Cash Flows

Cash Flows

MULTIPLECHOICEQUESTIONS
37. The statement of cash flows should help investors and creditors assess each of the followingexceptthe
a.entity’sability to generate future income. b.entity’sabilityto pay dividends.
c.reasons for the difference between net income and net cash provided by operating activities.
d.cash investing and financing transactions during the period.

38. The statement of cashflows
a.must be preparedona daily basis.
b.summarizes the operating,financing,and investing activities of an entity. c.is another name for the income statement.
d.is a special section of the income statement.
The Statement of Cash Flows 17-7

39. Whichoneofthefollowingitemsisnotgenerallyusedinpreparingastatementofcash flows?
a.Adjustedtrialbalance
b.Comparativebalancesheets c.Currentincomestatementd.Additional information
Cash Flows
40. Theprimarypurposeofthestatementof cashflows is to
a.provide information about theinvesting and financingactivitiesduringaperiod. b.prove thatrevenues exceed expenses if there is a net income.
c.provide informationaboutthecashreceiptsandcashpaymentsduringa period. d.facilitatebanking relationships.

41. Ifa companyreportsanet loss,it
a.maystillhavea netincreasein cash. b.willnotbe abletopaycashdividends. c.will not beabletogeta loan.
d.willnotbeable tomakecapitalexpenditures.

42. Inadditionto the three basicfinancialstatements,which ofthe following isalso arequired financialstatement?
a.the”CashBudget”
b.theStatementof CashFlows
c.theStatementof CashInflowsandOutflows d.the”CashReconciliation”

43. Thestatementof cashflowswillnotreportthe
a.amountof checksoutstanding atthe endof theperiod. b.sourcesofcashinthecurrentperiod.
c.uses of cashin thecurrentperiod.
d.changeinthecash balanceforthecurrentperiod.

44. Cashequivalentsdonotinclude a.short-termcorporatenotes. b.treasurybills.
c.moneymarketfunds.
d.2-yearcertificatesofdeposit.

45. Whichofthefollowing characteristicsdoesnotapplyto cashequivalents? a.Short-term
b.Highly-liquid
c.Readilyconvertibleintocash
d.Sensitiveto interestratechanges

46. Cashequivalentsaregenerally investmentswithmaturitiesof a.$1,000ormore.
b.threemonthsor less. c.atleastsixmonths.
d.oneyearorthe operatingcycle, whicheveris less.
17-8

47. The best measure of acompany’s abilitytogeneratesufficientcashtocontinueasagoing concern is netcashprovidedby
a.financingactivities. b. investingactivities. c.operatingactivities. d.processingactivities.

48. Theacquisitionof landbyissuingcommonstockis
a.a noncashtransactionwhich is notreported inthebodyofastatementofcashflows. b.acashtransactionandwouldbereportedinthebodyof astatementofcashflows.
c.a noncashtransactionandwouldbereportedinthebodyofastatementof cashflows. d.onlyreportedif thestatement of cashflowsisprepared usingthedirectmethod.

49. Theorderof presentationofactivitiesonthestatement of cashflowsis a.operating,investing,andfinancing.
b.operating,financing,andinvesting. c.financing, operating,andinvesting. d.financing,investing,andoperating.
Cash Flows
50. Financingactivitiesinvolve a.lendingmoney.
b.acquiringinvestments. c.issuingdebt.
d.acquiringlong-lived assets.

51. Investingactivitiesinclude
a.collecting cash on loansmade. b.obtainingcashfromcreditors. c.obtainingcapitalfromowners.
d.repayingmoneypreviouslyborrowed.

52. Generally,themostimportantcategoryonthestatementofcashflowsiscashflowsfrom a.operatingactivities.
b.investingactivities. c.financingactivities.
d.significantnoncash activities.

53. Thecategorythat isgenerally consideredtobe thebestmeasure ofacompany’sability to continue asagoingconcernis
a.cashflowsfromoperatingactivities. b.cashflowsfrominvestingactivities. c.cashflowsfromfinancingactivities. d.usuallydifferentfromyear to year.

54. Cashreceiptsfrom interestanddividendsareclassifiedas a.financingactivities.
b.investingactivities. c.operatingactivities.
d.eitherfinancingorinvestingactivities.
TheStatementof Cash Flows 17-9

55. Eachof thefollowingisanexampleof asignificantnoncashactivityexcept a.conversionofbonds intocommonstock.
b.exchangesof plantassets.
c.issuanceof debtto purchaseassets. d.stockdividends.

56. Ifacompanyhasbothaninflowandoutflowofcashrelatedtoproperty,plant,and equipment, the
a.twocasheffectscanbenettedandpresentedasoneitemintheinvestingactivities section.
b.cashinflowandcashoutflowshouldbereportedseparatelyintheinvestingactivities section.
c.twocasheffectscanbenettedandpresentedasoneiteminthefinancingactivities section.
d.cashinflowandcashoutflowshouldbereportedseparatelyinthefinancingactivities section.

57. Of theitemsbelow,theonethatappearsfirst onthestatementof cashflows is a.noncashinvesting andfinancingactivities.
b.netincrease(decrease)incash. c.cash attheendof theperiod.
d.cash atthebeginningoftheperiod.
Cash Flows
58. Whichof thefollowingtransactionsdoesnotaffectcashduring aperiod? a.Write-offofanuncollectibleaccount
b.Collectionofanaccounts receivable c.Saleof treasurystock
d.Exerciseofthecalloptiononbondspayable

59.    Significantnoncashtransactionswouldnotinclude a.conversionofbonds intocommonstock.b.assetacquisitionthroughbondissuance.
c.treasurystockacquisition. d.exchangeof plantassets.

60. Inpreparingastatementofcashflows,aconversionofbondsintocommonstockwillbe reported in
a.thefinancingsection.
b.the”extraordinary”section.
c.a separatescheduleornote tothefinancial statements