...........................374,000 354,000
    Less accumulated depreciation........................190,000 165,000
    Net property, plant, and equipment.....................184,000 189,000
    Total assets................................................$303,000 $303,000

    Liabilities and stockholder's Equity
    Current liabilities:
    Accounts payable.......................................$13,000 $9,000
    Accrued wages and salaries payable...................31,000 33,000
    Accrued income taxes payable.........................28,000 29,000
    Notes payable.............................................21,000 20,000
    Total current liabilities.....................................93,000 91,000
    Long-term debt..............................................76,000 73,000
    Deferred income taxes......................................39,000 40,000
    Total liabilities..............................................208,000 204,000
    Stockholders' equity:
    Common stock............................................28,000 26,000
    Retained earnings.........................................67,000 73,000
    Total stockholders' equity..................................95,000 99,000
    Total liabilities and stockholders' equity...............$303,000 $303,000

    The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.

    Which of the following classifications of changes in balance sheet accounts as sources and uses is correct?

    The change in Accounts Receivable is a use; The change in Inventory is a source

    The change in Accounts Receivable is a source; The change in Inventory is a source

    The change in Accounts Receivable is a use; The change in Inventory is a use

    The change in Accounts Receivable is a source; The change in Inventory is a use

    16.) Krech Corporation's comparative balance sheet appears below:
    Ending Beginning
    Balance Balance
    Assets:
    Current assets:
    Cash and cash eqivalents..............................$31,000 $28,000
    Accounts receivable.................................... 18,000 20,000
    Inventory..................................................70,000 66,000
    Total current assets........................................119,000 114,000
    Property, plant, and equipment...........................374,000 354,000
    Less accumulated depreciation........................190,000 165,000
    Net property, plant, and equipment.....................184,000 189,000
    Total assets................................................$303,000 $303,000

    Liabilities and stockholder's Equity
    Current liabilities:
    Accounts payable.......................................$13,000 $9,000
    Accrued wages and salaries payable...................31,000 33,000
    Accrued income taxes payable.........................28,000 29,000
    Notes payable.............................................21,000 20,000
    Total current liabilities.....................................93,000 91,000
    Long-term debt..............................................76,000 73,000
    Deferred income taxes......................................39,000 40,000
    Total liabilities..............................................208,000 204,000
    Stockholders' equity:
    Common stock............................................28,000 26,000
    Retained earnings.........................................67,000 73,000
    Total stockholders' equity..................................95,000 99,000
    Total liabilities and stockholders' equity...............$303,000 $303,000

    The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.

    Which of the following classifications of changes in balance sheet accounts as sources and uses is correct?

    The change in Accounts Payable is a source; The change in Accrued Wages and Salaries payable is a source

    The change in Accounts Payable is a use; The change in Accrued Wages and Salaries payable is a source

    The change in Accounts Payable is a source; The change in Accrued Wages and Salaries payable is a use

    The change in Accounts Payable is a use; The change in Accrued Wages and Salaries payable is a use

    17.) Krech Corporation's comparative balance sheet appears below:
    Ending Beginning
    Balance Balance
    Assets:
    Current assets:
    Cash and cash eqivalents..............................$31,000 $28,000
    Accounts receivable.................................... 18,000 20,000
    Inventory..................................................70,000 66,000
    Total current assets........................................119,000 114,000
    Property, plant, and equipment...........................374,000 354,000
    Less accumulated depreciation........................190,000 165,000
    Net property, plant, and equipment.....................184,000 189,000
    Total assets................................................$303,000 $303,000

    Liabilities and stockholder's Equity
    Current liabilities:
    Accounts payable.......................................$13,000 $9,000
    Accrued wages and salaries payable...................31,000 33,000
    Accrued income taxes payable.........................28,000 29,000
    Notes payable.............................................21,000 20,000
    Total current liabilities.....................................93,000 91,000
    Long-term debt..............................................76,000 73,000
    Deferred income taxes......................................39,000 40,000
    Total liabilities..............................................208,000 204,000
    Stockholders' equity:
    Common stock............................................28,000 26,000
    Retained earnings.........................................67,000 73,000
    Total stockholders' equity..................................95,000 99,000
    Total liabilities and stockholders' equity...............$303,000 $303,000

    The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.

    Which of the following classifications of changes in balance sheet accounts as sources and uses is correct?

    The change in Property, Plant, and Equipment is a use; The change in Long-Term Debt is a source

    The change in Property, Plant, and Equipment is a use; The change in Long-Term Debt is a use

    The change in Property, Plant, and Equipment is a source; The change in Long-Term Debt is a source

    The change in Property, Plant, and Equipment is a source; The change in Long-Term Debt is a use

    18.) Krech Corporation's comparative balance sheet appears below:
    Ending Beginning
    Balance Balance
    Assets:
    Current assets:
    Cash and cash eqivalents..............................$31,000 $28,000
    Accounts receivable.................................... 18,000 20,000
    Inventory..................................................70,000 66,000
    Total current assets........................................119,000 114,000
    Property, plant, and equipment...........................374,000 354,000
    Less accumulated depreciation........................190,000 165,000
    Net property, plant, and equipment.....................184,000 189,000
    Total assets................................................$303,000 $303,000

    Liabilities and stockholder's Equity
    Current liabilities:
    Accounts payable.......................................$13,000 $9,000
    Accrued wages and salaries payable...................31,000 33,000
    Accrued income taxes payable.........................28,000 29,000
    Notes payable.............................................21,000 20,000
    Total current liabilities.....................................93,000 91,000
    Long-term debt..............................................76,000 73,000
    Deferred income taxes......................................39,000 40,000
    Total liabilities..............................................208,000 204,000
    Stockholders' equity:
    Common stock............................................28,000 26,000
    Retained earnings.........................................67,000 73,000
    Total stockholders' equity..................................95,000 99,000
    Total liabilities and stockholders' equity...............$303,000 $303,000

    The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.

    The total dollar amount of all of the items that would be classified as sources when compiling a simplified statement of cash flows is:

    $34,000

    $28,000

    $37,000

    $3,000

    19.) Waite Company's comparative balance sheet and income statement for last year appear below:

    Statement of Financial Position
    Ending Balance Beginning Balance
    Cash...................................................................$27,000 $22,000
    Accounts receivable........................................,56,000 60,000
    Inventory............................................................48,000 36,000
    Prepaid expenses..............................................14,000 11,000
    Long-term investments....................................270,000 230,000
    Plant and equipment........................................440,000 440,000
    Accumulated depreciation..............................(306,000) (276,000)
    Total Assets........................................................549,000 523,000

    Accounts payable................................................$43,000 $33,000
    Accrued liabilities..................................................20,000 25,000
    Taxes payable.........................................................6,000 9,000
    Bonds payable......................................................130,000 150,000
    Deferred taxes.......................................................22,000 20,000
    Common stock......................................................120,000 110,000
    Retained earnings................................................208,000 176,000
    Total liabilities and owners' equity...............$549,000 $523,000

    Income statement

    Sales................................................$510,000
    Cost of goods sold..........................280,000
    Gross margin....................................230,000
    Selling and admin expense..........150,000
    Net operating income......................80,000
    Income taxes....................................24,000
    Net income.......................................$56,000

    The company declared and paid $24,000 in cash dividends during the year. The following questions pertain to the company's statement of cash flows.

    The net cash provided by (used in) operating activities last year was:

    $79,000

    $33,000

    $86,000

    $56,000

    20.) Waite Company's comparative balance sheet and income statement for last year appear below:

    Statement of Financial Position
    Ending Balance Beginning Balance
    Cash...................................................................$27,000 $22,000
    Accounts receivable........................................,56,000 60,000
    Inventory............................................................48,000 36,000
    Prepaid expenses..............................................14,000 11,000
    Long-term investments....................................270,000 230,000
    Plant and equipment........................................440,000 440,000
    Accumulated depreciation..............................(306,000) (276,000)
    Total Assets........................................................549,000 523,000

    Accounts payable................................................$43,000 $33,000
    Accrued liabilities..................................................20,000 25,000
    Taxes payable.........................................................6,000 9,000
    Bonds payable......................................................130,000 150,000
    Deferred taxes.......................................................22,000 20,000
    Common stock......................................................120,000 110,000
    Retained earnings................................................208,000 176,000
    Total liabilities and owners' equity...............$549,000 $523,000

    Income statement

    Sales................................................$510,000
    Cost of goods sold..........................280,000
    Gross margin....................................230,000
    Selling and admin expense..........150,000
    Net operating income......................80,000
    Income taxes....................................24,000
    Net income.......................................$56,000

    The company declared and paid $24,000 in cash dividends during the year. The following questions pertain to the company's statement of cash flows.

    The net cash provided by (used in) investing activities last year was:

    $30,000

    $(30,000)

    $40,000

    $(40,000)

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    https://brainmass.com/business/statement-of-cash-flows/multiple-choice-use-cash-statement-cash-flows-245395

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    The solution explains various multiple choice questions relating to statement of cash flows

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