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A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.

A) True
B) False

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


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) C) and D)
G) B) and E)

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The cash flow on total assets ratio is computed by dividing average total assets by operating income.

A) True
B) False

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The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:


A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Schedule of noncash financing and investing activities.
E) Reconciliation of cash balance.

F) C) and D)
G) A) and C)

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Jeffreys Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $240,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Jeffreys Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. Jeffreys Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $240,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Jeffreys Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. A) $62,000. B) $38,000. C) $28,000. D) $18,000. E) $58,000.


A) $62,000.
B) $38,000.
C) $28,000.
D) $18,000.
E) $58,000.

F) A) and E)
G) All of the above

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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.

A) True
B) False

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The payment of cash dividends to shareholders is classified as a financing activity.

A) True
B) False

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Bagwell's net income for the year ended December 31, Year 2 was $185,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2. Bagwell's net income for the year ended December 31, Year 2 was $185,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2. A) $185,000. B) $106,000. C) $95,000. D) $50,000. E) $145,000.


A) $185,000.
B) $106,000.
C) $95,000.
D) $50,000.
E) $145,000.

F) B) and D)
G) A) and B)

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Cash paid for merchandise is an operating activity.

A) True
B) False

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The statement of cash flows is:


A) Another name for the statement of financial position.
B) A financial statement that presents information about changes in equity during a period.
C) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.
D) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.
E) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

F) A) and E)
G) A) and D)

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For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. __________ (1) Received cash dividends from investments in trading securities. __________ (2) Collected accounts receivable from customers. __________ (3) Issued bonds payable for cash. __________ (4) Paid wages to employees. __________ (5) Issued stock for cash. __________ (6) Sold equipment for cash. __________ (7) Purchased land in exchange for a note payable. __________ (8) Paid cash dividends. __________ (9) Received interest from investments in trading securities. _________ (10) Purchases of land for cash.

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1. O; 2. O; 3. F; 4....

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Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: The amount of cash paid for dividends was: A) $52,000. B) $60,000. C) $58,000. D) $50,000. E) $42,000. The amount of cash paid for dividends was:


A) $52,000.
B) $60,000.
C) $58,000.
D) $50,000.
E) $42,000.

F) B) and D)
G) D) and E)

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Holly Oaks, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities: Holly Oaks, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities: A) $(187,000) . B) $206,000. C) $487,000. D) $113,000. E) $(113,000) .


A) $(187,000) .
B) $206,000.
C) $487,000.
D) $113,000.
E) $(113,000) .

F) None of the above
G) B) and E)

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Tate Company's 2017 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the indirect method. Tate Company's 2017 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the indirect method. The company also experienced the following during 2017: The company also experienced the following during 2017: Tate Company's 2017 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the indirect method. The company also experienced the following during 2017:

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A company had average total assets of $1,660,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $750,000. The cash flow on total assets ratio equals:


A) 45.2%.
B) 22.0%.
C) 11.65%.
D) 12.3%.
E) 79.5%.

F) A) and B)
G) A) and C)

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Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: The amount of cash paid for dividends was: A) $44,000. B) $40,000. C) $57,000. D) $53,000. E) $36,000. The amount of cash paid for dividends was:


A) $44,000.
B) $40,000.
C) $57,000.
D) $53,000.
E) $36,000.

F) A) and B)
G) A) and C)

Correct Answer

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To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

A) True
B) False

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Preparation of the statement of cash flows does not involve:


A) Computing the net increase or decrease in cash.
B) Computing and reporting net cash provided or used by operations.
C) Computing the profit compared to the net increase or decrease in cash.
D) Computing and reporting net cash provided or used by financing activities.
E) Computing and reporting net cash provided or used by investing activities.

F) C) and E)
G) B) and C)

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The cash flow on total assets ratio compared to the total assets ratio can be used as an indicator of earnings quality.

A) True
B) False

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A decrease in the inventory account during the year should be reported on the statement of cash flows as:


A) An increase in cash flows from operating activities
B) An increase in cash flows from investing activities
C) A decrease in cash flows from operating activities
D) A decrease in cash flows from investing activities
E) An increase in cash flows from financing activities

F) All of the above
G) A) and B)

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