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Managers only use the cash flow statement to evaluate the net cash increase or decrease, and do not pay much attention to the details of cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

A) True
B) False

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Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

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Noncash investing and financing activiti...

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Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:


A) Financing activities.
B) Investing activities.
C) Operating activities.
D) Direct activities.
E) Indirect activities.

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

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Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

A) True
B) False

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When using the indirect method to calculate and report the net cash provided or used by operating activities, net income is adjusted for all but which of the following?


A) Gains and losses from nonoperating items.
B) Revenues and expenses that did not provide or use cash.
C) Changes in noncurrent assets and noncurrent liabilities.
D) Changes in current liabilities related to operating activities.
E) Depreciation and amortization expense.

F) C) and D)
G) All of the above

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For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method. For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

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In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: Net cash provided by operating activities was: A) $120,000. B) $71,000. C) $70,000. D) $24,000. E) $110,000. Net cash provided by operating activities was:


A) $120,000.
B) $71,000.
C) $70,000.
D) $24,000.
E) $110,000.

F) None of the above
G) C) and D)

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The statement of cash flows reports:


A) Assets, liabilities, and equity.
B) Revenues, gains, expenses, and losses.
C) Cash inflows and cash outflows for an accounting period.
D) Equity, net income, and dividends.
E) Changes in equity.

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

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The statement of cash flows reports all but which of the following?


A) Cash flows from operating activities.
B) Cash flows from financing activities.
C) Cash flows from investing activities.
D) Significant noncash financing and investing activities.
E) The financial position of the company at the end of the accounting period.

F) A) and E)
G) D) and E)

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A company's Inventory balance at 12/31/17 was $188,000 and $200,000 at 12/31/16. Its Accounts Payable balance at 12/31/17 was $84,000 and $80,000 at 12/31/16, and its cost of goods sold for 2017 was $720,000. The company's total amount of cash payments for merchandise in 2017 equals:


A) $704,000.
B) $712,000.
C) $720,000.
D) $728,000.
E) $736,000.

F) A) and B)
G) A) and C)

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Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. A) $32,000. B) $68,000. C) $38,000. D) $40,000. E) $36,000.


A) $32,000.
B) $68,000.
C) $38,000.
D) $40,000.
E) $36,000.

F) B) and D)
G) A) and D)

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A statement of cash flows explains the differences between the beginning and ending balances of:


A) Net income.
B) Equity.
C) Cash and cash equivalents.
D) Working capital.
E) Cash, cash equivalents, and short-term investments.

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

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A company's income statement showed the following: net income, $124,000 and depreciation expense, $30,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; and accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.


A) $118,000.
B) $159,200.
C) $123,200.
D) $148,800.
E) $178,000.

F) C) and E)
G) A) and B)

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Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from operating activities using the indirect method: Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from operating activities using the indirect method: A) $332,200. B) $236,800. C) $261,400. D) $186,800. E) $189,400.


A) $332,200.
B) $236,800.
C) $261,400.
D) $186,800.
E) $189,400.

F) A) and B)
G) C) and E)

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Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $28,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the beginning cash balance is $5,000, what is the ending cash balance?


A) $55,000.
B) $45,000.
C) $31,000.
D) $6,000.
E) $11,000.

F) A) and E)
G) C) and E)

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In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: Net cash provided by operating activities was: A) $120,000. B) $60,000. C) $70,000. D) $80,000. E) $130,000. Net cash provided by operating activities was:


A) $120,000.
B) $60,000.
C) $70,000.
D) $80,000.
E) $130,000.

F) A) and B)
G) C) and E)

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The direct method of reporting operating cash flows:


A) Is recommended but not required by the FASB.
B) Must be used by all companies.
C) Is used by most companies.
D) Is considered supplementary disclosure.
E) Is not recommended by the FASB, but is commonly used.

F) A) and B)
G) C) and E)

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An increase in the accounts receivable account during the year should be reported on the statement of cash flows as:


A) An increase in cash flows from operating activities
B) An increase in cash flows from investing activities
C) A decrease in cash flows from operating activities
D) A decrease in cash flows from investing activities
E) An increase in cash flows from financing activities

F) C) and D)
G) B) and C)

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Financing activities include: (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

A) True
B) False

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A machine with a cost of $130,000, accumulated depreciation of $85,000, and current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:


A) $45,000.
B) $5,000.
C) $17,000.
D) $28,000.
E) $40,000.

F) B) and E)
G) A) and E)

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