ACC 560 Week 10 Quiz – Strayer NEW

 

Week 10 Quiz 9: Chapter 13

 

TRUE-FALSE STATEMENTS

    1.     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

 

    2.     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

 

    3.     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

 

    4.     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

 

    5.     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

 

 

    6.     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

 

    7.     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

 

    8.     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

 

    9.     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

 

  10.     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

 

  11.     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

 

  12.     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

 

  13.     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

 

  14.     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

 

  15.     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

 

  16.     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

 

  17.     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

 

 

  18.     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

 

  19.     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

 

  20.     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

 

  21.     A loss on sale 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

 

  22.     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

 

  23.     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

 

  24.     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

 

a25.     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

 

a26.     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

 

a27.     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

 

a28.     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

 

a29.     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

 

a30.     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

 

  31.     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

 

  32.     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

 

  33.     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

 

  34.     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

 

a35.     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

 

a36.     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

  37.     The statement of cash flows should help investors and creditors assess each of the following except the

a.   entity's ability to generate future income.

b.   entity's ability to pay dividends.

c.   reasons for the difference between net income and net cash provided by operating activities.

d.   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

 

  38.     The statement of cash flows

a.   must be prepared on a daily basis.

b.   summarizes the operating, financing, and investing activities of an entity.

c.   is another name for the income statement.

d.   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

 

  39.     Which one of the following items is not generally used in preparing a statement of cash flows?

a.   Adjusted trial balance

b.   Comparative balance sheets

c.   Current income statement

d.   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

 

  40.     The primary purpose of the statement of cash flows is to

a.   provide information about the investing and financing activities during a period.

b.   prove that revenues exceed expenses if there is a net income.

c.   provide information about the cash receipts and cash payments during a period.

d.   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

 

  41.     If a company reports a net loss, it

a.   may still have a net increase in cash.

b.   will not be able to pay cash dividends.

c.   will not be able to get a loan.

d.   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

 

  42.     In addition to the three basic financial statements, which of the following is also a required financial statement?

a.   the "Cash Budget"

b.   the Statement of Cash Flows

c.   the Statement of Cash Inflows and Outflows

d.   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

 

 

  43.     The statement of cash flows will not report the

a.   amount of checks outstanding at the end of the period.

b.   sources of cash in the current period.

c.   uses of cash in the current period.

d.   change in the cash balance for the current period.

 

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

 

  44.     The statement of cash flows reports each of the following except

a.   cash receipts from operating activities.

b.   cash payments from investing activities.

c.   the net change in cash.

d.   cash sales.

 

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

 

  45.     Each of the following are particularly interested in the statement of cash flows except

a.   creditors.

b.   employees.

c.   shareholders.

d.   government agencies.

 

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

 

  46.     Lending money and collecting the loans are

a.   operating activities.

b.   investing activities.

c.   financing activities.

d.   Non-cash investing and financing activities.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: None, IMA: Reporting

 

  47.     The cash effects of transactions that create revenues and expenses are

a.   financing activities.

b.   investing activities.

c.   operating activities.

d.   processing activities.

 

Ans: LO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Risk Analysis, AICPA PC: None, IMA: Business Economics

 

  48.     The acquisition of land by issuing common stock is

a.   a noncash transaction which is not reported in the body of a statement of cash flows.

b.   a cash transaction and would be reported in the body of a statement of cash flows.

c.   a noncash transaction and would be reported in the body of a statement of cash flows.

d.   only reported if the statement of cash flows is prepared using the direct method.

 

Continued................

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ACC 560 Week 10 Quiz – Strayer NEW

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