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Multiple Choice Use of Cash in Statement of Cash Flows

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)

Attachments

Solution Summary

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

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