Intermediate Accounting Canadian Canadian 6th Edition Beechy Test Bank 1

Intermediate Accounting Canadian Canadian
6th Edition Beechy Test Bank
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05
Student: ___________________________________________________________________________
1. A Statement of Cash Flows using the direct method and one using the indirect method will each produce the
same amount of net cash flow from operating activities.
True False
2. Only the indirect method of preparing the Statement of Cash Flows reports the reconciliation of net income
and net operating cash flow.
True False
3. All investments meeting the definition of cash equivalent must be so classified.

True False
4. Under IFRS, term preferred shares near their maturity date may be classified as cash equivalents for purposes
of the Statement of Cash Flows.
True False
5. Under ASPE, dividends paid must be classified as a financing activity.

True False
6. The write-off of a bad debt (allowance method) during the current period represents an outflow of cash on the
Statement of Cash Flows for the current period.
True False
7. A Statement of Cash Flows is significant in that it presents comprehensive information about the operating,
financing, and investing activities of a company.
True False
8. Sale of an asset and issuance of long-term debt will each cause an outflow of cash.
True False
9. Sale of an asset for less than its book value results in an inflow of cash.
True False
10. The indirect method of computing operating cash flows effectively converts accrual accounting income to
cash basis income as its starting point.
True False
11. A non-cash exchange is a transaction that involves an exchange of resources without any cash being directly
paid or received.
True False
12. The Statement of Cash Flows is dated at a specific point in time like the balance sheet.
True False
13. The Statement of Cash Flows can be based on (a) cash only or (b) cash plus cash equivalents.
True False
14. The Statement of Cash Flows is not a required financial statement in the same sense as the income statement
and balance sheet.
True False
15. In the preparation of the Statement of Cash Flows using the Direct Method, an operating loss would be
reported under cash flows from operating activities.
True False
16. Assume cash paid to suppliers for 2012 is $350,000, merchandise inventory increased by $5,000 during the
year, and accounts payable decreased by $10,000 during the year. The COGS for 2012 is $335,000.
True False
17. Depreciation expense represents a "flow" of cash during the current period.
True False
18. Depreciation expense is not a source of cash or cash equivalents.

True False
19. A Statement of Cash Flows is designed to help investors, creditors, and others to project a company's future
cash flows.
True False
20. Cash equivalents are "short-term, highly liquid investments" that are both: (a) readily convertible to known
amounts of cash and (b) so near their maturity that they present insignificant risk of changes in value because of
changes in interest rates.
True False
21. Generally, only investments with original maturities (to the investor) of less than three months qualify as a
cash equivalent.
True False
22. Examples of cash equivalents are treasury bills, money market funds, and commercial paper.
True False
23. Under ASPE, interest received and paid and dividends received must be classified in the operating activities
section of the Statement of Cash Flows.
True False
24. Dividends received may be classified as operating or investing activities under IFRS.
True False
25. Depreciation expense in the Statement of Cash Flows is reported under the investing section.
True False
26. A change in the company's policy on defining cash equivalents should be reported as a cumulative effect
adjustment.
True False
27. Cash from customers equals sales plus the increase in accounts receivable for the year.
True False
28. Accrual based net sales plus a decrease in accounts receivable for the year would equal cash from
customers.
True False
29. Writing off an uncollectible account against the allowance would increase cash from customers.
True False
30. Cash paid to suppliers is accrual based cost of goods sold plus the increase in inventory plus the increase in
accounts payable for the year.
True False
31. Cost of goods sold plus an increase in inventory minus an increase in accounts payable would equal cash
paid to suppliers.
True False
32. Under IFRS, interest received may be classified as operating or financing activities.
True False
33. Under IFRS, interest paid may be classified as operating or financing activities.
True False
34. Under IFRS, dividends received may be classified as operating or financing activities.
True False
35. Under IFRS, dividends paid may be classified as operating or financing activities.
True False
36. Sale for cash of a short-term investment at its cost would cause an inflow of cash.
True False
37. Salary expense plus amortization of deferred compensation expense for the year would equal cash paid for
salaries.
True False
38. If Harris Company issues both a balance sheet and an income statement with comparative figures from last
year, a statement of cash flows should be issued for each period for which an income statement is presented.
True False
39. Cash paid to suppliers plus an increase in inventory minus an increase in accounts payable would equal cost
of goods sold.
True False
40. When a Statement of Cash Flows is prepared using the indirect method, a decrease in the balance of a
prepaid expense during the reporting period is an "add back" adjustment to net income to convert it to cash from
operating activities.
True False
41. A corporation has paid $20,000 in cash dividends each year on its common shares. Although during year 1
the company had a cash shortage, it declared the dividend. However, it was stipulated that the $20,000 cash
dividend would not be paid until year 2. This dividend will affect the year 1 Statement of Cash Flows by:
A. increasing the cash from operating activities.
B. increasing the cash from financing activities.
C. decreasing the cash from financing activities.
D. decreasing the cash from operating activities.
E. will not affect the Statement of Cash Flows.
42. The main purpose of the Statement of Cash Flows is:

A. determine the change in cash during the period
B. list the cash inflows and outflows by meaningful cash flow category
C. disclose the quality of earnings
D. explain why the balance sheet accounts changed during the year
43. Which of the following is the operating cash flow?

A. rent payments
B. dividend payments
C. payments for the purchase of a building
D. principal payment on a bank loan
44. A corporation recorded the following entry:
How would this transaction be shown on a Statement of Cash Flows?

A. Cash outflow for operating activities
B. Cash outflow for investing activities
C. Cash outflow for financing activities
D. Cash inflow for financing activities
45. Which method or format for preparing the Statement of Cash Flows reports the major operating cash flows
on an individual line-item basis?
A. Only direct method
B. Only indirect method
C. Both direct and indirect
D. Neither direct nor indirect
46. Which of the following is a financing cash flow?

A. Purchase of common shares of another company
B. Dividend payments
C. Rental payments
D. Interest received
47. How is depreciation expense treated in the Statement of Cash Flows and related disclosures when the
statement is prepared using the indirect format?
A. added to net income
B. subtracted from net income
C. placed into the investing section
D. does not appear because it is not a cash flow
48. Under IFRS, interest received may be classified as:

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.
49. Under IFRS, interest paid may be classified as:

50. Under IFRS, dividends received may be classified as:
51. Under IFRS, dividends paid may be classified as:

B. Financing Activities.
C. Investing Activities.
52. In a Statement of Cash Flows:

A. net cash flow from operating activities is always the same as net income.
B. net cash flow from operating activities must be the same as net increase in cash during the period.
C. net cash flow from operating activities is always greater than net income.
D. net cash flow from operating activities is always less than net income.
E. net cash flow from operating activities may be less than or greater than net income.
53. Which of the following would not be shown in one of the three activity sections of the Statement of Cash
Flows prepared using the indirect format?
A. Refinancing a bond issue currently due with a new bond issue
B. A decrease in trade accounts receivable over the period
C. Purchase of a subsidiary corporation
D. A decrease in long-term notes payable over the period
54. A corporation paid $4,000 cash for rent. This payment should be reflected on the Statement of Cash Flows
as a:
A. cash inflow from operating activities.
B. cash outflow from operating activities.
C. cash outflow from investing activities.
D. cash outflow from financing activities.
55. A corporation reported the following information in its income statement:
The corporation should report the following amount on its Statement of Cash Flows for net cash from operating
activities:
A. $11,600
B. $13,600
C. $14,600
D. $17,100
56. The following item is found on the income statement of a corporation: Gain from sale of equipment, $5,000.
The equipment sold during the year originally cost $20,000, had accumulated depreciation of $16,000 and was
sold for cash. The Statement of Cash Flows should show an inflow of cash from investing activities of:
A. $1,000
B. $4,000
C. $5,000
D. $9,000
57. A company started business on January 1, year 1. At the end of year 1, the financial statements showed the
following amounts:
Income on the accrual basis and net cash inflow from operating activities were:
A. Choice A
B. Choice B
C. Choice C
D. Choice D
58. Which one of the following statement does not primarily report changes in amounts or accounts?
A. Statement of Cash Flows
B. Balance sheet
C. Income statement
D. Statement of retained earnings
59. Which of the following would cause an inflow of cash?
A. Payment of a long-term bond
B. Sale for cash of a short-term investment at its cost
C. Payment of accounts payable
D. Repurchase of common stock for cash
E. Accrual of a dividend
60. Which of the following would cause an outflow of cash?

A. Issuance of long-term debt to finance a construction project
B. Collection on an account receivable
C. Cash purchase of a long-term marketable security
D. Sale of a long-term asset for cash

A. Payment of a long-term debt
B. Purchase of inventory for cash
C. Sale of an asset for cash at less than its book value
D. Issuing common stock in payment for legal services already provided
62. If a company issues both a balance sheet and an income statement with comparative figures from last year,
Statement of Cash Flows:
A. Should be issued for the current year only.
B. Should be issued for each period for which an income statement is presented.
C. is no longer necessary; but may be used at the company's option.
D. Should not be issued.
63. Which of the following causes a net change in cash?

A. Write-off of a bad debt
B. Payment of a long-term debt by issuing common shares
C. Declaration of a cash dividend
D. Declaration and issuance of a stock dividend
E. Payment of a cash dividend declared in a previous period
64. What effect does the write-off of an account receivable have on the Statement of Cash Flows?
A. A decrease to operating cash flows under the direct method.
B. A decrease to operating cash flows under the indirect method.
C. A decrease to financing cash flows.
D. There is no effect.
65. Which of the following would not be a cash-paid item using the direct method for reporting operating
activities?
A. Depreciation expense
B. Cash paid to suppliers
C. Cash paid for income taxes
D. Cash paid for interest
66. Under the direct method, cash from customers would be sales plus a(n):
A. Decrease in accounts payable.
B. Increase in accounts payable.
C. Decrease in accounts receivable.
D. Increase in accounts receivable.
67. Cash paid for income taxes under the direct method would be income tax expense minus:
A. An increase in income taxes payable.
B. A decrease in income taxes payable.
C. Beginning income taxes payable.
D. Ending income taxes payable.
68. When using the direct method for reporting operating activities, which of the following would represent a
cash-paid item?
A. Depreciation expense, adjusted for changes in depreciation methods
B. Patent amortization expense, adjusted for changes in estimates
C. Interest expense, adjusted for changes in interest payable and amortization of bond premiums or discounts
D. Loss on sale of plant assets
E. Gain on sale of plant assets
69. Under the direct method, cash paid to suppliers can be computed as cost of goods sold for the period:
A. Plus an increase in inventory and minus an increase in accounts payable.
B. Plus a decrease in inventory and minus an increase in accounts payable.
C. Minus an increase in inventory and plus an increase in accounts payable.
D. Minus a decrease in inventory and plus an increase in accounts payable.
70. On a reconciliation of net income to cash from operations, depreciation is treated as an adjustment to net
income because depreciation:
A. is a direct outflow of cash.
B. reduces net income but does not involve an outflow of cash.
C. reduces net income and involves an outflow of cash.
D. is an outflow of cash to a reserve account for replacement of assets.
71. Which of the following is not an inflow of cash?
A. Collection of a short-term receivable
B. Sale of a capital asset for cash
C. Cash borrowed on a short-term note
D. Depreciation expense
72. The amortization of bond discount on long-term debt should be presented in a Statement of Cash Flows as
a(n):
A. Inflow and outflow of cash.
B. Outflow of cash.
C. Deduction from net income in the adjustments to reconcile net income to cash from operating activities.
D. Addition to net income in the adjustments to reconcile net income to cash from operating activities.
73. The amortization of patents should be presented in a Statement of Cash Flows as a(n):
A. inflow and outflow of cash.
B. outflow of cash.
C. addition to net income in the adjustments to reconcile net income to cash from operating activities.
D. deduction from net income in the adjustments to reconcile net income to cash from operating activities.
74. Which of the following is not an adjustment to reconcile net income to cash from operating activities?
A. Accrued liability change (increase or decrease)
B. Amortization of premium or discount on bonds payable
C. Cash dividend declared but not yet paid
D. Prepaid expense (increase or decrease)
75. Which of the following is a deduction from net income when reconciling to cash flow from operating
activities?
A. Amortization of premium on bonds payable
B. Cash dividend declared and paid
C. Collection of an account receivable
D. Bad debt written off (allowance method)
76. The gain on the sale of a long-term investment should be disclosed separately in a Statement of Cash Flows
of a company with substantial operating profits as a(n):
A. Adjustment to net income in the reconciliation of net income to cash from operating activities.
B. Outflow from operating activities.
C. Outflow from investing activities.
D. Inflow from financing activities.
77. A loss on the sale of machinery in the ordinary course of business should be presented in a Statement of
Cash Flows as a(n):
B. Inflow from operating activities.
C. Inflow from investing activities.
D. Outflow from investing activities.
78. In a Statement of Cash Flows, the amortization of goodwill for a company with substantial operating profits
should be presented as a(n):
A. Inflow from operating activities.
B. Inflow from investing activities.
D. Adjustment to net income in the reconciliation of net income to cash from operating activities.
79. When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory
over the beginning inventory will result in an adjustment to reported net income because:
A. Cash is increased because inventory is a current asset.
B. Inventory is an expense deducted in computing net earnings, but is not a use of cash.
C. The net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers.
D. All changes in noncash accounts must be disclosed.
80. Which of the following independent transactions would cause net income to be more than cash from
operating activities?
A. A decrease in the accounts receivable account
B. An increase in the merchandise inventory account
C. An increase in the accounts payable account
D. An increase in the accrued wages account
81. Cash flows from investing activities would include all of these except:
A. Proceeds from sale of operating assets.
B. Proceeds from sale of long-term investments
C. Interest paid on notes receivable.
D. Proceeds from sale of securities available for sale.
E. Collection of principal amounts of loans made to other parties.
82. Cash outflows from investing activities would include payments for all of the following except:
A. Purchase of capital assets.
B. Investments in securities available for sale.
C. Repurchase of common stock.
D. Loans to other parties.
83. Which one of the following would not be a cash inflow from financing activities for ABC Company?
A. Cash from issuing ABC common stock
B. Cash from issuing ABC preferred stock
C. Cash from issuing ABC bonds payable
D. Cash from sale of XYZ common stock
84. Which one of the following would not be a cash outflow from financing activities for ABC Company?
A. Cash paid for dividends on ABC common stock.
B. Cash paid for purchase of XYZ common stock.
C. Cash paid for dividends on ABC preferred stock.
D. Cash paid for interest on ABC bonds payable.
85. A Statement of Cash Flows would not report the effects of:
A. Cash dividends paid.
B. A purchase and immediate retirement of common stock.
C. Stock dividends declared and issued.
D. Common shares issued for cash.
86. The Statement of Cash Flows does not report the effects of:
A. Common shares purchased for cancellation.
B. Cash dividends paid.
C. Common shares issued for cash to pay for assets or to pay debt.
D. Common shares issued as the result of a stock dividend.
87. Which of the following could be a cash equivalent for purposes of reporting in the Statement of Cash
Flows?
A. Investment in common shares
B. Cash in a checking account
C. Investment in a treasury bills
D. Investment in redeemable preferred shares
88. Choose the operating cash flow for Bikk Inc.
A. Principal payment on a note payable to a supplier for inventory purchased by Bikk for resale by Bikk
B. Dividend paid to Bikk's shareholders.
C. Principal payment on a loan from a financial institution; Bikk used the proceeds to purchase inventory for
resale
D. Capitalized interest
89. For which of the following accounts would the change during the year in that account not be found the
reconciliation of net income and net operating cash flow?
A. Dividends payable
B. Interest payable
C. Prepaid rent
D. Wages payable
E. Short-term notes payable to supplier

A. to determine the change in cash for the period.
B. to disclose information about cash receipts and disbursements during the period.
C. to disclose the changes in long-term asset and liability accounts during the period.
D. to disclose significant noncash investing and financing activities during the period.
E. to explain why net income and net operating cash flows are different.
91. In preparing the Statement of Cash Flows, which of the following transactions would be considered an
investing activity?
A. sale of equipment at book value
B. Sale of merchandise on credit
C. Declaration of cash dividend
D. Issuance of bonds payable at a discount
92. Which of the following items involving current trade accounts receivable is most likely to appear in a
Statement of Cash Flows?
A. Balance in allowance for uncollectible accounts
B. Write-off of a specific account
C. Sales returns and allowances
D. Collection of an account previously written off
E. Change in net sales
93. When preparing the Statement of Cash Flows, which of the following sources of information should be
consulted after considering all others?
A. Income statement
B. Comparative balance sheet in general
C. Remaining unexplained balance sheet account changes
D. Retained earnings statement
E. Company records
94. Choose the correct statement about preparation of the Statement of Cash Flows:
A. Only the indirect method is required; the direct method is optional
B. A spreadsheet must be used in computerized situations
C. No particular preparation method is mandated by GAAP
D. The direct method must be used unless available information does not permit it, in which case the indirect
method may be used
95. ABC acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its
common shares; no market price was quoted). How should this transaction be reported on the Statement of Cash
Flows?
A. Reported on the face of the Statement of Cash Flows
B. Report $10,000 as a noncash investing and financing activity on the Statement of Cash Flows
C. Report the $12,000 as an inflow of cash on the Statement of Cash Flows
D. Report the $12,000 as a noncash activity in the notes to the financial statement.
96. In the preparation of a Statement of Cash Flows:

A. The statement must include most noncash exchanges.
B. The statement must be prepared using the working capital definition of funds.
C. Stock dividends and stock splits must be reported on the statement.
D. The statement must be cumulative over the last two reporting periods.
E. None of these answers are correct.
97. An asset (land) was purchased and payment in full was made by issuing the company's common shares. No
cash was paid. Therefore, this transaction should be reported on the Statement of Cash Flows:
A. as an "Adjustment to reconcile net income to operating activities."
B. should not be reported on the Statement of Cash Flows but details explained in the disclosure notes.
C. as an outflow of cash.
D. As a non-cash exchange.
98. In preparing a Statement of Cash Flows, you encountered the following transaction of February 1, 2013:
acquired a small office building in exchange for 5,000 of our common shares; market value $15 per share. How
should this transaction be reported on the Statement of Cash Flows?
A. Report as a concurrent inflow and outflow of cash on the Statement of Cash Flows.
B. Report as a noncash investing and financing activity.
C. Not reported on the Statement of Cash Flows because it did not affect cash, but details explained in the
disclosure notes.
D. Report on a Statement of Cash Flows as an investing activity.
99. The purchase of debt securities to be held to maturity would be classified into which of the following
categories for purposes of disclosure in the Statement of Cash Flows?
A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item
100. The change in short-term payables to suppliers would be classified into which of the following categories
for purposes of disclosure in the Statement of Cash Flows?
101. XYZ has the following assets:
What would be the total cash equivalents at year-end for XYZ?

A. $80,000
B. $100,000
C. $120,000
D. $140,000
E. $220,000
102. The following four events affecting property, plant and equipment, and intangible assets, occurred during
the current year for a firm:
(i.) Purchased equipment for $50,000.

(ii.) Successfully defended a patent infringement suit costing the firm $60,000 in legal fees this year; as a result,
the firm has sole rights to the patent.
(iii.) Capitalized and paid $30,000 of interest on a building under construction which is to house the firm's new
offices.
(iv.) Received $100,000 in casualty insurance proceeds as a result of fire damage to one of the firm's factories.
What is the net effect on investing cash flow of the above transactions for the current year?
A. $10,000 increase
B. $110,000 decrease
C. $140,000 decrease
D. $40,000 decrease
103. RJB reported sales of $200,000 and an increase in accounts receivable of $30,000 during 2001. Under the
direct method, what would be RJB's cash collected from customers during 2001?
A. $170,000
B. $200,000
C. $230,000
D. Cannot be determined from information given.
104. A firm's accumulated depreciation account increased $30,000 for the year, and total plant assets at cost
increased $200,000. During the year, the firm purchased $350,000 of new equipment for cash, and sold
equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale. What is the
complete disclosure of these events in the indirect method Statement of Cash Flows?
A. $350,000 investing cash outflow; $50,000 investing cash inflow; $70,000 addition reconciling adjustment
B. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment
C. $300,000 investing cash outflow; $130,000 addition reconciling adjustment
D. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment;
$70,000 addition reconciling adjustment
105. A firm's dividends payable account increased $10,000 during the year. The firm also declared $35,000 of
dividends. What is the complete disclosure in the direct method Statement of Cash Flows for these events?
A. $25,000 financing cash outflow; $10,000 addition reconciling adjustment
B. $45,000 financing cash outflow
C. $25,000 financing cash outflow
D. $35,000 financing cash outflow
E. $25,000 financing cash outflow; $10,000 subtraction reconciling adjustment
106. The sale of $3,000 worth of cash equivalents at cost has what effect on the direct method Statement of
Cash Flows.
A. add $3,000 in the reconciliation
B. no disclosure
C. $3,000 operating cash inflow
D. $3,000 investing cash inflow
E. $3,000 investing cash outflow
107. The sale of $3,000 worth of cash equivalents costing $2,500 has what effect on the indirect method
Statement of Cash Flows.
A. $500 operating cash inflow
B. no disclosure
C. $500 operating cash outflow
D. $500 subtraction reconciling adjustment
E. $500 operating cash inflow; $500 subtraction reconciling adjustment
108. SDB reported sales of $300,000, write-offs of uncollectible accounts of $10,000 against the allowance, and
a decrease in net accounts receivable of $40,000 during 2013. What would be SDB's cash collected from
customers during 2013?
A. $300,000
B. $330,000
C. $340,000
D. $350,000
109. If cash collected from customers for 2013 is $780,000 and accounts receivable increased by $20,000
during the year, what were sales for 2013?
A. $600,000
B. $780,000
C. $800,000
110. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000
during the year and accounts payable decreased by $30,000 during the year. What would be DBB's cash paid to
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000
111. ARI Inc. began 2013 with the following:
During 2013 the following events occurred:
At the end of 2013, ARI showed a balance in gross accounts receivable (before the allowance for doubtful
accounts) of $16,800. In the direct method Statement of Cash Flows, what amount would be shown as an
operating cash inflow?
A. $21,000
B. $22,000
C. $30,000
D. $28,200
112. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000 and trade
accounts payable increased by $12,000. The cash paid to suppliers was:
A. $148,000
B. $98,000
C. $160,000
D. $172,000
E. $102,000
113. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000
during the year, and accounts payable decreased by $30,000 during the year. What would be DBB's cash paid to
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000
during the year, and accounts payable increased by $30,000 during the year. What would be DBB's cash paid to
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000
116. MDB reported sales of $800,000, bad debt expense (allowance method) of $30,000, and an increase in net
accounts receivable of $120,000 during 2013. What is MDB's cash collected from customers for 2013 if MDB
did not record any write-offs during the period?
A. $650,000
B. $680,000
C. $710,000
D. $800,000
117. Assume cash paid to suppliers for 2011 is $350,000; merchandise inventory increased by $5,000 during the
year, and accounts payable decreased by $10,000 during the year. What was cost of goods sold for 2011?
A. $335,000
B. $345,000
C. $355,000
D. $365,000
118. Assume cash paid to suppliers for 2011 is $420,000; that merchandise inventory increased by $20,000
during the year, and that cost of goods sold was $415,000 for 2011. During 2011, accounts payable must have:
A. Increased by $5,000
B. Decreased by $5,000
C. Increased by $15,000
D. Decreased by $15,000
119. A firm purchased $20,000 worth of investments classified as securities available for sale. At the end of the
year, the investments were worth $23,000. What is the correct disclosure of these events in the direct method
A. Investing cash outflow, $20,000
B. Add $17,000 in reconciliation of earnings and net operating cash flow
C. Investing cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow
D. No disclosure is needed
120. The income statement for CBA reported a net loss of $14,000. Also, the statement reported depreciation
expense of $12,000 and amortization of patents of $6,000. Assuming no additional "adjustments to reconcile net
income to cash from operating activities," the cash flow from operations would be a:
A. $4,000 inflow.
B. $6,000 inflow.
C. $16,000 inflow.
D. $30,000 inflow.
E. ($4,000) outflow.
121. The following information was provided by the records of QRS for the current reporting year:
The cash paid to suppliers was:

A. $63,000
B. $77,000
C. $80,000
D. $97,000
122. The sale of $3,000 worth of cash equivalents at cost has what effect on the indirect method Statement of
Cash Flows.
A. Add $3,000 in the reconciliation
B. No disclosure
C. $3,000 Operating cash inflow
123. The net income for a corporation for the current accounting period was $275,000. Changes in various
accounts during the period follow:
The cash provided by operations for the current period is:

A. $275,000
B. $260,300
C. $350,300
D. $309,550
E. $278,340
124. The following was provided by the records of RST for the current reporting year:
The cash flow from operating activities was:

A. $40,000 outflow.
B. $7,000 inflow.
C. $5,000 inflow.
D. $4,000 inflow.
125. WXY reported sales revenue of $40,000 and expenses of $35,000 during the period ended December 31,
2011. During the year, accounts receivable increased by $1,500; merchandise inventory increased by $1,000;
accounts payable increased by $500; dividends payable decreased by $700; and depreciation expense of $2,500
was recorded. What was the amount of net cash flow from operating activities?
A. $4,800
B. $2,500
C. $4,500
D. $5,500
E. $6,000
126. ABC reported sales revenue of $100,000 and expenses of $106,000 for the period ended December 31,
2011; accounts receivable decreased by $500; accounts payable increased by $2,500; accrued wages payable
decreased by $1,500; short-term loans to banks increased by $600; and depreciation expense of $4,000 was
recorded. What was the amount of net cash flow from operating activities for 2011?
A. $500 inflow
B. $1,000 inflow
C. $100 Inflow
D. $500 outflow
E. $1,000 outflow
127. MNO reported net income of $42,000 for the reporting period ended December 3, 2011. MNO's records
provided the following information:
The net cash flow from operating activities was:

A. $36,500
B. $38,500
C. $46,500
D. $48,500
128. The following information was provided by the records of RST for the annual reporting period ended
December 31, 2011:

A. $172
B. $188
C. $190
D. $200
129. The records of WXY provided the following information for the year ended December 31, 2011:
(1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
(2) Inventory increased by $4,000.
(3) Accounts payable decreased by $6,000.
(4) Declared a cash dividend, $5,000.
(5) Depreciation expense, $2,000.
(6) Net income, $19,000.
(7) Loss on sale of machine, $3,000.
(8) On December 31, 2011, paid insurance premium on all assets, for 2012 and 2013, $800. There was no
prepaid insurance on January 1, 2011.
What was the net cash inflow from operating activities for 2011?
A. $7,200
B. $13,200
C. $16,200
D. $21,200
130. Choose the combination that best reflects the appropriate classification of cash paid for operating,
investing, and financing activities.
A. Choice A
B. Choice B
C. Choice C
D. Choice D
131. The purchase of securities available for sale but not considered cash equivalents would be classified into
which of the following categories for purposes of disclosure in the Statement of Cash Flows?
132. As per ASPE, Dividends received from trading securities would be classified into which of the following
133. RJB made inventory purchases amounting to $200,000 during 2014. During the year, its accounts payable
(all of which arose from inventory purchases) increased by $20,000. The company had sales of $1,000,000 and
is subject to a gross profit percentage of 90%. How much cash did RJB pay to its inventory suppliers during
2014?
A. $120,000
B. $180,000
C. $320,000
D. $220,000
134. VJC received the following cash inflows during 2012:
What would be VJC's cash inflow from investing and financing activities, respectively, for 2011 under IFRS?
Note: Under IFRS, dividends received may also be classified as operating cash flows.
135. KWB made the following cash outflows during 2011:
What would be KWB's cash outflows for investing and financing activities for 2011 under IFRS?
Note: Under IFRS, dividends and interest paid may also be classified as operating cash flows.
136. EAE made the following cash outflows during 2012:
What would be EAE's cash outflow for financing activities for 2012 (000s)?
137. BWL paid the following cash outflows during 2012:
What would be BWL's cash outflow for investing and financing activities, respectively, for 2012 under IFRS?
138. MNO's books for the period ended December 31, 2012, contained the following data:
Under IFRS, the net inflow (outflow) in cash from investing and financing activities (respectively) during 2012
was:
139. MJC received the following cash inflows during 2012:
What would be cash inflow from operating, investing, and financing activities, respectively, for 2012?
Note: Under IFRS, interest received may also be an investing activity.
140. KEC paid the following cash outflows during 2012:
What would be cash outflow for operating, investing, and financing activities, respectively, for 2012?
141. ABC had the following balances on its Statement of Financial Position for Year 1:
Accounts Receivable, Jan 1, Year 1: $500

Accounts Receivable, Dec 31, Year 1: $400
Allowance for Doubtful Accounts, Jan 1, Year 1: $50cr
Allowance for Doubtful Accounts, Dec 31st, Year 1: $140cr
All sales during Year 1 were made on credit, in the amount of $1,000. Bad debt expense for the year was $100.
What were ABC's cash collections for Year1?
142. VJW received the following cash inflows during 2012:
What would be cash inflow from financing activities for 2012?
143. The records of CDE provided the following information for the period ended December 31, 2012:
Compute CDE's cash flow from Operating activities for 2012.
144. RLN received the following cash inflows during 2012.
What would be cash inflow from investing activities for 2012?

145. Given the following data, answer the questions that follow.
Additional Information:
1) What was cash from customers during year 2?

2) What was cash paid to suppliers during year 2?
3) What was net cash inflow from operating activities during year 2?
4) What was net cash inflow (outflow) from investing activities during year 2?
5) What was net cash inflow (outflow) from financing activities during year 2?
146. For each transaction, enter a check mark to indicate its effect on cash flow. If there is no effect, do not
mark either blank.
147. Place a check mark in the appropriate column(s) with respect to each item listed below which indicates
where the item would be reported on the Statement of Cash Flows.
(a) Made periodic transfer of cash to bond sinking fund.

(b) Collected accounts receivable from trade customers.
(c) Paid for extraordinary repairs and debited accum. Depreciation.
(d) Sold securities carried as short-term investment at book value.
(e) Declared cash dividend on common stock to be paid in first month of the next fiscal year.
(f) Increased allowance for doubtful accounts at the end of the fiscal period.
(g) Purchased new equip. by issuing a note due in six months.
(h) Sold unissued common stock at par. Used the cash for working capital purposes.
(i) Bonds covered by a sinking fund matured. The fund was used to pay them in full.
(j) Building acquired; paid no cash but issued a long-term mortgage note payable.
148. Given the following data:
Additional information:
1. Increase in accounts receivable during 2011 - $25,000

2. Decrease in inventory during 2011 - $13,000
3. Decrease in accounts payable during 2001 - $28,000
4. Sale of old equipment for cash - $65,000
5. Dividends declared - $45,000; dividends paid - $40,000
6. New building acquired by issuing common shares - $42,000
7. Sold bonds for cash - proceeds of $75,000
What was net cash inflow (outflow) from operating activities during 2011?
149. JCB, Inc. has completed the Dec. 31, 2012 income statement, balance sheet, and retained earnings
statement. The spreadsheet for the Statement of Cash Flows (direct method) has been started below. Complete
the spreadsheet.
Additional data:
1. Purchased capital asset for $80 cash.

2. Sold capital asset for $150 cash (cost- $200; Acc. Depr.- $70).
3. Issued 10 common shares (MV - $15/share) to retire L-T notes payable.
4. Issued L-T notes payable for $100 cash.
5. Declared and paid cash dividends of $60.
Operating Activities:
Investing Activities:
Financing Activities:
Noncash Exchanges:
Incr. (Decr) in cash
150. Reported net income for ABC for 2013 was $20,000. Additional information is as follows:
The Statement of Cash Flows, indirect method, would report cash flow from operations of
$_______________________.
151. Complete the following Statement of Cash Flows schedule to determine cash inflow (outflow) from
operations:
Statement of Cash Flows
Net income......................$100,000
Adjustments to convert net income to cash from
operating activities:
(a) Inventory increase, $3,000............

(b) Accounts payable decrease, $7,000........
(c) Depreciation expense, $12,000..........
(d) Gain on sale of land, $4,000..........
(e) Accounts receivable decrease, $5,000......
(f) Amortization of discount on bonds payable, $1,000
(g) Loss on sale of investments in SAS, $2,000....
(h) Correction of prior years' errors, loss, $11,000......
Cash inflow (outflow) from operating activities...
152. A corporation is preparing a Statement of Cash Flows. Complete the following part of it in the spaces
provided (be sure to indicate + or -):
153. Complete the following Statement of Cash Flows, indirect method, schedule to determine cash inflow
(outflow) from operating activities:
Statement of Cash Flows, Indirect Method
Adjustments to convert net income to cash from operating activities:
154. You are preparing a Statement of Cash Flows. Complete the following schedule to compute cash flow
from operating activities:
155. ABC Company has just completed the December 31, 2001, financial statements except for the Statement
of Cash Flows. Information on changes in accounts appears in tabular format below. Additional information for
2001:
a. Net income, $16,000.

b. Depreciation expense, $5,000.
c. Cash dividend declared and paid, $4,000.
d. Declared and issued a $10,000 stock dividend, recorded at par.
e. December 30, 2001, purchased a machine (a capital asset) for $10,000; paid half cash and issued a one year,
18%, interest-bearing note of $5,000 for the balance.
f. Sold 20 shares of unissued shares at $26 per share, collected cash in full.
g. Repurchased 10 shares of their ABC shares at $25 per share (assume the single-transaction method is used
for common stock), paid cash in full.
h. Purchased a tract of land and paid for it in full by exchanging for it all of the investment in X Corporation
shares. The shares were quoted on the market at $12,000 (any gain or loss is included in income as an
"ordinary" item).
i. Sold an idle plant for $6,000 cash.
j. Extraordinary gain of $2,000 (net of income tax) due to an earthquake (infrequent and unusual), which caused
the loss of capital assets that originally cost $12,000 when they were two-thirds, depreciated; received $6,000
cash settlement from the insurance company.
156. Data for XOC for 2013 were as follows:
(a) On December 31, 2013, sold a capital asset with a carrying value of $5,000 for $2,000 cash.
(b) Depreciation expense for 2001, $4,000.
(c) Sold 500 common shares at $10 cash per share.
(d) Paid $1,000 on a long-term note payable.
(e) Sold a long term investment costing $400 for $500 cash.
(f) Inventory increased $2,500.
(g) Amortized $30 of patent costs.
(h) Net income, $23,000.
Required:
1. What was net cash inflow (outflow) from investing activities for 2013? Show computations.
2. What was net cash inflow (outflow) from financing activities for 2013? Show computations.
157. The following income statement and additional information for MDB, Inc. is relevant to the statement of
changes in financial position.
Required:
1. Prepare a schedule showing cash from operations (direct method).

2. Prepare a schedule showing cash from operations (indirect method).
158. The following data is provided:
Required:
Prepare a Statement of Cash Flows, direct method. Include a reconciliation of earnings and net operating cash
flow.
159. A firm reported the following in its 2011 financial statements:
Income statement
(a) Describe the required disclosure implied by the above information for the indirect method Statement of Cash
Flows for 2001, including the reconciliation of net income and net operating cash flow.
(b) Explain as completely as possible the reasoning for your response in (a).
(c) Describe the required disclosure implied by the above information for the direct method Statement of Cash
Flows for 2011, omitting any reference to the reconciliation of net income and net operating cash flow.
160. The adjusted trial balances for a firm, at December 31, 2011 and 2010 are as follows:
No plant assets were sold in 2011. The firm allocates depreciation expense to other operating expense accounts.
Required:
Determine the firm's 2011 net cash flow from operating activities using the indirect method.
161. A firm's recent comparative balance sheets and income statements follow:
Income statement for year ended December 31, 2011
1. During 2011, equipment costing $20,000 was sold for cash.

2. During 2011, $10,000 of bonds payable were issued in exchange for capital assets. There was no
amortization of bond discount or premium.
Required:
Prepare the 2011 Statement of Cash Flows using the indirect method.
162. Two formats of presenting the Statement of Cash Flows are allowed under ASPE and IFRS. Describe the
two formats and provide your own opinion on which results in a more complete picture of a firm's cash flows.
163. The records of BCD provided the following information for the year ended December 31, 2011:
(1)
(2) Cash dividends of $5,000 were declared in 2010 and paid in 2011, and cash dividends of $2,000 were
declared and paid in 2011.
(3) Net loss in 2011, $1,000.
(4) Depreciation expense for 2011, $5,000.
Calculate the amount of net cash from operating activities during 2011.
Calculate KWB's cash outflow for investing activities for 2011.

Calculate cash inflow from financing activities for 2013.
Calculate net cash inflow from operating activities for 2011.
(6) Net income, $19,000.
Calculate the net cash inflow from operating activities for 2011.
direct method, calculate what would be RJB's cash collected from customers during 2011?
equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale.
Present the complete disclosure of these events in an indirect format Statement of Cash Flows.
dividends.
Present the complete disclosure of these events in the direct format Statement of Cash Flows.
a decrease in net accounts receivable of $40,000 during 2011.
Calculate what would be SDB's cash collected from customers during 2011.
during the year, calculate the amount of sales for 2011.
173. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000, and trade
accounts payable increased by $12,000.
Calculate the amount of cash paid to suppliers.
174. Assume cash paid to suppliers for 2011 is $420,000, that merchandise inventory increased by $20,000
during the year, and that cost of goods sold was $415,000 for 2011.
Calculate the net change in accounts payable during 2011.
175. WXY reported sales revenue of $40,000, and expenses of $35,000 during the period ended December 31,
was recorded.
Calculate the amount of net cash flow from operating activities.
176. Complete the cash column based on the following data for the Statement of Cash Flows:
177. A corporation started operations on January 1; the reporting period ends December 31. At the end of the
year, the company's records reflected the following amounts after all adjusting entries: Sales revenue, $700,000;
Cost of goods sold, $400,000; Expenses (total), $200,000; Accrued wages payable, $5,000; Accounts payable,
$10,000 and Accounts receivable, $25,000.
(a) Net income, accrual basis, was $____________________.
(b) Net cash inflow from operating activities was $____________.
05 Key
1. A Statement of Cash Flows using the direct method and one using the indirect method will each produce the
same amount of net cash flow from operating activities.
TRUE
Accessibility: Keyboard Navigation

Beechy - Chapter 05 #1
Blooms: Knowledge
Difficulty: Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
2. Only the indirect method of preparing the Statement of Cash Flows reports the reconciliation of net income
and net operating cash flow.
TRUE

Blooms: Knowledge
Difficulty: Easy
3. All investments meeting the definition of cash equivalent must be so classified.

FALSE

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest; dividends and income taxes.
4. Under IFRS, term preferred shares near their maturity date may be classified as cash equivalents for purposes
of the Statement of Cash Flows.
TRUE

Blooms: Knowledge
Difficulty: Easy
5. Under ASPE, dividends paid must be classified as a financing activity.
TRUE

Blooms: Knowledge
Difficulty: Easy
6. The write-off of a bad debt (allowance method) during the current period represents an outflow of cash on the
Statement of Cash Flows for the current period.
FALSE

Blooms: Knowledge
Difficulty: Easy
7. A Statement of Cash Flows is significant in that it presents comprehensive information about the operating,
financing, and investing activities of a company.
TRUE

Blooms: Knowledge
Difficulty: Easy
8. Sale of an asset and issuance of long-term debt will each cause an outflow of cash.
FALSE

Blooms: Knowledge
Difficulty: Easy
9. Sale of an asset for less than its book value results in an inflow of cash.
TRUE

Blooms: Knowledge
Difficulty: Easy
10. The indirect method of computing operating cash flows effectively converts accrual accounting income to
cash basis income as its starting point.
TRUE

Blooms: Knowledge
Difficulty: Easy
11. A non-cash exchange is a transaction that involves an exchange of resources without any cash being directly
paid or received.
TRUE

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 05-01 Understand the structure; purpose and interpretation of the statement of cash flow (SCF).
12. The Statement of Cash Flows is dated at a specific point in time like the balance sheet.
FALSE

Blooms: Knowledge
Difficulty: Easy
13. The Statement of Cash Flows can be based on (a) cash only or (b) cash plus cash equivalents.
TRUE

Blooms: Knowledge
Difficulty: Easy
14. The Statement of Cash Flows is not a required financial statement in the same sense as the income statement
and balance sheet.
FALSE

Blooms: Knowledge
Difficulty: Easy
15. In the preparation of the Statement of Cash Flows using the Direct Method, an operating loss would be
reported under cash flows from operating activities.
FALSE

Blooms: Knowledge
Difficulty: Easy
16. Assume cash paid to suppliers for 2012 is $350,000, merchandise inventory increased by $5,000 during the
year, and accounts payable decreased by $10,000 during the year. The COGS for 2012 is $335,000.
TRUE

Blooms: Knowledge
Difficulty: Easy
17. Depreciation expense represents a "flow" of cash during the current period.
FALSE

Blooms: Knowledge
Difficulty: Easy
18. Depreciation expense is not a source of cash or cash equivalents.

TRUE

Blooms: Knowledge
Difficulty: Easy
19. A Statement of Cash Flows is designed to help investors, creditors, and others to project a company's future
cash flows.
TRUE

Blooms: Knowledge
Difficulty: Easy
20. Cash equivalents are "short-term, highly liquid investments" that are both: (a) readily convertible to known
amounts of cash and (b) so near their maturity that they present insignificant risk of changes in value because of
changes in interest rates.
TRUE

Blooms: Knowledge
Difficulty: Easy
21. Generally, only investments with original maturities (to the investor) of less than three months qualify as a
cash equivalent.
TRUE

Blooms: Knowledge
Difficulty: Easy
22. Examples of cash equivalents are treasury bills, money market funds, and commercial paper.
TRUE

Blooms: Knowledge
Difficulty: Easy
23. Under ASPE, interest received and paid and dividends received must be classified in the operating activities
section of the Statement of Cash Flows.
TRUE

Blooms: Knowledge
Difficulty: Easy
24. Dividends received may be classified as operating or investing activities under IFRS.
TRUE

Blooms: Knowledge
Difficulty: Easy
25. Depreciation expense in the Statement of Cash Flows is reported under the investing section.
FALSE

Blooms: Knowledge
Difficulty: Easy
26. A change in the company's policy on defining cash equivalents should be reported as a cumulative effect
adjustment.
FALSE

Blooms: Knowledge
Difficulty: Easy
27. Cash from customers equals sales plus the increase in accounts receivable for the year.
FALSE

Blooms: Knowledge
Difficulty: Easy
28. Accrual based net sales plus a decrease in accounts receivable for the year would equal cash from
customers.
TRUE

Blooms: Knowledge
Difficulty: Easy
29. Writing off an uncollectible account against the allowance would increase cash from customers.
FALSE

Blooms: Knowledge
Difficulty: Easy
30. Cash paid to suppliers is accrual based cost of goods sold plus the increase in inventory plus the increase in
accounts payable for the year.
FALSE

Blooms: Knowledge
Difficulty: Easy
31. Cost of goods sold plus an increase in inventory minus an increase in accounts payable would equal cash
paid to suppliers.
TRUE

Blooms: Knowledge
Difficulty: Easy
32. Under IFRS, interest received may be classified as operating or financing activities.
FALSE

Blooms: Knowledge
Difficulty: Easy
33. Under IFRS, interest paid may be classified as operating or financing activities.
TRUE

Blooms: Knowledge
Difficulty: Easy
34. Under IFRS, dividends received may be classified as operating or financing activities.
FALSE

Blooms: Knowledge
Difficulty: Easy
35. Under IFRS, dividends paid may be classified as operating or financing activities.
TRUE

Blooms: Knowledge
Difficulty: Easy
36. Sale for cash of a short-term investment at its cost would cause an inflow of cash.
TRUE

Blooms: Knowledge
Difficulty: Easy
37. Salary expense plus amortization of deferred compensation expense for the year would equal cash paid for
salaries.
FALSE

Blooms: Knowledge
Difficulty: Easy
38. If Harris Company issues both a balance sheet and an income statement with comparative figures from last
year, a statement of cash flows should be issued for each period for which an income statement is presented.
TRUE

Blooms: Knowledge
Difficulty: Easy
39. Cash paid to suppliers plus an increase in inventory minus an increase in accounts payable would equal cost
of goods sold.
FALSE

Blooms: Knowledge
Difficulty: Easy
40. When a Statement of Cash Flows is prepared using the indirect method, a decrease in the balance of a
prepaid expense during the reporting period is an "add back" adjustment to net income to convert it to cash from
operating activities.
TRUE

Blooms: Knowledge
Difficulty: Easy
41. A corporation has paid $20,000 in cash dividends each year on its common shares. Although during year 1
the company had a cash shortage, it declared the dividend. However, it was stipulated that the $20,000 cash
dividend would not be paid until year 2. This dividend will affect the year 1 Statement of Cash Flows by:
A. increasing the cash from operating activities.
B. increasing the cash from financing activities.
C. decreasing the cash from financing activities.
D. decreasing the cash from operating activities.
E. will not affect the Statement of Cash Flows.

Blooms: Knowledge
Difficulty: Easy

A. determine the change in cash during the period
B. list the cash inflows and outflows by meaningful cash flow category
C. disclose the quality of earnings
D. explain why the balance sheet accounts changed during the year

Blooms: Knowledge
Difficulty: Easy
43. Which of the following is the operating cash flow?

A. rent payments
B. dividend payments
C. payments for the purchase of a building
D. principal payment on a bank loan

Blooms: Knowledge
Difficulty: Easy
44. A corporation recorded the following entry:
How would this transaction be shown on a Statement of Cash Flows?

A. Cash outflow for operating activities
B. Cash outflow for investing activities
C. Cash outflow for financing activities
D. Cash inflow for financing activities

Blooms: Knowledge
Difficulty: Easy
45. Which method or format for preparing the Statement of Cash Flows reports the major operating cash flows
on an individual line-item basis?
A. Only direct method
B. Only indirect method
C. Both direct and indirect
D. Neither direct nor indirect

Blooms: Knowledge
Difficulty: Easy
46. Which of the following is a financing cash flow?

A. Purchase of common shares of another company
B. Dividend payments
C. Rental payments
D. Interest received

Blooms: Knowledge
Difficulty: Easy
47. How is depreciation expense treated in the Statement of Cash Flows and related disclosures when the
statement is prepared using the indirect format?
A. added to net income
B. subtracted from net income
C. placed into the investing section
D. does not appear because it is not a cash flow

Blooms: Knowledge
Difficulty: Easy
48. Under IFRS, interest received may be classified as:


Blooms: Knowledge
Difficulty: Medium
49. Under IFRS, interest paid may be classified as:


Blooms: Knowledge
Difficulty: Medium
50. Under IFRS, dividends received may be classified as:

Blooms: Knowledge
Difficulty: Medium
51. Under IFRS, dividends paid may be classified as:

B. Financing Activities.
C. Investing Activities.

Blooms: Knowledge
Difficulty: Medium
52. In a Statement of Cash Flows:

A. net cash flow from operating activities is always the same as net income.
B. net cash flow from operating activities must be the same as net increase in cash during the period.
C. net cash flow from operating activities is always greater than net income.
D. net cash flow from operating activities is always less than net income.
E. net cash flow from operating activities may be less than or greater than net income.

Blooms: Knowledge
Difficulty: Easy
53. Which of the following would not be shown in one of the three activity sections of the Statement of Cash
Flows prepared using the indirect format?
A. Refinancing a bond issue currently due with a new bond issue
B. A decrease in trade accounts receivable over the period
C. Purchase of a subsidiary corporation
D. A decrease in long-term notes payable over the period

Blooms: Knowledge
Difficulty: Easy
54. A corporation paid $4,000 cash for rent. This payment should be reflected on the Statement of Cash Flows
as a:
A. cash inflow from operating activities.
B. cash outflow from operating activities.
C. cash outflow from investing activities.
D. cash outflow from financing activities.

Blooms: Knowledge
Difficulty: Easy
55. A corporation reported the following information in its income statement:
The corporation should report the following amount on its Statement of Cash Flows for net cash from operating
activities:
A. $11,600
B. $13,600
C. $14,600
D. $17,100

Blooms: Knowledge
Difficulty: Easy
56. The following item is found on the income statement of a corporation: Gain from sale of equipment, $5,000.
The equipment sold during the year originally cost $20,000, had accumulated depreciation of $16,000 and was
sold for cash. The Statement of Cash Flows should show an inflow of cash from investing activities of:
A. $1,000
B. $4,000
C. $5,000
D. $9,000

Blooms: Knowledge
Difficulty: Easy
57. A company started business on January 1, year 1. At the end of year 1, the financial statements showed the
following amounts:
Income on the accrual basis and net cash inflow from operating activities were:
A. Choice A
B. Choice B
C. Choice C
D. Choice D

Blooms: Knowledge
Difficulty: Easy
58. Which one of the following statement does not primarily report changes in amounts or accounts?
A. Statement of Cash Flows
B. Balance sheet
C. Income statement
D. Statement of retained earnings

Blooms: Knowledge
Difficulty: Easy
A. Payment of a long-term bond
B. Sale for cash of a short-term investment at its cost
C. Payment of accounts payable
D. Repurchase of common stock for cash
E. Accrual of a dividend

Blooms: Knowledge
Difficulty: Easy
60. Which of the following would cause an outflow of cash?

A. Issuance of long-term debt to finance a construction project
B. Collection on an account receivable
C. Cash purchase of a long-term marketable security
D. Sale of a long-term asset for cash

Blooms: Knowledge
Difficulty: Easy

A. Payment of a long-term debt
B. Purchase of inventory for cash
C. Sale of an asset for cash at less than its book value
D. Issuing common stock in payment for legal services already provided

Blooms: Knowledge
Difficulty: Easy
62. If a company issues both a balance sheet and an income statement with comparative figures from last year,
Statement of Cash Flows:
A. Should be issued for the current year only.
B. Should be issued for each period for which an income statement is presented.
C. is no longer necessary; but may be used at the company's option.
D. Should not be issued.

Blooms: Knowledge
Difficulty: Easy
63. Which of the following causes a net change in cash?
A. Write-off of a bad debt
B. Payment of a long-term debt by issuing common shares
C. Declaration of a cash dividend
D. Declaration and issuance of a stock dividend
E. Payment of a cash dividend declared in a previous period

Blooms: Knowledge
Difficulty: Easy
64. What effect does the write-off of an account receivable have on the Statement of Cash Flows?
A. A decrease to operating cash flows under the direct method.
B. A decrease to operating cash flows under the indirect method.
C. A decrease to financing cash flows.
D. There is no effect.

Blooms: Knowledge
Difficulty: Easy
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
65. Which of the following would not be a cash-paid item using the direct method for reporting operating
activities?
A. Depreciation expense
B. Cash paid to suppliers
C. Cash paid for income taxes
D. Cash paid for interest

Blooms: Knowledge
Difficulty: Easy
66. Under the direct method, cash from customers would be sales plus a(n):
A. Decrease in accounts payable.
B. Increase in accounts payable.
C. Decrease in accounts receivable.
D. Increase in accounts receivable.

Blooms: Knowledge
Difficulty: Easy
67. Cash paid for income taxes under the direct method would be income tax expense minus:
A. An increase in income taxes payable.
B. A decrease in income taxes payable.
C. Beginning income taxes payable.
D. Ending income taxes payable.

Blooms: Knowledge
Difficulty: Easy
68. When using the direct method for reporting operating activities, which of the following would represent a
cash-paid item?
A. Depreciation expense, adjusted for changes in depreciation methods
B. Patent amortization expense, adjusted for changes in estimates
C. Interest expense, adjusted for changes in interest payable and amortization of bond premiums or discounts
D. Loss on sale of plant assets
E. Gain on sale of plant assets

Blooms: Knowledge
Difficulty: Easy
69. Under the direct method, cash paid to suppliers can be computed as cost of goods sold for the period:
A. Plus an increase in inventory and minus an increase in accounts payable.
B. Plus a decrease in inventory and minus an increase in accounts payable.
C. Minus an increase in inventory and plus an increase in accounts payable.
D. Minus a decrease in inventory and plus an increase in accounts payable.

Blooms: Knowledge
Difficulty: Easy
70. On a reconciliation of net income to cash from operations, depreciation is treated as an adjustment to net
income because depreciation:
A. is a direct outflow of cash.
B. reduces net income but does not involve an outflow of cash.
C. reduces net income and involves an outflow of cash.
D. is an outflow of cash to a reserve account for replacement of assets.

Blooms: Knowledge
Difficulty: Easy
71. Which of the following is not an inflow of cash?

A. Collection of a short-term receivable
B. Sale of a capital asset for cash
C. Cash borrowed on a short-term note
D. Depreciation expense

Blooms: Knowledge
Difficulty: Easy
72. The amortization of bond discount on long-term debt should be presented in a Statement of Cash Flows as
a(n):
A. Inflow and outflow of cash.
B. Outflow of cash.
C. Deduction from net income in the adjustments to reconcile net income to cash from operating activities.
D. Addition to net income in the adjustments to reconcile net income to cash from operating activities.

Blooms: Knowledge
Difficulty: Easy
73. The amortization of patents should be presented in a Statement of Cash Flows as a(n):
A. inflow and outflow of cash.
B. outflow of cash.
C. addition to net income in the adjustments to reconcile net income to cash from operating activities.
D. deduction from net income in the adjustments to reconcile net income to cash from operating activities.

Blooms: Knowledge
Difficulty: Easy
74. Which of the following is not an adjustment to reconcile net income to cash from operating activities?
A. Accrued liability change (increase or decrease)
B. Amortization of premium or discount on bonds payable
C. Cash dividend declared but not yet paid
D. Prepaid expense (increase or decrease)

Blooms: Knowledge
Difficulty: Easy
75. Which of the following is a deduction from net income when reconciling to cash flow from operating
activities?
A. Amortization of premium on bonds payable
B. Cash dividend declared and paid
C. Collection of an account receivable
D. Bad debt written off (allowance method)

Blooms: Knowledge
Difficulty: Easy
76. The gain on the sale of a long-term investment should be disclosed separately in a Statement of Cash Flows
of a company with substantial operating profits as a(n):
B. Outflow from operating activities.
D. Inflow from financing activities.

Blooms: Knowledge
Difficulty: Medium
77. A loss on the sale of machinery in the ordinary course of business should be presented in a Statement of
Cash Flows as a(n):
B. Inflow from operating activities.
C. Inflow from investing activities.
D. Outflow from investing activities.

Blooms: Knowledge
Difficulty: Medium
78. In a Statement of Cash Flows, the amortization of goodwill for a company with substantial operating profits
should be presented as a(n):
A. Inflow from operating activities.
B. Inflow from investing activities.
D. Adjustment to net income in the reconciliation of net income to cash from operating activities.

Blooms: Knowledge
Difficulty: Easy
79. When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory
over the beginning inventory will result in an adjustment to reported net income because:
A. Cash is increased because inventory is a current asset.
B. Inventory is an expense deducted in computing net earnings, but is not a use of cash.
C. The net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers.
D. All changes in noncash accounts must be disclosed.

Blooms: Knowledge
Difficulty: Easy
80. Which of the following independent transactions would cause net income to be more than cash from
operating activities?
A. A decrease in the accounts receivable account
B. An increase in the merchandise inventory account
C. An increase in the accounts payable account
D. An increase in the accrued wages account

Blooms: Knowledge
Difficulty: Easy
81. Cash flows from investing activities would include all of these except:
A. Proceeds from sale of operating assets.
B. Proceeds from sale of long-term investments
C. Interest paid on notes receivable.
D. Proceeds from sale of securities available for sale.
E. Collection of principal amounts of loans made to other parties.

Blooms: Knowledge
Difficulty: Easy
82. Cash outflows from investing activities would include payments for all of the following except:
A. Purchase of capital assets.
B. Investments in securities available for sale.
C. Repurchase of common stock.
D. Loans to other parties.

Blooms: Knowledge
Difficulty: Easy
83. Which one of the following would not be a cash inflow from financing activities for ABC Company?
A. Cash from issuing ABC common stock
B. Cash from issuing ABC preferred stock
C. Cash from issuing ABC bonds payable
D. Cash from sale of XYZ common stock

Blooms: Knowledge
Difficulty: Easy
84. Which one of the following would not be a cash outflow from financing activities for ABC Company?
A. Cash paid for dividends on ABC common stock.
B. Cash paid for purchase of XYZ common stock.
C. Cash paid for dividends on ABC preferred stock.
D. Cash paid for interest on ABC bonds payable.

Blooms: Knowledge
Difficulty: Easy
85. A Statement of Cash Flows would not report the effects of:
A. Cash dividends paid.
B. A purchase and immediate retirement of common stock.
C. Stock dividends declared and issued.
D. Common shares issued for cash.

Blooms: Knowledge
Difficulty: Easy
86. The Statement of Cash Flows does not report the effects of:
A. Common shares purchased for cancellation.
B. Cash dividends paid.
C. Common shares issued for cash to pay for assets or to pay debt.
D. Common shares issued as the result of a stock dividend.

Blooms: Knowledge
Difficulty: Medium
87. Which of the following could be a cash equivalent for purposes of reporting in the Statement of Cash
Flows?
A. Investment in common shares
B. Cash in a checking account
C. Investment in a treasury bills
D. Investment in redeemable preferred shares

Blooms: Knowledge
Difficulty: Easy
88. Choose the operating cash flow for Bikk Inc.
A. Principal payment on a note payable to a supplier for inventory purchased by Bikk for resale by Bikk
B. Dividend paid to Bikk's shareholders.
C. Principal payment on a loan from a financial institution; Bikk used the proceeds to purchase inventory for
resale
D. Capitalized interest

Blooms: Knowledge
Difficulty: Easy
89. For which of the following accounts would the change during the year in that account not be found the
reconciliation of net income and net operating cash flow?
A. Dividends payable
B. Interest payable
C. Prepaid rent
D. Wages payable
E. Short-term notes payable to supplier

Blooms: Knowledge
Difficulty: Easy

A. to determine the change in cash for the period.
B. to disclose information about cash receipts and disbursements during the period.
C. to disclose the changes in long-term asset and liability accounts during the period.
D. to disclose significant noncash investing and financing activities during the period.
E. to explain why net income and net operating cash flows are different.

Blooms: Knowledge
Difficulty: Easy
91. In preparing the Statement of Cash Flows, which of the following transactions would be considered an
investing activity?
A. sale of equipment at book value
B. Sale of merchandise on credit
C. Declaration of cash dividend
D. Issuance of bonds payable at a discount

Blooms: Knowledge
Difficulty: Easy
92. Which of the following items involving current trade accounts receivable is most likely to appear in a
A. Balance in allowance for uncollectible accounts
B. Write-off of a specific account
C. Sales returns and allowances
D. Collection of an account previously written off
E. Change in net sales

Blooms: Knowledge
Difficulty: Easy
93. When preparing the Statement of Cash Flows, which of the following sources of information should be
consulted after considering all others?
A. Income statement
B. Comparative balance sheet in general
C. Remaining unexplained balance sheet account changes
D. Retained earnings statement
E. Company records

Blooms: Knowledge
Difficulty: Easy
94. Choose the correct statement about preparation of the Statement of Cash Flows:
A. Only the indirect method is required; the direct method is optional
B. A spreadsheet must be used in computerized situations
C. No particular preparation method is mandated by GAAP
D. The direct method must be used unless available information does not permit it, in which case the indirect
method may be used

Blooms: Knowledge
Difficulty: Easy
95. ABC acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its
common shares; no market price was quoted). How should this transaction be reported on the Statement of Cash
Flows?
A. Reported on the face of the Statement of Cash Flows
B. Report $10,000 as a noncash investing and financing activity on the Statement of Cash Flows
C. Report the $12,000 as an inflow of cash on the Statement of Cash Flows
D. Report the $12,000 as a noncash activity in the notes to the financial statement.

Blooms: Knowledge
Difficulty: Easy
96. In the preparation of a Statement of Cash Flows:

A. The statement must include most noncash exchanges.
B. The statement must be prepared using the working capital definition of funds.
C. Stock dividends and stock splits must be reported on the statement.
D. The statement must be cumulative over the last two reporting periods.
E. None of these answers are correct.

Blooms: Knowledge
Difficulty: Easy
97. An asset (land) was purchased and payment in full was made by issuing the company's common shares. No
cash was paid. Therefore, this transaction should be reported on the Statement of Cash Flows:
A. as an "Adjustment to reconcile net income to operating activities."
B. should not be reported on the Statement of Cash Flows but details explained in the disclosure notes.
C. as an outflow of cash.
D. As a non-cash exchange.

Blooms: Knowledge
Difficulty: Medium
98. In preparing a Statement of Cash Flows, you encountered the following transaction of February 1, 2013:
acquired a small office building in exchange for 5,000 of our common shares; market value $15 per share. How
should this transaction be reported on the Statement of Cash Flows?
A. Report as a concurrent inflow and outflow of cash on the Statement of Cash Flows.
B. Report as a noncash investing and financing activity.
C. Not reported on the Statement of Cash Flows because it did not affect cash, but details explained in the
disclosure notes.
D. Report on a Statement of Cash Flows as an investing activity.

Blooms: Knowledge
Difficulty: Easy
99. The purchase of debt securities to be held to maturity would be classified into which of the following

Blooms: Knowledge
Difficulty: Easy
100. The change in short-term payables to suppliers would be classified into which of the following categories
for purposes of disclosure in the Statement of Cash Flows?

Blooms: Knowledge
Difficulty: Easy
101. XYZ has the following assets:
What would be the total cash equivalents at year-end for XYZ?

A. $80,000
B. $100,000
C. $120,000
D. $140,000
E. $220,000

Blooms: Application
Difficulty: Easy
102. The following four events affecting property, plant and equipment, and intangible assets, occurred during
the current year for a firm:
(i.) Purchased equipment for $50,000.

(ii.) Successfully defended a patent infringement suit costing the firm $60,000 in legal fees this year; as a result,
the firm has sole rights to the patent.
(iii.) Capitalized and paid $30,000 of interest on a building under construction which is to house the firm's new
offices.
(iv.) Received $100,000 in casualty insurance proceeds as a result of fire damage to one of the firm's factories.
What is the net effect on investing cash flow of the above transactions for the current year?
A. $10,000 increase
B. $110,000 decrease
C. $140,000 decrease
D. $40,000 decrease

Blooms: Knowledge
Difficulty: Medium
direct method, what would be RJB's cash collected from customers during 2001?
A. $170,000
B. $200,000
C. $230,000

Blooms: Knowledge
Difficulty: Medium
equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale. What is the
complete disclosure of these events in the indirect method Statement of Cash Flows?
A. $350,000 investing cash outflow; $50,000 investing cash inflow; $70,000 addition reconciling adjustment
B. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment
C. $300,000 investing cash outflow; $130,000 addition reconciling adjustment
D. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment;
$70,000 addition reconciling adjustment

Blooms: Knowledge
Difficulty: Medium
dividends. What is the complete disclosure in the direct method Statement of Cash Flows for these events?
A. $25,000 financing cash outflow; $10,000 addition reconciling adjustment
B. $45,000 financing cash outflow
C. $25,000 financing cash outflow
D. $35,000 financing cash outflow
E. $25,000 financing cash outflow; $10,000 subtraction reconciling adjustment

Blooms: Knowledge
Difficulty: Medium
106. The sale of $3,000 worth of cash equivalents at cost has what effect on the direct method Statement of
Cash Flows.
A. add $3,000 in the reconciliation
B. no disclosure
C. $3,000 operating cash inflow

Blooms: Knowledge
Difficulty: Medium
107. The sale of $3,000 worth of cash equivalents costing $2,500 has what effect on the indirect method
Statement of Cash Flows.
A. $500 operating cash inflow
B. no disclosure
C. $500 operating cash outflow
D. $500 subtraction reconciling adjustment
E. $500 operating cash inflow; $500 subtraction reconciling adjustment

Blooms: Knowledge
Difficulty: Medium
a decrease in net accounts receivable of $40,000 during 2013. What would be SDB's cash collected from
customers during 2013?
A. $300,000
B. $330,000
C. $340,000
D. $350,000

Blooms: Knowledge
Difficulty: Medium
during the year, what were sales for 2013?
A. $600,000
B. $780,000
C. $800,000

Blooms: Knowledge
Difficulty: Medium
during the year and accounts payable decreased by $30,000 during the year. What would be DBB's cash paid to
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

Blooms: Knowledge
Difficulty: Medium
111. ARI Inc. began 2013 with the following:
During 2013 the following events occurred:
At the end of 2013, ARI showed a balance in gross accounts receivable (before the allowance for doubtful
accounts) of $16,800. In the direct method Statement of Cash Flows, what amount would be shown as an
operating cash inflow?
A. $21,000
B. $22,000
C. $30,000
D. $28,200

Blooms: Knowledge
Difficulty: Medium
112. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000 and trade
accounts payable increased by $12,000. The cash paid to suppliers was:
A. $148,000
B. $98,000
C. $160,000
D. $172,000
E. $102,000

Blooms: Knowledge
Difficulty: Medium
during the year, and accounts payable decreased by $30,000 during the year. What would be DBB's cash paid to
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

Blooms: Knowledge
Difficulty: Medium
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

Blooms: Knowledge
Difficulty: Medium
suppliers for 2013?
A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

Blooms: Knowledge
Difficulty: Medium
116. MDB reported sales of $800,000, bad debt expense (allowance method) of $30,000, and an increase in net
accounts receivable of $120,000 during 2013. What is MDB's cash collected from customers for 2013 if MDB
did not record any write-offs during the period?
A. $650,000
B. $680,000
C. $710,000
D. $800,000

Blooms: Knowledge
Difficulty: Medium
117. Assume cash paid to suppliers for 2011 is $350,000; merchandise inventory increased by $5,000 during the
year, and accounts payable decreased by $10,000 during the year. What was cost of goods sold for 2011?
A. $335,000
B. $345,000
C. $355,000
D. $365,000

Blooms: Knowledge
Difficulty: Medium
118. Assume cash paid to suppliers for 2011 is $420,000; that merchandise inventory increased by $20,000
during the year, and that cost of goods sold was $415,000 for 2011. During 2011, accounts payable must have:
A. Increased by $5,000
B. Decreased by $5,000
C. Increased by $15,000
D. Decreased by $15,000

Blooms: Knowledge
Difficulty: Medium
119. A firm purchased $20,000 worth of investments classified as securities available for sale. At the end of the
year, the investments were worth $23,000. What is the correct disclosure of these events in the direct method
A. Investing cash outflow, $20,000
B. Add $17,000 in reconciliation of earnings and net operating cash flow
C. Investing cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow
D. No disclosure is needed

Blooms: Knowledge
Difficulty: Medium
120. The income statement for CBA reported a net loss of $14,000. Also, the statement reported depreciation
expense of $12,000 and amortization of patents of $6,000. Assuming no additional "adjustments to reconcile net
income to cash from operating activities," the cash flow from operations would be a:
A. $4,000 inflow.
B. $6,000 inflow.
C. $16,000 inflow.
D. $30,000 inflow.
E. ($4,000) outflow.

Blooms: Knowledge
Difficulty: Medium
121. The following information was provided by the records of QRS for the current reporting year:

A. $63,000
B. $77,000
C. $80,000
D. $97,000

Blooms: Knowledge
Difficulty: Medium
122. The sale of $3,000 worth of cash equivalents at cost has what effect on the indirect method Statement of
Cash Flows.
A. Add $3,000 in the reconciliation
B. No disclosure
C. $3,000 Operating cash inflow

Blooms: Knowledge
Difficulty: Medium
123. The net income for a corporation for the current accounting period was $275,000. Changes in various
accounts during the period follow:
The cash provided by operations for the current period is:

A. $275,000
B. $260,300
C. $350,300
D. $309,550
E. $278,340

Blooms: Knowledge
Difficulty: Medium
124. The following was provided by the records of RST for the current reporting year:
The cash flow from operating activities was:

A. $40,000 outflow.
B. $7,000 inflow.
C. $5,000 inflow.
D. $4,000 inflow.

Blooms: Knowledge
Difficulty: Medium
125. WXY reported sales revenue of $40,000 and expenses of $35,000 during the period ended December 31,
was recorded. What was the amount of net cash flow from operating activities?
A. $4,800
B. $2,500
C. $4,500
D. $5,500
E. $6,000

Blooms: Knowledge
Difficulty: Medium
126. ABC reported sales revenue of $100,000 and expenses of $106,000 for the period ended December 31,
2011; accounts receivable decreased by $500; accounts payable increased by $2,500; accrued wages payable
decreased by $1,500; short-term loans to banks increased by $600; and depreciation expense of $4,000 was
recorded. What was the amount of net cash flow from operating activities for 2011?
A. $500 inflow
B. $1,000 inflow
C. $100 Inflow
D. $500 outflow
E. $1,000 outflow

Blooms: Knowledge
Difficulty: Medium
127. MNO reported net income of $42,000 for the reporting period ended December 3, 2011. MNO's records
provided the following information:
The net cash flow from operating activities was:

A. $36,500
B. $38,500
C. $46,500
D. $48,500

Blooms: Knowledge
Difficulty: Medium
128. The following information was provided by the records of RST for the annual reporting period ended
December 31, 2011:

A. $172
B. $188
C. $190
D. $200

Blooms: Knowledge
Difficulty: Medium
(6) Net income, $19,000.
What was the net cash inflow from operating activities for 2011?
A. $7,200
B. $13,200
C. $16,200
D. $21,200

Blooms: Knowledge
Difficulty: Medium
130. Choose the combination that best reflects the appropriate classification of cash paid for operating,
investing, and financing activities.
A. Choice A
B. Choice B
C. Choice C
D. Choice D

Blooms: Knowledge
Difficulty: Medium
131. The purchase of securities available for sale but not considered cash equivalents would be classified into
which of the following categories for purposes of disclosure in the Statement of Cash Flows?

Blooms: Knowledge
Difficulty: Medium
132. As per ASPE, Dividends received from trading securities would be classified into which of the following

Blooms: Knowledge
Difficulty: Medium
133. RJB made inventory purchases amounting to $200,000 during 2014. During the year, its accounts payable
(all of which arose from inventory purchases) increased by $20,000. The company had sales of $1,000,000 and
is subject to a gross profit percentage of 90%. How much cash did RJB pay to its inventory suppliers during
2014?
A. $120,000
B. $180,000
C. $320,000
D. $220,000

Blooms: Knowledge
Difficulty: Medium
134. VJC received the following cash inflows during 2012:
What would be VJC's cash inflow from investing and financing activities, respectively, for 2011 under IFRS?

Blooms: Application
Difficulty: Medium
What would be KWB's cash outflows for investing and financing activities for 2011 under IFRS?
Note: Under IFRS, dividends and interest paid may also be classified as operating cash flows.

Blooms: Application
Difficulty: Medium
136. EAE made the following cash outflows during 2012:
What would be EAE's cash outflow for financing activities for 2012 (000s)?
Financing Cash Outflows: $14 + 60 + 30 = $104

Blooms: Application
Difficulty: Medium
137. BWL paid the following cash outflows during 2012:
What would be BWL's cash outflow for investing and financing activities, respectively, for 2012 under IFRS?
Investing Cash Outflows: $100,000 + 30,000 + 80,000 = $210,000

Financing Cash Outflows: $20,000 + 5,000 = $25,000

Blooms: Application
Difficulty: Medium
138. MNO's books for the period ended December 31, 2012, contained the following data:
Under IFRS, the net inflow (outflow) in cash from investing and financing activities (respectively) during 2012
was:
Investing Cash Outflows: $4,500

Financing Cash Outflows: $-3,500 - 2,000 - 5,000 = $10,500

Blooms: Application
Difficulty: Medium
139. MJC received the following cash inflows during 2012:
What would be cash inflow from operating, investing, and financing activities, respectively, for 2012?
Operating Cash flows: $600 + $4 = $604

Investing Cash flows: $100 + $20 = $120
Financing Cash flows: $400 + $70 = $470

Blooms: Application
Difficulty: Medium
140. KEC paid the following cash outflows during 2012:
What would be cash outflow for operating, investing, and financing activities, respectively, for 2012?
Operating Cash Outflows: $25,000 + $4,000 = $29,000

Investing Cash Outflows: $20,000 + $40,000 + $43,000 = $103,000
Financing Cash Outflows: $12,000

Blooms: Application
Difficulty: Medium
141. ABC had the following balances on its Statement of Financial Position for Year 1:
Accounts Receivable, Jan 1, Year 1: $500

Accounts Receivable, Dec 31, Year 1: $400
Allowance for Doubtful Accounts, Jan 1, Year 1: $50cr
Allowance for Doubtful Accounts, Dec 31st, Year 1: $140cr
All sales during Year 1 were made on credit, in the amount of $1,000. Bad debt expense for the year was $100.
What were ABC's cash collections for Year1?
$500 + $1,000 - $400 - $(50 + 100 - 140) = $1,090

Blooms: Application
Difficulty: Medium
What would be cash inflow from financing activities for 2012?
$30,000 + $100,000 = $130,000

Blooms: Application
Difficulty: Medium
Compute CDE's cash flow from Operating activities for 2012.
Cash flow from Operating Activities: 92

Blooms: Application
Difficulty: Medium
144. RLN received the following cash inflows during 2012.
What would be cash inflow from investing activities for 2012?
$50,000 + $40,000 = $90,000

Note: Under IFRS, interest received may qualify as an operating cash inflow.

Blooms: Application
Difficulty: Medium
145. Given the following data, answer the questions that follow.
Additional Information:
1) What was cash from customers during year 2?

2) What was cash paid to suppliers during year 2?
3) What was net cash inflow from operating activities during year 2?
4) What was net cash inflow (outflow) from investing activities during year 2?
5) What was net cash inflow (outflow) from financing activities during year 2?

Blooms: Application
Difficulty: Hard
146. For each transaction, enter a check mark to indicate its effect on cash flow. If there is no effect, do not
mark either blank.

Blooms: Knowledge
Difficulty: Hard
147. Place a check mark in the appropriate column(s) with respect to each item listed below which indicates
where the item would be reported on the Statement of Cash Flows.
(a) Made periodic transfer of cash to bond sinking fund.

(b) Collected accounts receivable from trade customers.
(c) Paid for extraordinary repairs and debited accum. Depreciation.
(d) Sold securities carried as short-term investment at book value.
(e) Declared cash dividend on common stock to be paid in first month of the next fiscal year.
(f) Increased allowance for doubtful accounts at the end of the fiscal period.
(g) Purchased new equip. by issuing a note due in six months.
(h) Sold unissued common stock at par. Used the cash for working capital purposes.
(i) Bonds covered by a sinking fund matured. The fund was used to pay them in full.
(j) Building acquired; paid no cash but issued a long-term mortgage note payable.

Blooms: Application
Difficulty: Hard
148. Given the following data:
1. Increase in accounts receivable during 2011 - $25,000

2. Decrease in inventory during 2011 - $13,000
3. Decrease in accounts payable during 2001 - $28,000
4. Sale of old equipment for cash - $65,000
5. Dividends declared - $45,000; dividends paid - $40,000
6. New building acquired by issuing common shares - $42,000
7. Sold bonds for cash - proceeds of $75,000
What was net cash inflow (outflow) from operating activities during 2011?

Blooms: Application
Difficulty: Hard
149. JCB, Inc. has completed the Dec. 31, 2012 income statement, balance sheet, and retained earnings
statement. The spreadsheet for the Statement of Cash Flows (direct method) has been started below. Complete
the spreadsheet.
Additional data:
1. Purchased capital asset for $80 cash.

2. Sold capital asset for $150 cash (cost- $200; Acc. Depr.- $70).
3. Issued 10 common shares (MV - $15/share) to retire L-T notes payable.
4. Issued L-T notes payable for $100 cash.
5. Declared and paid cash dividends of $60.
Noncash Exchanges:
Incr. (Decr) in cash
JCB, Inc. Spreadsheet for Statement of Cash Flows
Noncash Exchanges:
Issued common stock to retire

Blooms: Application
Difficulty: Hard
150. Reported net income for ABC for 2013 was $20,000. Additional information is as follows:
The Statement of Cash Flows, indirect method, would report cash flow from operations of
$_______________________.
Net income, $20,000 + (b) $2,000 + (d) $400 + (e) $200 + (f) $70 - (g) $30 + (h) $500 - (i) $3,000 - (j) $130 =
$20,010.

Blooms: Application
Difficulty: Hard
151. Complete the following Statement of Cash Flows schedule to determine cash inflow (outflow) from
operations:
Net income......................$100,000
Adjustments to convert net income to cash from
operating activities:
(a) Inventory increase, $3,000............

(b) Accounts payable decrease, $7,000........
(c) Depreciation expense, $12,000..........
(d) Gain on sale of land, $4,000..........
(e) Accounts receivable decrease, $5,000......
(f) Amortization of discount on bonds payable, $1,000
(g) Loss on sale of investments in SAS, $2,000....
(h) Correction of prior years' errors, loss, $11,000......
Cash inflow (outflow) from operating activities...
$100,000 - (a) $3,000 - (b) $7,000 + (c) $12,000 - (d) $4,000 + (e) $5,000 + (f) $1,000 + (g) $2,000 = $106,000;
(h) not applicable

Blooms: Application
Difficulty: Hard
152. A corporation is preparing a Statement of Cash Flows. Complete the following part of it in the spaces
provided (be sure to indicate + or -):

Blooms: Application
Difficulty: Hard
153. Complete the following Statement of Cash Flows, indirect method, schedule to determine cash inflow
(outflow) from operating activities:
Statement of Cash Flows, Indirect Method
Adjustments to convert net income:

Blooms: Application
Difficulty: Hard
154. You are preparing a Statement of Cash Flows. Complete the following schedule to compute cash flow
from operating activities:
Operating Activities

Blooms: Application
Difficulty: Hard
155. ABC Company has just completed the December 31, 2001, financial statements except for the Statement
of Cash Flows. Information on changes in accounts appears in tabular format below. Additional information for
2001:
a. Net income, $16,000.

b. Depreciation expense, $5,000.
c. Cash dividend declared and paid, $4,000.
d. Declared and issued a $10,000 stock dividend, recorded at par.
e. December 30, 2001, purchased a machine (a capital asset) for $10,000; paid half cash and issued a one year,
18%, interest-bearing note of $5,000 for the balance.
f. Sold 20 shares of unissued shares at $26 per share, collected cash in full.
g. Repurchased 10 shares of their ABC shares at $25 per share (assume the single-transaction method is used
for common stock), paid cash in full.
h. Purchased a tract of land and paid for it in full by exchanging for it all of the investment in X Corporation
shares. The shares were quoted on the market at $12,000 (any gain or loss is included in income as an
"ordinary" item).
i. Sold an idle plant for $6,000 cash.
j. Extraordinary gain of $2,000 (net of income tax) due to an earthquake (infrequent and unusual), which caused
the loss of capital assets that originally cost $12,000 when they were two-thirds, depreciated; received $6,000
cash settlement from the insurance company.
Operating Activities
Investing Activities
Financing Activities
Noncash Activity Schedule

Purchased equipment for $10,000, paid $5,000 down and issued a $5,000 note for the balance
Purchased land by exchanging investment in X corp. shares, $12,000.

Blooms: Application
Difficulty: Hard
156. Data for XOC for 2013 were as follows:
(a) On December 31, 2013, sold a capital asset with a carrying value of $5,000 for $2,000 cash.
(b) Depreciation expense for 2001, $4,000.
(c) Sold 500 common shares at $10 cash per share.
(d) Paid $1,000 on a long-term note payable.
(e) Sold a long term investment costing $400 for $500 cash.
(f) Inventory increased $2,500.
(g) Amortized $30 of patent costs.
(h) Net income, $23,000.
Required:
1. What was net cash inflow (outflow) from investing activities for 2013? Show computations.
2. What was net cash inflow (outflow) from financing activities for 2013? Show computations.

Blooms: Application
Difficulty: Hard
157. The following income statement and additional information for MDB, Inc. is relevant to the statement of
changes in financial position.
Required:
1. Prepare a schedule showing cash from operations (direct method).

2. Prepare a schedule showing cash from operations (indirect method).

Blooms: Application
Difficulty: Hard
158. The following data is provided:
Required:
Prepare a Statement of Cash Flows, direct method. Include a reconciliation of earnings and net operating cash
flow.
Cash from customers (375,000 - 10,000). $365,000

Cash paid to suppliers
Note: New building was acquired by issuing common shares for $21,000
Reconciliation of earnings and net operating cash flow:

Blooms: Application
Difficulty: Hard
159. A firm reported the following in its 2011 financial statements:
Income statement
(a) Describe the required disclosure implied by the above information for the indirect method Statement of Cash
Flows for 2001, including the reconciliation of net income and net operating cash flow.
(b) Explain as completely as possible the reasoning for your response in (a).
(c) Describe the required disclosure implied by the above information for the direct method Statement of Cash
Flows for 2011, omitting any reference to the reconciliation of net income and net operating cash flow.
(a) Add increase in unearned rent $7,000 in reconciliation.

(b) $7,000 more cash rent was received than recognized as revenue because unearned rent increased that much.
But net income which begins the reconciliation reflects rent revenue only. Therefore, to include the total rent
cash inflow in net operating cash flow, the $7,000 difference must be added to net income in the reconciliation.
(c) Operating cash inflow: rent received $99,000.

Blooms: Application
Difficulty: Hard
160. The adjusted trial balances for a firm, at December 31, 2011 and 2010 are as follows:
No plant assets were sold in 2011. The firm allocates depreciation expense to other operating expense accounts.
Required:
Determine the firm's 2011 net cash flow from operating activities using the indirect method.

Blooms: Application
Difficulty: Hard
161. A firm's recent comparative balance sheets and income statements follow:
Income statement for year ended December 31, 2011
1. During 2011, equipment costing $20,000 was sold for cash.

2. During 2011, $10,000 of bonds payable were issued in exchange for capital assets. There was no
amortization of bond discount or premium.
Required:
Prepare the 2011 Statement of Cash Flows using the indirect method.

For the Year Ended December 31, 2011
Operating activities
Investing activities
Financing activities
Non cash activity schedule:

Blooms: Application
Difficulty: Hard
162. Two formats of presenting the Statement of Cash Flows are allowed under ASPE and IFRS. Describe the
two formats and provide your own opinion on which results in a more complete picture of a firm's cash flows.
The direct and indirect formats are two acceptable ways to present a Statement of Cash Flows. Each has three
activity sections into which are placed descriptions of cash flows, aggregated by type. The last two sections, the
investing and financing sections, are identical for each format. However, the direct format discloses the actual
operating cash flows such as collections from customers and payments to employees.
The indirect format shows the reconciliation of net income and net operating cash flow and includes such items
as depreciation, amortization, gains and losses, and changes in operating working capital accounts. The direct
format presents the reconciliation as a supplemental schedule.
Therefore, the direct format Statement of Cash Flows for a firm contains all the information included in the
indirect format statement, as well as the operating cash flows. As a result, the direct format provides more cash
flow information and is more consistent with the purpose of the Statement of Cash Flows (i.e. to present cash
flow information in meaningful categories).
The individual operating cash flows are important for assessing the sources of cash from various operating and
repetitive sources. For example, are collections from customers sufficient to cover operating cash demands?
Only the direct format provides this information. The reconciliation also provides important information.
Assessments about the quality of earnings are enhanced by this schedule which essentially explains why accrual
earnings and cash-basis earnings are not the same. The reconciliation is required for both formats.

Blooms: Knowledge
Difficulty: Hard
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
163. The records of BCD provided the following information for the year ended December 31, 2011:
(1)
(2) Cash dividends of $5,000 were declared in 2010 and paid in 2011, and cash dividends of $2,000 were
declared and paid in 2011.
(3) Net loss in 2011, $1,000.
(4) Depreciation expense for 2011, $5,000.
Calculate the amount of net cash from operating activities during 2011.

Blooms: Application
Difficulty: Hard
Calculate KWB's cash outflow for investing activities for 2011.

Blooms: Application
Difficulty: Hard
Calculate cash inflow from financing activities for 2013.

Blooms: Application
Difficulty: Hard
Calculate net cash inflow from operating activities for 2011.

Blooms: Application
Difficulty: Hard
(6) Net income, $19,000.
Calculate the net cash inflow from operating activities for 2011.
Cash flows for operating

Blooms: Application
Difficulty: Hard
direct method, calculate what would be RJB's cash collected from customers during 2011?

Blooms: Application
Difficulty: Hard
equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale.
Present the complete disclosure of these events in an indirect format Statement of Cash Flows.
Operating activities:
Loss on disposal (original cost 100,000 less 30,000
Cash flows from investing activities:

Blooms: Application
Difficulty: Hard
dividends.
Present the complete disclosure of these events in the direct format Statement of Cash Flows.
This is an outflow from financing activities

Blooms: Application
Difficulty: Hard
a decrease in net accounts receivable of $40,000 during 2011.
Calculate what would be SDB's cash collected from customers during 2011.

Blooms: Application
Difficulty: Hard
during the year, calculate the amount of sales for 2011.

Blooms: Application
Difficulty: Hard
173. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000, and trade
accounts payable increased by $12,000.
Calculate the amount of cash paid to suppliers.

Blooms: Application
Difficulty: Hard
174. Assume cash paid to suppliers for 2011 is $420,000, that merchandise inventory increased by $20,000
during the year, and that cost of goods sold was $415,000 for 2011.
Calculate the net change in accounts payable during 2011.

Blooms: Application
Difficulty: Hard
175. WXY reported sales revenue of $40,000, and expenses of $35,000 during the period ended December 31,
was recorded.
Calculate the amount of net cash flow from operating activities.

Blooms: Application
Difficulty: Hard
176. Complete the cash column based on the following data for the Statement of Cash Flows:

Blooms: Application
Difficulty: Hard
177. A corporation started operations on January 1; the reporting period ends December 31. At the end of the
year, the company's records reflected the following amounts after all adjusting entries: Sales revenue, $700,000;
Cost of goods sold, $400,000; Expenses (total), $200,000; Accrued wages payable, $5,000; Accounts payable,
$10,000 and Accounts receivable, $25,000.
(a) Net income, accrual basis, was $____________________.
(b) Net cash inflow from operating activities was $____________.
b) Net cash inflow from operating activities:

Blooms: Application
Difficulty: Hard
05 Summary
Category # of Question
s
Accessibility: Keyboard Navigation 122
Beechy - Chapter 05 177
Blooms: Application 43
Blooms: Knowledge 134
Difficulty: Easy 93
Difficulty: Hard 33
Difficulty: Medium 51
Learning Objective: 05-01 Understand the structure; purpose and interpretation of the statement of cash flow (SCF). 4
Learning Objective: 05-02 Prepare a SCF in proper format. 160
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows. 2
Learning Objective: 05- 16
04 Understand the classification choices allowed in preparing the SCF for interest; dividends and income taxes.

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3. All investments meeting the definition of cash equivalent must be so classified.

5. Under ASPE, dividends paid must be classified as a financing activity.

18. Depreciation expense is not a source of cash or cash equivalents.

42. The main purpose of the Statement of Cash Flows is:

43. Which of the following is the operating cash flow?

44. A corporation recorded the following entry:

How would this transaction be shown on a Statement of Cash Flows?

46. Which of the following is a financing cash flow?

48. Under IFRS, interest received may be classified as:

49. Under IFRS, interest paid may be classified as:

51. Under IFRS, dividends paid may be classified as:

52. In a Statement of Cash Flows:

60. Which of the following would cause an outflow of cash?

61. Which of the following would cause an inflow of cash?

63. Which of the following causes a net change in cash?

90. The main purpose of the Statement of Cash Flows is:

96. In the preparation of a Statement of Cash Flows:

101. XYZ has the following assets:

What would be the total cash equivalents at year-end for XYZ?

(i.) Purchased equipment for $50,000.

During 2013 the following events occurred:

The cash paid to suppliers was:

The cash provided by operations for the current period is:

The cash flow from operating activities was:

The net cash flow from operating activities was:

The cash paid to suppliers was:

134. VJC received the following cash inflows during 2012:

135. KWB made the following cash outflows during 2011:

137. BWL paid the following cash outflows during 2012:

140. KEC paid the following cash outflows during 2012:

Accounts Receivable, Jan 1, Year 1: $500

What would be cash inflow from financing activities for 2012?

Compute CDE's cash flow from Operating activities for 2012.

144. RLN received the following cash inflows during 2012.

What would be cash inflow from investing activities for 2012?

1) What was cash from customers during year 2?

(a) Made periodic transfer of cash to bond sinking fund.

148. Given the following data:

1. Increase in accounts receivable during 2011 - $25,000

1. Purchased capital asset for $80 cash.

(a) Inventory increase, $3,000............

Adjustments to convert net income to cash from operating activities:

a. Net income, $16,000.

1. Prepare a schedule showing cash from operations (direct method).

159. A firm reported the following in its 2011 financial statements:

Income statement for year ended December 31, 2011

1. During 2011, equipment costing $20,000 was sold for cash.

164. KWB made the following cash outflows during 2011:

Calculate KWB's cash outflow for investing activities for 2011.

Calculate cash inflow from financing activities for 2013.

Calculate net cash inflow from operating activities for 2011.

Accessibility: Keyboard Navigation

Accessibility: Keyboard Navigation

3. All investments meeting the definition of cash equivalent must be so classified.

Accessibility: Keyboard Navigation

Accessibility: Keyboard Navigation

Accessibility: Keyboard Navigation

Accessibility: Keyboard Navigation

Accessibility: Keyboard Navigation