ACC 206

ACC 206 Week 9 Quiz – Strayer New

ACC 206 Week 9 Quiz – Strayer New

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Quiz 7 Chapter17

THESTATEMENTOFCASHFLOWS

CHAPTER STUDY OBJECTIVES

1.Indicatetheusefulnessofthestatementofcashflows.

2.Distinguishamongoperating,investing,andfinancingactivities.

3.Prepareastatementofcashflowsusingtheindirectmethod.

4.Analyzethestatementofcashflows.

5.Explainhowtouseaworksheettopreparethestatementofcashflowsusingtheindirectmethod.

6.Prepareastatementofcashflowsusingthedirectmethod.

ACC 206

TRUE-FALSESTATEMENTS

1. Thestatementofcashflowsisarequiredstatementthatmustbepreparedalongwithan income statement,balancesheet,andretainedearningsstatement.

2. Forexternalreporting,acompanymustprepareeitheranincomestatementora statementof cashflows,but notboth.

3. Aprimaryobjectiveofthestatementofcashflowsistoshowtheincomeorlosson investingandfinancingtransactions.

4. A statementofcashflows indicatesthe sourcesanduses of cashduringaperiod.

5. Inpreparingastatementofcashflows,cashequivalentsaresubtractedfrom cashinorder tocomputethenetchangeincashduring a period.

6. Cashequivalentsarehighly-liquidinvestmentsthathavematuritiesoflessthanthree months.

7. The useofcashtopurchasehighlyliquidshort-terminvestments(cashequivalents)would be reportedonthestatement of cashflowsasaninvestingactivity.

8. Inpreparingastatementofcashflows,theissuanceofdebtshouldbereported separately from theretirementof debt.

9. Noncashinvestingandfinancingactivitiesmustbereportedinthebodyofastatementof cashflows.

10. Thestatementofcashflowsclassifiescashreceiptsandpaymentsasoperating, nonoperating, financial,andextraordinaryactivities.

11. Thesaleof landfor cashwouldbeclassifiedasacashinflowfroman investingactivity.

12. Cashflowfrominvestingactivitiesisconsideredthemostimportantcategoryonthe statementof cashflowsbecauseit isconsideredthebestmeasureof expectedincome.

13. Thereceiptofdividends fromlong-term investments instockisclassified asacashinflow frominvestingactivities.
TheStatementof Cash Flows 17-5

ACC 206

14. Thepaymentofinterestonbondspayableisclassifiedasacashoutflowfromoperating activities.

15. Anyitemthatappearsontheincomestatementwouldbeconsideredaseitheracash inflowor cashoutflowfromoperatingactivities.

16. Theacquisitionofabuildingbyissuingbondswouldbeconsideredaninvestingand financing activity thatdidnot affectcash.

17. Allmajorfinancingandinvestingactivitiesaffectcash.

18. Cashprovidedbyoperationsisgenerallyequaltooperatingincome.

19. Usingtheindirectmethod,anincrease inaccountsreceivable duringaperiod isdeducted fromnetincomeincalculatingcashprovidedbyoperations.

20. Usingtheindirectmethod,anincreaseinaccountspayableduringaperiodisdeducted from netincomeincalculatingcashprovidedbyoperations.

21. Alossonsaleofequipmentisaddedtonetincomeindeterminingcashprovidedby operationsundertheindirectmethod.

22. Inpreparingastatementofcashflows,anincreaseintheCommonStockandTreasury Stockaccountsduringaperiodwouldbe an investingactivity.

23. Cashprovidedby operatingactivitiesfailsto take intoaccountthatacompanymust invest in newfixedassetsjusttomaintainits currentlevelofoperations.

24. Freecashflowequalscashprovidedbyoperationslesscapitalexpendituresandcash dividends.

a25. Theuseof aworksheetto prepareastatementofcashflowsis optional.

a26. Duringtheyear,IncomeTaxExpenseamountedto$30,000andIncomeTaxesPayable increasedby$3,000;therefore,thecashpaidforincometaxeswas$27,000.

a27. Inpreparingnetcashflowfromoperatingactivitiesusingthedirectmethod,eachitemin theincomestatementisadjustedfromtheaccrualbasistothecashbasis.

a28. Usingthedirectmethod,majorclassesofinvestingandfinancingactivitiesarelistedin theoperatingactivitiessection.

a29. Duringaperiod,costofgoodssold+anincreaseininventory+anincreaseinaccounts payable =cashpaidtosuppliers.

a30. Operatingexpenses+anincreaseinprepaidexpenses–adecreaseinaccrued expensespayable=cashpaymentsfor operatingexpenses.
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ACC 206
Additional True-FalseQuestions

31. Thestatementofcashflowsclassifiescashreceiptsandcashpaymentsintotwo categories:operatingactivitiesand nonoperatingactivities.

32. Financingactivitiesincludetheobtainingofcashfromissuingdebtandrepayingthe amounts borrowed.

33. TheadjustedtrialbalanceistheonlyitemneededtopreparetheStatementofCash Flows.

34. Undertheindirectmethod,retainedearningsisadjustedforitemsthataffectedreported netincomebutdidnot affect cash.

a35. ThereconcilingentryfordepreciationexpenseinaworksheetisacredittoAccumulated DepreciationandadebittoOperating-DepreciationExpense.

a36. Underthedirectmethod,theformulaforcomputingcashcollectionsfromcustomersis salesrevenuesplustheincreaseinaccountsreceivableorminusthedecreasein accounts receivable.