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Which statement is false regarding the preparation of the indirect method of the statement of cash flows?


A) An increase in merchandise inventory is subtracted from net income.
B) Depreciation expense is added to net income.
C) An increase in accounts receivable is added to net income.
D) An increase in accounts payable is added to net income.

E) A) and B)
F) B) and D)

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____________________ activities relate to transactions between the firm and its creditors and owners.

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Which of the following statements about the statement of cash flows is correct?


A) A purchase of equipment is classified as a cash inflow from investing activities.
B) Cash dividends paid are classified as cash flows from operating activities.
C) Cash dividends received on stock investments are classified as cash flows from operating activities.
D) A company with a net loss on the income statement will always have a net cash outflow from operating activities.

E) All of the above
F) A) and B)

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When preparing the statement of cash flows using the indirect method,an increase in inventories would appear as


A) a decrease in the operating activities section
B) an increase in the operating activities section
C) a use of cash in the investing activities section
D) a source of cash in the investing activities section

E) B) and D)
F) B) and C)

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Which of the following statements is true?


A) A cash dividend is an operating cash outflow.
B) Cash paid to repurchase treasury stock is an investing cash outflow.
C) Cash paid to acquire stock in another company is a financing outflow.
D) Purchase of a patent is an investing cash outflow.

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

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Lagos Corp.recorded sales of $345,000 in 2010,in addition its accounts receivable and accounts payable balances at the beginning and end of 2010 were as follows: Lagos Corp.recorded sales of $345,000 in 2010,in addition its accounts receivable and accounts payable balances at the beginning and end of 2010 were as follows: How much cash did Lagos collect from customers in 2010? A) $345,000 B) $320,000 C) $324,000 D) $316,000 How much cash did Lagos collect from customers in 2010?


A) $345,000
B) $320,000
C) $324,000
D) $316,000

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

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Normally,cash flows from financing will start using cash during which phase of the product life cycle?


A) Introduction
B) Growth
C) Maturity
D) Decline

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

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The financial statements for Warren Company show the following: Cost of goods sold $725,000 The financial statements for Warren Company show the following: Cost of goods sold $725,000 Based on this information,cash paid for merchandise was A) $736,000 B) $719,000 C) $731,000 D) $741,000 Based on this information,cash paid for merchandise was


A) $736,000
B) $719,000
C) $731,000
D) $741,000

E) B) and C)
F) C) and D)

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An increase in accounts receivable during a period indicates that a firm did not collect as much ____________________ as the amount of revenues included in net income.

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Which of the following is not an expense excluded when calculating EBITDA?


A) depreciation expense
B) administrative expense
C) interest expense
D) tax expense

E) None of the above
F) A) and C)

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Which of the following is not one of the reasons why net income differs from cash flows from operations under the indirect method of calculating cash flows?


A) non-cash items, such as depreciation and amortization
B) changes in working capital accounts
C) gains and losses related to the sale of plant, property and equipment
D) sale or repurchase of capital stock

E) All of the above
F) A) and C)

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All of the following are firms that may experience a long lag between the expenditures of cash and the receipt of cash from customers,except:.


A) restaurants
B) wineries
C) construction companies
D) aerospace manufacturers

E) A) and D)
F) All of the above

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Kraco Corporation reported 2010 net income of $450,000,including the effects of depreciation expense of $60,000,and amortization expense on a patent of $10,000.Also,cash of $50,000 was borrowed on a 5-year note payable.Based on this data,total cash inflow from operating activities using the indirect method for 2010 was


A) $570,000
B) $520,000
C) $470,000
D) $440,000

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

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____________________ activities relate to the acquisition and sale of noncurrent assets,particularly property,plant and equipment.

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The receipt of cash when employees exercise stock options is a (an)____________________ activity.

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The acquisition of new investments would be classified as ____________________ activities in the statement of cash flows.

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A cash inflow from financing activities includes:


A) receipt of interest payments.
B) proceeds from selling equipment.
C) proceeds from issuance of bonds payable.
D) proceeds from selling investments in equity securities of another company.

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

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The issuance of debt would be classified as a (an)____________________ activity in the statement of cash flows.

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


A) Payment of a cash dividend.
B) The company purchased some of its own stock from a stockholder.
C) Amortization of patent for the period.
D) Sale of equipment at book value (i.e. no gain or loss) .

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

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Firms with short operating cycles will experience less of a lag between the creation and delivery of their products and the collection of cash from customers because


A) their cash flow from operations will be much greater than their working capital from operations.
B) their cash flow from operations will not differ much from their working capital from operations.
C) their cash flow from operations will be much less than their working capital from operations.
D) there will be no relation between their cash flow from operations and working capital from operations.

E) A) and C)
F) All of the above

Correct Answer

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