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Exam 11: Statement of Cash Flows

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Question 71

Multiple Choice

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Under what section of the Statement of Cash Flows would you classify the purchase of equipment by issuing a long-term note payable?

A) Operating.
B) Investing.
C) Financing.
D) Noncash activity.

E) A) and B)
F) A) and C)

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Question 72

Multiple Choice

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In the operating activities section of the statement of cash flows, we start with net income when using:

A) the direct method.
B) the indirect method.
C) both the direct and the indirect method.
D) neither the direct nor the indirect method.

E) A) and D)
F) C) and D)

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Question 73

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We record dividends received as a financing activity. We record dividends received as an operating activity.

Investing activities include cash transactions involving the purchase and sale of long-term assets and current investments.

Which of the following items is reported in the statement of cash flows using the direct method?

Wireless Technologies reports sales of $50 million. Accounts receivable at the beginning and end of the year are $5 million and $7 million, respectively. What is the amount of cash received from customers?

The total net cash flows from operating activities differ between the direct and indirect methods. The total net cash flows from operating activities are identical under both the direct and indirect methods.

For each of the following five transactions, indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating (O), investing (I), financing (F), or noncash (NC) activity.

We record dividends paid as a financing activity.

Place the following items in the correct order as they would appear in the statement of cash flows: $\begin{array}{lr}\text { 1. Beginning cash balance } & \text { Operating activities } \_\_\_\\\text { 2. Net increase (decrease) in cash } & \text { Investing activities } \_\_\_\\\text { 3. Financing activities } & \text { Financing activities } \_\_\_\\\text { 4. Operating activities } & \text { Net increase (decrease) in cash }\_\_\_ \\\text { 5. Ending cash balance } & \text { Beginning cash balance } \_\_\_\\\text { 6. Investing activities } & \text { Ending cash balance }\_\_\_\end{array}$

Dividends received from an investment is classified as a(an) __________ cash flow, and paying dividends on stock issued is classified as a(an) ____________ cash flow on the Statement of Cash Flows.

We can separate cash return on assets into:

We calculate cash return on assets as

Using the indirect method, we begin with net income and then list adjustments to net income in order to arrive at operating cash flows.

The total of the cash flows from operating, investing, and financing activities equals the net increase or decrease in cash for the year.

Which of the following transactions would not create a cash flow?

Under the indirect method, an increase in accounts payable is added to net income to arrive at net cash flows from operating activities.

For each of the following five transactions, indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating (O), investing (I), financing (F), or noncash (NC) activity.

The indirect method begins with net income, while the direct method considers each of the individual accounts that make up net income.

Which of the following statements is not true relating to cash flow analysis?