ACC 557 Week 10 Quiz - Strayer NEW

All possible Questions with answers.</strong>

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<h2>TRUE-FALSE STATEMENTS</h2>
<ol>
<li>The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="2">
<li>For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="3">
<li>A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="4">
<li>A statement of cash flows indicates the sources and uses of cash during a period.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="5">
<li>A statement of cash flows should help investors and creditors assess the entity’s ability to generate future income.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA
<ol start="6">
<li>The information in a statement of cash flows helps investors and creditors assess the company’s ability to pay dividends and meet obligations.</li>
</ol>
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Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="7">
<li>Financial statement readers can determine future investing and financing transactions by examining a company’s statement of cash flows.</li>
</ol>
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Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="8">
<li>In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.</li>
</ol>
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Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<ol start="9">
<li>Noncash investing and financing activities must be reported in the body of a statement of cash flows.</li>
</ol>
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Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol>
<li>The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities.</li>
</ol>
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Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol>
<li>The sale of land for cash would be classified as a cash inflow from an investing activity.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="2">
<li>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.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="3">
<li>The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="4">
<li>The payment of interest on bonds payable is classified as a cash outflow from operating activities.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="5">
<li>Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

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<ol start="6">
<li>The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="7">
<li>All major financing and investing activities affect cash.</li>
</ol>
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Ans: LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

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<ol start="8">
<li>Cash provided by operations is generally equal to operating income.</li>
</ol>
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Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="9">
<li>Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.</li>
</ol>
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Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol>
<li>Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.</li>
</ol>
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Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol>
<li>A loss on disposal of equipment is added to net income in determining cash provided by operations under the indirect method.</li>
</ol>
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Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="2">
<li>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.</li>
</ol>
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Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="3">
<li>A company must deduct depreciation expense from net income to determining net cash provided by operating activities.</li>
</ol>
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Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="4">
<li>A gain on disposal of plant assets is deducted from net income in determine net cash provided by operating activities.</li>
</ol>
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Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="5">
<li>The measurement of free cash flow provides additional insight regarding a company's cash-generating ability.</li>
</ol>
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Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="6">
<li>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.</li>
</ol>
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Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="7">
<li>Free cash flow equals cash provided by operations less capital expenditures and cash dividends.</li>
</ol>
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Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<sup>a</sup>28.     The use of a worksheet to prepare a statement of cash flows is optional.

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Ans: LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<sup>a</sup>29.     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.

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Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<sup>a</sup>30.     The Loss on Disposal of Plant Assets is a debit to the operating section of the Cash account.

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Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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<sup>a</sup>31.     The change in cash is equal to the change in liabilities less the change in equity plus the change in noncash assets.

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Ans: LO: 6, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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<ol start="2">
<li>During a period, cost of goods sold + an increase in inventory + an increase in accounts payable = cash paid to suppliers.</li>
</ol>
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Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<ol start="3">
<li>Operating expenses + an increase in prepaid expenses – a decrease in accrued expenses payable = cash payments for operating expenses.</li>
</ol>
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Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<ol start="4">
<li>The statement of cash flows classifies cash receipts and cash payments into two categories: operating activities and nonoperating activities.</li>
</ol>
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Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting

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<ol start="5">
<li>Financing activities include the obtaining of cash from issuing debt and repaying the amounts borrowed.</li>
</ol>
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Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

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<ol start="6">
<li>The adjusted trial balance is the only item needed to prepare the Statement of Cash Flows.</li>
</ol>
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Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

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<ol start="7">
<li>Under the indirect method, retained earnings is adjusted for items that affected reported net income but did not affect cash.</li>
</ol>
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Ans: LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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<ol start="8">
<li>The reconciling entry for depreciation expense in a worksheet is a credit to Accumulated Depreciation and a debit to Operating-Depreciation Expense.</li>
</ol>
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Ans: LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<ol start="9">
<li>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.</li>
</ol>
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Ans: LO: 6, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

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<h2>MULTIPLE CHOICE QUESTIONS</h2>
<ol>
<li>The statement of cash flows should help investors and creditors assess each of the following <em>except</em> the</li>
<li>entity's ability to generate future income.</li>
<li>entity's ability to pay dividends.</li>
<li>reasons for the difference between net income and net cash provided by operating activities.</li>
<li>cash investing and financing transactions during the period.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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<ol>
<li>The statement of cash flows</li>
<li>must be prepared on a daily basis.</li>
<li>summarizes the operating, financing, and investing activities of an entity.</li>
<li>is another name for the income statement.</li>
<li>is a special section of the income statement.</li>
</ol>
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Ans: LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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<ol start="2">
<li>Which one of the following items is <em>not</em> generally used in preparing a statement of cash flows?</li>
<li>Adjusted trial balance</li>
<li>Comparative balance sheets</li>
<li>Current income statement</li>
<li>Additional information</li>
</ol>
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Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Measurement, AICPA PC: None, IMA: FSA

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<ol start="3">
<li>The primary purpose of the statement of cash flows is to</li>
<li>provide information about the investing and financing activities during a period.</li>
<li>prove that revenues exceed expenses if there is a net income.</li>
<li>provide information about the cash receipts and cash payments during a period.</li>
<li>facilitate banking relationships.</li>
</ol>
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Ans: LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

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<ol start="4">
<li>If a company reports a net loss, it</li>
<li>may still have a net increase in cash.</li>
<li>will not be able to pay cash dividends.</li>
<li>will not be able to get a loan.</li>
<li>will not be able to make capital expenditures.</li>
</ol>
Continued..................
ALL Possible Questions With Answers


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ACC 557 Week 10 Quiz - Strayer NEW

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