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| 1 | |
Which one of the following transactions would not normally be considered an operating, investing, or financing activity involving the inflow or outflow of cash? |
| | A) | Acquiring cash for the business by signing a note payable with the local bank. |
| | B) | Buying a new building for the business by issuing common stock whose market value is equal to the purchase price. |
| | C) | Buying treasury stock by acquiring it on the New York Stock Exchange. |
| | D) | Paying back in full a bank loan taken out two years ago. |
| | E) | All of the above involve the inflow or outflow of cash. |
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| 2 | |
Since cash and cash equivalents are combined when preparing the statement of cash flows, which of the following transactions would not be reported as a separate item on the statement of cash flows? |
| | A) | Using cash to buy treasury stock. |
| | B) | Using cash to pay dividends. |
| | C) | Selling trading securities for the same amount of cash originally used to purchase them. |
| | D) | Issuing common stock for cash. |
| | E) | All of the above would be reported separately on the statement of cash flows. |
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| 3 | |
Which of the following transactions are considered non-cash investing and financing activities? |
| | A) | Purchasing non-cash assets by issuing common stock. |
| | B) | Retirement of long-term debt by issuing common stock. |
| | C) | Conversion of preferred stock into common stock. |
| | D) | Exchanging one used vehicle for a different vehicle where the vehicle is the only consideration involved in the transaction. |
| | E) | All of the above are noncash investing and financing activities. |
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| 4 | |
Regardless of whether the direct method or the indirect method is used to prepare the statement of cash flows, which sections of the statement are prepared and reported in the same manner on the statement? |
| | A) | The operating section and the financing section. |
| | B) | The operating section and the investing section. |
| | C) | The investing section and the financing section. |
| | D) | The financing section only. |
| | E) | The investing section only. |
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| 5 | |
Suppose a company has no cash equivalents. It analyses its Cash account to determine the causes of change for the current year. Where would issuances of common stock traded on the New York Stock Exchange and payments received from customers to pay off their accounts most likely be found? |
| | A) | Both would be found on the debit side of the Cash account. |
| | B) | Both would be found on the credit side of the Cash account. |
| | C) | The former would be found on the credit side of the Cash account and the latter would be found on the debit side of the Cash account. |
| | D) | The former would be found on the debit side of the Cash account and the latter would be found on the credit side of the Cash account. |
| | E) | None of the above is correct. |
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| 6 | |
Which of the following activities is an operating activity? |
| | A) | Issuing bonds at their face amount. |
| | B) | Issuing stock in complete payment of a fixed asset. |
| | C) | Purchasing the common stock of another corporation as an investment. |
| | D) | Purchasing merchandise inventory for resale to customers. |
| | E) | Paying off a long-term mortgage note payable. |
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| 7 | |
Which of the following transactions would be considered an investing activity? |
| | A) | Issuing common stock for cash. |
| | B) | Purchase of a new piece of equipment. |
| | C) | Paying off principal of a long-term notes payable. |
| | D) | Borrowing money by signing a long-term notes payable at the local bank. |
| | E) | The sale of inventory to a customer for cash. |
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| 8 | |
Which of the following activities is a financing activity? |
| | A) | Borrowing money. |
| | B) | Paying back a loan to the bank. |
| | C) | The payment of a cash dividend. |
| | D) | Issuing common stock. |
| | E) | All of the above are financing activities. |
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| 9 | |
Which of the following activities would be reported on a schedule of noncash investing and financing activities? |
| | A) | Convertible preferred stock was converted to common stock. |
| | B) | A building was purchased solely with cash. |
| | C) | Common stock was issued on the New York Stock Exchange. |
| | D) | Long-term notes payable paid off two years before due date. |
| | E) | Selling inventory for cash. |
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| 10 | |
When preparing the operating section of the statement of cash flows using the indirect method, which of the following would be added to net income? |
| | A) | Gain on sale of equipment. |
| | B) | Depreciation expense. |
| | C) | Depletion expense. |
| | D) | A loss on the sale of an asset. |
| | E) | All of the above would be added back to net income except the gain on the sale of equipment. |
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| 11 | |
Which of the following statements is not true about computing cash flows from operating activities using the indirect method? |
| | A) | An increase in current liabilities is added to net income. |
| | B) | An increase in current assets is subtracted from net income. |
| | C) | A decrease in current liabilities is subtracted from net income. |
| | D) | A decrease in current assets is added to net income. |
| | E) | None of the above. |
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| 12 | |
A company obtained a new building by issuing a combination of common stock and long-term notes payable. How would this transaction be reported on the statement of cash flows? |
| | A) | On a separate schedule accompanying the statement of cash flows. |
| | B) | On the statement of cash flows as both an investing and financing activity. |
| | C) | On the statement of cash flows as an investing activity, only. |
| | D) | It would not be reported on the statement of cash flows. |
| | E) | None of the above. |
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| 13 | |
The cash provided from operations was $92,000. The net increase in cash was $88,000. If the net cash inflow from financing activities was $60,000, then what was the net cash flow from investing activities? |
| | A) | A net inflow of $64,000. |
| | B) | A net outflow of $56,000. |
| | C) | A net inflow of $4,000. |
| | D) | A net outflow of $64,000. |
| | E) | None of the above. |
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| 14 | |
(Appendix B) The beginning balance of Accounts Receivable was $84,000 and the ending balance was $54,000. Sales were $340,000. What was the net cash inflow from customer receipts? |
| | A) | $310,000. |
| | B) | $370,000. |
| | C) | $394,000. |
| | D) | $256,000. |
| | E) | None of the above. |
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| 15 | |
(Appendix B) The Prepaid Insurance account had a beginning balance of $7,000 and an ending balance of $12,000. The Insurance Expense account has an ending balance of $4,500. What was the net cash outflow related to insurance expense? |
| | A) | $9,500. |
| | B) | $7,500. |
| | C) | $5,000. |
| | D) | $14,50. |
| | E) | None of the above. |
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