Chapter(17)-MCQ - Intermediate Accounting CH17 The Statement of Cash Flows PDF

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Intermediate Accounting CH17 The Statement of Cash Flows...

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Chapter(17)-MCQ 1. Accounts receivable arising from sales to customers amounted to HK$86,000 and HK$77,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was HK$290,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is a. HK$290,000. b. HK$299,000. c. HK$213,000. d. HK$280,000. Ans: b, Solution; HK$290,000 + (HK$86,000 - HK$77,000) = HK$299,000 2. Bush Company reported net income of €60,000 for the year. During the year, accounts receivable decreased by €8,000, accounts payable increased by €4,000 and depreciation expense of €5,000 was recorded. Net cash provided by operating activities for the year is a. €48,000. b. €77,000. c. €59,000. d. €55,000. Ans: b, Solution; €60,000 + €8,000 + €4,000 + €5,000 = €77,000 3. Adams Company reported a net loss of £6,000 for the year ended December 31, 2020. During the year, accounts receivable increased £15,000, merchandise inventory decreased £12,000, accounts payable decreased by £20,000, and depreciation expense of £12,000 was recorded. During 2020, operating activities a. used net cash of £17,000. b. used net cash of £29,000. c. provided net cash of £24,000. d. provided net cash of £21,000. Ans: a, Solution; (£6,000) + (£15,000) + £12,000 + (£20,000) + £12,000 = (£17,000) 4. The net income reported on the income statement for the current year was HK$220,000. Depreciation recorded on plant assets was HK$35,000. Accounts receivable and inventories increased by HK$2,000 and HK$8,000, respectively. Prepaid expenses and accounts payable decreased by HK$2,000 and HK$12,000 respectively. How much cash was provided by operating activities? a. HK$200,000 b. HK$235,000 1

c. HK$220,000 d. HK$255,000 Ans: b, Solution; HK$220,000 + HK$35,000 − HK$2,000 − HK$8,000 + HK$2,000 − HK$12,000 = HK$235,000 5. Wilson Company reported net income of €105,000 for the year ended December 31, 2020. During the year, inventories decreased by €15,000, accounts payable decreased by €20,000, depreciation expense was €18,000 and a gain on disposal of equipment of €9,000 was recorded. Net cash provided by operating activities in 2020 using the indirect method was a. €101,000. b. €109,000. c. €120,000. d. €118,000. Ans: b, Solution; €105,000 + €15,000 − €20,000 + €18,000 − €9,000 = €109,000 6. If accounts receivable have increased during the period, a. revenues on an accrual basis are less than revenues on a cash basis. b. revenues on an accrual basis are greater than revenues on a cash basis. c. revenues on an accrual basis are the same as revenues on a cash basis. d. expenses on an accrual basis are greater than expenses on a cash basis. Ans: b, 7. If accounts payable have increased during a period, a. revenues on an accrual basis are less than revenues on a cash basis. b. expenses on an accrual basis are less than expenses on a cash basis. c. expenses on an accrual basis are greater than expenses on a cash basis. d. expenses on an accrual basis are the same as expenses on a cash basis. Ans: c, 8. Which one of the following affects cash during a period? a. Recording depreciation expense b. Declaration of a cash dividend c. Write-off of an uncollectible account receivable d. Payment of an accounts payable 2

Ans: d, 9. In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is a. added to net income. b. deducted from net income. c. ignored because it does not affect cash. d. not reported on a statement of cash flows. Ans: b, 10. In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is a. deducted from net income. b. added to net income. c. ignored because it does not affect income. d. ignored because it does not affect expenses. Ans: a, 11. In calculating net cash provided by operating activities using the indirect method, patent amortization expense for the period a. is deducted from net income. b. causes cash to increase. c. causes cash to decrease. d. is added to net income. Ans: d, 12. Which of the following would be subtracted from net income when using the indirect method to calculate net cash provided (used) by operating activities? a. Depreciation expense b. An increase in accounts receivable c. An increase in accounts payable d. A decrease in prepaid expenses Ans: b, 13. Which of the following adjustments to convert net income to net cash provided by operating activities is incorrect? Add to Net Income Deduct from Income a. Accounts Receivable decrease increase b. Prepaid Expenses increase decrease c. Inventory decrease increase d. Accounts Payable increase decrease Ans: b,

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