Chapter 13 - test bank of managerial accounting book PDF

Preview

Summary

test bank of managerial accounting book ...

Description

CHAPTER 13 STATEMENT OF CASH FLOWS SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY I t e m

L O

BT I t e m

L O

BT I t e m

K K K K K C C K

2 2 2 2 2 2 2 2

K K C C C C C C

L O

BT

I t e m

L O

BT

I t e m

5 6 6 6 6 6 2 2

C C K C K K K K

33. 34. a,sg 35. a,sg 36.

109. 110. 111. 112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. a 124. a 125. a 126. a 127. 128. a 129. a 130. a 131. a 132.

3 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 3,6 4 4 4 4 4 5 5 5 5 6 6 6 6 6

AP AP C C C C C C C C K C AP AN C C C C C AP C K AP AP

133. 134. a 135. a 136. a 137. a 138. a 139. a 140. a 141. a 142. a 143. a 144. a 145. sg 146. sg 147. st 148. sg 149. sg 150. sg 151. sg 152. a,sg 153. a,sg 154. a.sg 155.

162. 163.

3 4

AP AP

L O

BT

2 3 5 6

K C K K

6 6 6 6 6 6 6 6 6 6 6 6 6 2 2 2 2 1 3 3,6 6 6 5

AP AP AP AP AP C AP AP C AP AP AP AP K K K K C K AP AP AP K

6 6

AP AP

True-False Statements 1. 2. 3. 4. 5. 6. 7. 8.

1 1 1 1 1 1 1 2

9. 10. 11. 12. 13. 14. 15. 16.

17. 18. 19. 20. 21. 22. 23. 24.

2 3 3 3 3 3 4 4

C C C C C C K K

a

25. 26. a 27. a 28. a 29. a 30. sg 31. sg 32. a

sg

sg

Multiple Choice Questions 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60.

1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

K K C C C K K C K K K C K C C C C C K C K C C C

61. 62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84.

2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

K K K K AP AP AP AP AP AP AP AP AP AP AP K K AP K C C C C C

85. 86. 87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108.

156. 157.

2 3

C AP

158. 159.

3 3

AP AP

160. 161.

3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3

AP AP K C C K K C C C C C C C C AP C C K AP AP AP AP AP

a

a

Brief Exercises

sg st a

3 3

K K

This question also appears in the Study Guide. This question also appears in a self-test at the student companion website. This topic is dealt with in an Appendix to the chapter.

a

164. 165.

a

13 - 2

Test Bank for Managerial Accounting Sixth Edition

SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY Exercises 166. 167. 168. 169. 170. 171.

2 2 2 2 3 3

C C C AP AP AP

172. 173. 174. 175. 176. 177.

3 3,4 3 3 3 3

C AP AP AP AP AP

178. 3 179. 3 180. 3,4 181. 3,4 182. 4 a 183. 5

AP AN AP AP AP AP

a

184. 185. a 186. a 187. a 188. a 189. a

6 6 6 6 6 6

AP AP AP AP AP AP

6 6 6

K AN K

1

K

a

190. 191.

a

6 6

AP AP

6

K

Completion Statements 192. 193. 194.

2 2 3

K K K

195. 196. 197.

3 3 3

K K K

198. 199. a 200.

3 4 6

K K K

a

201. 202. a 203.

a

a

204.

Matching Statements 205.

3

K

206.

6

K

Short-Answer Essay 207. 208. sg st a

2 1

K K

209. 210.

1 2,3

K K

211. 212.

1 1

K K

213.

This question also appears in the Study Guide. This question also appears in a self-test at the student companion website. This topic is dealt with in an Appendix to the chapter.

SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE I t e m T y p e I t e m

T y pe I t e m

1. 2. 3. 4.

TF TF TF TF

5. 6. 7. 37.

TF TF TF MC

38. 39. 40. 41.

8. 9. 10. 11. 12. 13. 14. 15.

TF TF TF TF TF TF TF TF

16. 17. 31. 32. 33. 46. 47. 48.

TF TF TF TF TF MC MC MC

49. 50. 51. 52. 53. 54. 55. 56.

18. 19. 20. 21.

TF TF TF TF

22. 34. 70. 71.

TF TF MC MC

72. 73. 74. 75.

T y pe I t e m

T y pe I t e m

Learning Objective 1 MC 42. MC 46. MC 43. MC 150. MC 44. MC 208. MC 45. MC 209. Learning Objective 2 MC 57. MC 65. MC 58. MC 66. MC 59. MC 67. MC 60. MC 68. MC 61. MC 69. MC 62. MC 146. MC 63. MC 147. MC 64. MC 148. Learning Objective 3 MC 76. MC 80. MC 77. MC 81. MC 78. MC 82. MC 79. MC 83. Continued on the next page.

T y p e I t e m

T y p e I t e m

MC MC SA SA

211. 212. 213.

SA SA SA

MC MC MC MC MC MC MC MC

149. 156. 166. 167. 168. 169. 192. 193.

MC BE Ex Ex Ex Ex C C

207. 210.

SA SA

MC MC MC MC

84. 85. 86. 87.

MC MC MC MC

88. 89. 90. 91.

MC MC MC MC

FOR INSTRUCTOR USE ONLY

T y p e

Statement of Cash Flows Note: TF = True-False MC = Multiple Choice

BE = Brief Exercise Ex = Exercise

13 - 3

C = Completion

SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE

92. 93. 94. 95. 96. 97. 98. 99.

MC MC MC MC MC MC MC MC

100. 101. 102. 103. 104. 105. 106. 107.

MC MC MC MC MC MC MC MC

23. 24.

TF TF

119. 120.

MC MC

25. 35.

TF TF

124. 125.

MC MC

a

MC MC MC MC MC MC MC MC

a a

a

26. TF 27. TF a 28. TF a 29. TF a 30. TF a 36. TF a 110. MC a 111. MC a

a a

112. 113. a 114. a 115. a 116. a 117. a 118. a 128. a

Learning Objective 3 (Cont.) MC 116. MC 160. BE MC 117. MC 161. BE MC 118. MC 162. BE MC 151. MC 170. Ex MC 152. MC 171. Ex MC 157. BE 172. Ex MC 158. BE 173. Ex MC 159. BE 174. Ex Learning Objective 4 121. MC 123. MC 173. Ex 122. MC 163. BE 180. Ex Learning Objective a5 a 126. MC a155. MC a 127. MC a183. Ex Learning Objective a6 a 129. MC a137. MC a145. MC a 130. MC a138. MC a152. MC a 131. MC a139. MC a153. MC a 132. MC a140. MC a154. MC a 133. MC a141. MC a164. BE a 134. MC a142. MC a165. BE a 135. MC a143. MC a184. Ex a 136. MC a144. MC a185. Ex 108. 109. 110. 111. 112. 113. 114. 115.

Note: TF = True-False MC = Multiple Choice

BE = Brief Exercise Ex = Exercise

175. 176. 177. 178. 179. 180. 181. 194.

Ex Ex Ex Ex Ex Ex Ex C

195. 196. 197. 198. 205. 210.

C C C C SA SA

181. 182.

Ex Ex

199.

C

Ex Ex Ex Ex Ex Ex C C

202. 203. a 204. a 206.

a

186. 187. a 188. a 189. a 190. a 191. a 200. a 201. a

a

a

C C C C

C = Completion

CHAPTER LEARNING OBJECTIVES 1. Indicate the usefulness of the statement of cash flows. The statement of cash flows provides information about the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during the period. 2. Distinguish among operating, investing, and financing activities. Operating activities include the cash effects of transactions that enter into the determination of net income. Investing activities involve cash flows resulting from changes in investments and long-term asset items. Financing activities involve cash flows resulting from changes in long-term liability and stockholders' equity items. 3. Prepare a statement of cash flows using the indirect method. The preparation of a statement of cash flows involves three major steps: (1) Determine net cash provided/used by operating activities by converting net income from an accrual basis to a cash basis. (2) Analyze changes in noncurrent asset and liability accounts and record as investing and FOR INSTRUCTOR USE ONLY

13 - 4

Test Bank for Managerial Accounting Sixth Edition

financing activities, or disclose as noncash transactions. (3) Compare the net change in cash on the statement of cash flows with the change in the cash account reported on the balance sheet to make sure the amounts agree.

FOR INSTRUCTOR USE ONLY

Statement of Cash Flows

13 - 5

4. Analyze the statement of cash flows. Free cash flow indicates the amount of cash a company generated during the current year that is available for the payment of additional dividends or for expansion. a

5. Explain how to use a worksheet to prepare the statement of cash flows using the indirect method. When there are numerous adjustments, a worksheet can be a helpful tool in preparing the statement of cash flows. Key guidelines for using a worksheet are (1) List accounts with debit balances separately from those with credit balances. (2) In the reconciling columns in the bottom portion of the worksheet, show cash inflows as debits and cash outflows as credits. (3) Do not enter reconciling items in any journal or account, but use them only to help prepare the statement of cash flows. The steps in preparing the worksheet are (1) Enter beginning and ending balances of balance sheet accounts. (2) Enter debits and credits in reconciling columns. (3) Enter the increase or decrease in cash in two places as a balancing amount.

a

6. Prepare a statement of cash flows using the direct method. The preparation of the statement of cash flows involves three major steps: (1) Determine net cash provided/used by operating activities by converting net income from an accrual basis to a cash basis. (2) Analyze changes in noncurrent asset and liability accounts and record as investing and financing activities, or disclose as noncash transactions. (3) Compare the net change in cash on the statement of cash flows with the change in the cash account reported on the balance sheet to make sure the amounts agree. The direct method reports cash receipts less cash payments to arrive at net cash provided by operating activities.

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: T, 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: F, 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: F, 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: T, 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: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: FSA

FOR INSTRUCTOR USE ONLY

13 - 6 6.

Test Bank for Managerial Accounting Sixth Edition The information in a statement of cash flows helps investors and creditors assess the company’s ability to pay dividends and meet obligations.

Ans: T, 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: F, 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: T, 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: F, 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: F, 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: T, 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: F, 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: F, 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: T, 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: F, 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: T, 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: F, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Communications, AICPA BB: Legal/Regulatory, AICPA FN: Reporting, AICPA PC: Communication, IMA: FSA

FOR INSTRUCTOR USE ONLY

Statement of Cash Flows 18.

13 - 7

Cash provided by operations is generally equal to operating income.

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

25.

The use of a worksheet to prepare a statement of cash flows is optional.

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

26.

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

27.

The loss on disposal of plant assets is a debit to the operating section of the cash account.

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

28.

The change in cash is equal to the change in liabilities less the change in equity plus the change in noncash assets.

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

29.

During a period, cost of goods sold + an inc...