ACC 557 Week 10 Quiz – Strayer NEW
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Quiz Chapter 13
All
possible Questions with answers.
TRUE-FALSE
STATEMENTS
The
statement of cash flows is a required statement that must be prepared along
with an income statement, balance sheet, and retained earnings statement.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
For
external reporting, a company must prepare either an income statement or a
statement of cash flows, but not both.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
A
primary objective of the statement of cash flows is to show the income or loss
on investing and financing transactions.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
A
statement of cash flows indicates the sources and uses of cash during a period.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
A
statement of cash flows should help investors and creditors assess the entity’s
ability to generate future income.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA
The
information in a statement of cash flows helps investors and creditors assess
the company’s ability to pay dividends and meet obligations.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Financial
statement readers can determine future investing and financing transactions by
examining a company’s statement of cash flows.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
In
preparing a statement of cash flows, the issuance of debt should be reported
separately from the retirement of debt.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement,
AICPA PC: Problem Solving, IMA: FSA
Noncash
investing and financing activities must be reported in the body of a statement
of cash flows.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
The
statement of cash flows classifies cash receipts and payments as operating,
nonoperating, financial, and extraordinary activities.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
The sale
of land for cash would be classified as a cash inflow from an investing
activity.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Cash
flow from investing activities is considered the most important category on the
statement of cash flows because it is considered the best measure of expected
income.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
The
receipt of dividends from long-term investments in stock is classified as a
cash inflow from investing activities.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
The
payment of interest on bonds payable is classified as a cash outflow from
operating activities.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Any item
that appears on the income statement would be considered as either a cash
inflow or cash outflow from operating activities.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The acquisition
of a building by issuing bonds would be considered an investing and financing
activity that did not affect cash.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
All
major financing and investing activities affect cash.
Ans: LO:
2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA
Cash provided
by operations is generally equal to operating income.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Using
the indirect method, an increase in accounts receivable during a period is
deducted from net income in calculating cash provided by operations.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Using
the indirect method, an increase in accounts payable during a period is
deducted from net income in calculating cash provided by operations.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
A loss
on disposal of equipment is added to net income in determining cash provided by
operations under the indirect method.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
In
preparing a statement of cash flows, an increase in the Common Stock and
Treasury Stock accounts during a period would be an investing activity.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
A
company must deduct depreciation expense from net income to determining net cash
provided by operating activities.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
A gain
on disposal of plant assets is deducted from net income in determine net cash
provided by operating activities.
Ans: LO:
3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
The
measurement of free cash flow provides additional insight regarding a company's
cash-generating ability.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Cash provided
by operating activities fails to take into account that a company must invest
in new fixed assets just to maintain its current level of operations.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Free
cash flow equals cash provided by operations less capital expenditures and cash
dividends.
Ans: LO:
4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
a28. The
use of a worksheet to prepare a statement of cash flows is optional.
Ans: LO:
5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector,
AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
a29.
During the year, Income Tax Expense amounted to $30,000 and Income Taxes
Payable increased by $4,000; therefore, the cash paid for income taxes was
$26,000.
Ans: LO:
6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector,
AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
a30. The
Loss on Disposal of Plant Assets is a debit to the operating section of the
Cash account.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
a31. The
change in cash is equal to the change in liabilities less the change in equity
plus the change in noncash assets.
Ans: LO:
6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
During a
period, cost of goods sold + an increase in inventory + an increase in accounts
payable = cash paid to suppliers.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector,
AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
Operating
expenses + an increase in prepaid expenses – a decrease in accrued expenses
payable = cash payments for operating expenses.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector,
AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
The
statement of cash flows classifies cash receipts and cash payments into two
categories: operating activities and nonoperating activities.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB:
Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting
Financing
activities include the obtaining of cash from issuing debt and repaying the
amounts borrowed.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The
adjusted trial balance is the only item needed to prepare the Statement of Cash
Flows.
Ans: LO:
2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Measurement, AICPA PC: None, IMA: FSA
Under
the indirect method, retained earnings is adjusted for items that affected
reported net income but did not affect cash.
Ans: LO:
3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
reconciling entry for depreciation expense in a worksheet is a credit to
Accumulated Depreciation and a debit to Operating-Depreciation Expense.
Ans: LO:
5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
Under
the direct method, the formula for computing cash collections from customers is
sales revenues plus the increase in accounts receivable or minus the decrease
in accounts receivable.
Ans: LO:
6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
MULTIPLE
CHOICE QUESTIONS
The
statement of cash flows should help investors and creditors assess each of the
following except the
entity's
ability to generate future income.
entity's
ability to pay dividends.
reasons
for the difference between net income and net cash provided by operating
activities.
cash
investing and financing transactions during the period.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
statement of cash flows
must be
prepared on a daily basis.
summarizes
the operating, financing, and investing activities of an entity.
is
another name for the income statement.
is a
special section of the income statement.
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
Which
one of the following items is not generally used in preparing a statement of
cash flows?
Adjusted
trial balance
Comparative
balance sheets
Current
income statement
Additional
information
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Measurement, AICPA PC: None, IMA: FSA
The
primary purpose of the statement of cash flows is to
provide
information about the investing and financing activities during a period.
prove
that revenues exceed expenses if there is a net income.
provide
information about the cash receipts and cash payments during a period.
facilitate
banking relationships.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
If a
company reports a net loss, it
may
still have a net increase in cash.
will not
be able to pay cash dividends.
will not
be able to get a loan.
will not
be able to make capital expenditures.
Ans: LO:
1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
In
addition to the three basic financial statements, which of the following is
also a required financial statement?
the
"Cash Budget"
the
Statement of Cash Flows
the
Statement of Cash Inflows and Outflows
the
"Cash Reconciliation"
Ans: LO:
1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory,
AICPA FN: Reporting, AICPA PC: None, IMA: Reporting
The
statement of cash flows will not report the
amount
of checks outstanding at the end of the period.
sources
of cash in the current period.
uses of
cash in the current period.
change
in the cash balance for the current period.
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