Part 3 - Statement of Cash Flows

c. provide information about cash receipts and cash payments during a period

The primary purpose of the statement of cash flows is to

a. provide information about the investing and financing activities during a period

b. prove that revenues exceed expenses if there is a net income

c. provide information about cash receipts and cash payments during a period

d. facilitate banking relationships

d. payment for goods purchased

An example of a cash flow classified as operating activity is

a. purchase of equipment

b. sale of share capital

c. issue not note payable to a bank

d. payment for goods purchased

c. financing activities

Cash dividends paid to shareholders in the statement of cash flows is shown under

a. operating activities

b. investing activities

c. financing activities

d. financing activities or operating activities

b. indirect method

The method of presenting cash flow from operations where profit is adjusted for items without any cash effect is called

a. direct method

b. indirect method

c. allowance method

d. reconciliation methods

c. with other or long-term creditors of the business or that involve borrowing cash on a short-term basis

In the statement of cash flows, financing activities are those activities

a. that involve the production or purchase and the sale of goods and services to customers, including expenditures to administer the business

b. that involve making and collecting loans or purchasing and selling plant assets, and other productive assets

c. with other or long-term creditors of the business or that involve borrowing cash on a short-term basis

d. that include receipts or interest payments, cash collections from customers, and receipt of cash dividends from other companies

a. transactions that involve making and collecting loans or that involve purchasing and selling plant assets and other productive assets

In the statement of cash flows, investing activities are

a. transactions that involve making and collecting loans or that involve purchasing and selling plant assets and other productive assets

b. transactions with owners or long-term creditors of the business that involve borrowing cash on a short-term basis

c. activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures to administer the business

d. cash flows such as proceeds from issuance of bonds and cash outflows such as payments of principal amounts owed

a. reduces the reported profit bot does not involve an outflow of cash

In a statement of cash flows using indirect method of presenting cash flow from operating activities, depreciation is treated as an adjustment to reported profit because depreciation

a. reduces the reported profit bot does not involve an outflow of cash

n. reduces the reported profit and involves an inflow of cash

c. is an inflow of cash for asset replacement fund

d. usually represents a significant portion of operating expenses

a. Sale of a business segment

In preparing a statement of cash flows, which of the following transactions would be considered an investing activity?

a. Sale of a business segment

b. Issuance of bonds payable at a discount

c. Purchase of treasury shares

d. Sale of share capital

d. financing activity

In preparing a statement of cash flows, the sale of treasury shares at an amount greater than cost would be classified as a/an

a. transfer activity

b. operating activity

c. investing activity

d. financing activity

b. Investing activities section

Mango Corporation uses the indirect method to depict cash flows. Indicate where, if at all, land and building purchased with cash would be classified on the statement of cash flows

a. Operating activities section

b. Investing activities section

c. Financing activities section

d. Does not represent a cash flow

a. operating, investing, and financing

The order of presentation of activities on the statement of cash flows is

a. operating, investing, and financing

b. operating, financing, and investing

c. financing, operating, and investing

d. financing, investing, and operating

a. the financing activities section

In preparing a statement of cash flows, a conversion of bonds into ordinary share capital will be reported in

a. the financing activities section

b. the “extraordinary” section

c. a separate schedule or note to the financial statements

d. the shareholders’ equity section

b. Profit + depreciation - increase in accounts receivable + increase in accounts payable

Which of the following is a correct way to compute cash flow from operations using the indirect method? (disregard income tax effect)

a. Profit + depreciation - increase in accounts receivable + decrease in accounts payable

b. Profit + depreciation - increase in accounts receivable + increase in accounts payable

c. Profit - depreciation - increase in accounts receivable + decrease in accounts payable

d. Profit + depreciation + increase in accounts receivable - decrease in accounts payable

c. Cost of goods sold + increase in inventories + decrease in accounts payable

Which is a correct way to compute cash paid to merchandise suppliers?

a. Cost of goods sold + increase in inventories - decrease in accounts payable

b. Cost of goods sold - increase in inventories + decrease in accounts payable

c. Cost of goods sold + increase in inventories + decrease in accounts payable

d. Cost of goods sold + decrease in inventories + increase in accounts payable