ACC 557 Week 10 Quiz – Strayer NEW



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Quiz Chapter 13

All possible Questions with answers.

TRUE-FALSE STATEMENTS

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



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



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



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



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

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



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



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



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



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



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



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



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



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



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



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



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



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



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



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



A loss on disposal 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



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



A company must deduct depreciation expense from net income to determining net cash provided by operating activities.


Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting



A gain on disposal of plant assets is deducted from net income in determine net cash provided by operating activities.


Ans: LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting



The measurement of free cash flow provides additional insight regarding a company's cash-generating ability.


Ans: LO: 4, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: Reporting



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



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



a28. 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: Mea

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