1. The statement of cash flows reports

all of the income, expenses, profit or losses a company has earned or incurred during an accounting period
the change in total assets during an accounting period
all of the cash a company has received and all of the cash a company has disbursed during an accounting period
all of the sources and uses of shareholders’ equity

 

2. The statement of cash flows reports the ________.

sources and uses of cash
profitability of a company
changes in shareholders’ equity
financial position of a company

 

3. Cash budgets allow companies to plan for any cash shortage by ________.

borrowing money
altering the timing of receipts or disbursements
securing a line of credit from a local bank
all of these

 

4. Cash from operating activities includes ________.

all cash receipts and all cash disbursements for long-term business assets
detailed estimates of the sources of cash and uses of cash
all cash receipts and cash disbursements for routine sales and payments made in the course of doing business
all cash receipts and all cash disbursements for loans, contributions from owners, and distributions to owners

 

5. The following information is from Cashew, Inc.’s December 31, 2011 annual report:
Income statement Balance sheet
12/31/11 12/31/10
Sales Revenue $90,000
Accounts receivable $8,000 $10,000
Salary expense $30,000
Salary payable $2,000 $3,000

 

Cash collected from customers on Cashew, Inc.’s statement of cash flows equals ________.

$92,000
$88,000
$90,000
$98,000

 

6. The following information is from Sharp, Inc.’s December 31, 2011 annual report:
Income statement Balance sheet
12/31/11 12/31/10
Sales Revenue $90,000
Accounts receivable $8,000 $10,000
Salary expense $30,000
Salary payable $2,000 $3,000

 

Cash paid for salaries on Sharp, Inc.’s statement of cash flows equals ________.

$31,000
$29,000
$30,000
$33,000

 

7. The following information is from X, Inc.’s December 31, 2011 annual report:
Income statement Balance sheet
12/31/11 12/31/10
Sales Revenue $90,000
Unearned revenue $8,000 $10,000
Insurance expense $30,000
Prepaid insurance $2,000 $3,000

 

Note: X, Inc. does not sell to its customers on account; it collects cash from its customers in advance.

Cash collected from customers on X, Inc.’s statement of cash flows equals ________.

$98,000
$92,000
$88,000 solution: 90000-(10000-8000) = 88000
$90,000

 

8. The following information is from Avatar, Inc.’s December 31, 2011 annual report:
Income statement Balance sheet
12/31/11 12/31/10
Sales Revenue $80,000
Unearned revenue $5,000 $9,000
Insurance expense $20,000
Prepaid insurance $3,000 $2,000

 

Note: Avatar always collects cash from its customers in advance.

Cash paid for insurance on Avatar, Inc.’s statement of cash flows equals ________.

$23,000
$19,000
$22,000
$21,000

 

9. The following information is from ABC, Inc.’s December 31, 2011 annual report:
Income statement Balance sheet
12/31/11 12/31/10
Sales Revenue $800,000
Unearned revenue $8,000 $10,000
Insurance expense $30,000
Prepaid insurance $1,000 $3,000

 

Note: ABC, Inc. does not sell to its customers on account; it collects cash from its customers in advance.

Cash paid for interest on ABC, Inc.’s statement of cash flows equals ________.

$28,000
$32,000
$33,000
$30,000

 

10. On January 1, 2011, Company Z had accounts receivable of $5,000. During the year, Company Z sold $100,000 of merchandise to credit customers. At December 31, 2011, Company Z had accounts receivable of $4,000. How much cash did the company collect from credit customers during the year?

$105,000
$101,000
$95,000
$99,000

 

11. The direct method of preparing the operating activities section of the statement of cash flows ________.

adjusts accrual-basis income
lists each important item of cash outflows from investing activities
adjusts cash-basis income
lists each important item of cash inflows from operating activities

 

12. The direct method for the preparation of the statement of cash flows ________.

starts by estimating the sources of cash and the uses of cash.
starts with net income and makes adjustments for all the items that are not cash.
starts by converting every number on the income statement to its cash amount.
all of these

 

13. The indirect method of preparing the statement of cash flows ________.

starts by converting net income into an accrual-based number
is preferred by business over the direct method
reports a greater amount of cash than the direct method
provides greater clarity for users than the direct method

 

14. Depreciation expense, using the indirect method of preparing the statement of cash flows, is ________.

added to investing activities
subtracted from investing activities
added to net income
subtracted from net income

 

15. The indirect method for the preparation of the statement of cash flows ________.

is not in conformity with GAAP
is not in conformity with IFRS
is the preferred method used by businesses
is recommended by the FASB

 

16. A use of cash for operating activities is ________.

payment of dividends
cash used to purchase treasury stock
payment of an account payable
cash used to buy equipment

 

17. A use of cash for investing activities is ________.

payment of an account payable
cash used to purchase treasury stock
cash used to buy equipment
payment of dividends

 

18. Team Shirts, Inc. had net cash from operating activities of $50,000. It paid $40,000 to buy a new computer system by signing a $30,000 note and paying the balance. Net cash from (or used for) investing activities for the period was ________.

$40,000
$(10,000)
$10,000
$(40,000)

 

19. Negative cash flow from financing activities on the statement of cash flows means that a company has ________.

paid a large cash dividend to shareholders
bought additional property, plant and equipment
sold additional shares of common stock
paid more for operating expenses than it collected from customers

 

20. Positive cash flow from operating activities on the statement of cash flows means that a company has ________.

bought additional property, plant and equipment
paid a large cash dividend to shareholders
sold additional shares of common stock
collected more from customers than it paid for operating expenses

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