Chapters 5 and 23, MCQ PDF

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Intermediate accounting taste bank...

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"The Final Revision of Intermediate Acc." "Second Grade 2021" "A "Aga ga gain in in!!! !!! !!!!, !, pro rove ve ve:: Your smar artn tn tnes es ess, s, your cle levvern rnes es ess, s, you ourr po pow wer erfu fu ful,l, an and d your chall llen en enge ge to sm smas as ash h th thee 40 MCQ only on 'C 'Cas as ash h Flo low w St Stat at atem em emen en entt, Chapt pter er erss 5 aan nd 2 23 3"

Marwan El Rashedy

"M "Ma arw rwan an E Ell Ra Rashe she shed dy" "C "CH HAP APTER TER TERS S "5 a and nd 23 23", ", M MCQ CQ CQ"" 1. The state tatemen men mentt of ca cash sh flow flows s prov provide ide ides s ans nswer wer wers s to all of th the e follow following ing qu ques es estions tions exc except ept a. where did the cash come from during the period? b. what was the cash used for during the period? c. what is the impact of inflation on the cash balance at the end of the year? d. what was the change in the cash balance during the period? Answer: C 2.

The st state ate atement ment o off cas cash h flow flows s rep reports orts all of tthe he follow following ing ex excep cep ceptt a. the net change in cash for the period. b. the cash effects of operations during the period. c. the free cash flows generated during the period. d. investing transactions. Answer: C

3.

The state statemen men mentt of cash flow flows s help helps s meet the obje objectiv ctiv ctive e of finan financial cial rep report ort orting, ing, wh which ich is to a asse sse ssess ss a allll o off th the e fo follow llow llowing ing exce except pt the a. amount of future cash flows. b. source of future cash flows. c. timing of future cash flows. d. uncertainty of future cash flows. Answer: B

4. If co commo mmo mmon n sto stock ck was is issued sued to ac acquire quire an $8,00 8,000 0 ma machi chi chine, ne, how would the tran transa sa saction ction app appear ear on the stat stateme eme ement nt of ccash ash flow flows? s? a. It would depend on whether you are using the direct or the indirect method. b. It would be a positive $8,000 in the financing section and a negative $8,000 in the investing section. c. It would be a negative $8,000 in the financing section and a positive $8,000 in the investing section. d. It would not appear on the statement of cash flows but rather on a schedule of noncash investing and financing activities. Answer: D 5.

Whi Which ch of the foll ollowi owi owing ng even events ts will appear in the ca cash sh flows from fifin nancin ancing g activit activities ies sec of the stat t of cash flo section tion stateme eme emen n flows? ws? a. Cash purchases of equipment. b. Cash purchases of bonds issued by another company. c. Cash received as repayment for funds loaned. d. Cash purchase of treasury stock. Answer: D

6.

Making and ccolle olle ollecting cting lo loans ans and di dispo spo sposing sing of pro proper per perty, ty, pla plant, nt, a and nd equ equipme ipme ipment nt are a. operating activities. b. investing activities. c. financing activities. d. liquidity activities. Answer: B

7.

In prep preparin arin aring g a state stateme me ment nt of cash fflow low lows, s, sale of treas treasury ury stoc stock k at an amount gre greater ater than cost w woul oul ould db be e cl classi assi assified fied as a(n a(n)) a. operating activity. b. financing activity. c. extraordinary activity. d. investing activity. Answer: B

8.

In p prep rep reparin arin aring g a sta stateme teme tement nt of ca cash sh flo flows ws ws,, ca cash sh flow flows s fr from om op operati erati erating ng a acti cti ctivitie vitie vities s a. are always equal to accrual accounting income. b. are calculated as the difference between revenues and expenses. c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash. d. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash. Answer: C

9.

In p prep rep reparin arin aring g a sta stateme teme tement nt of ca cash sh flo flows ws ws,, wh which ich of the follo followin win wing g tra transac nsac nsaction tion tions s wo would uld be cconsi an inve a onsi onsider der dered ed investin stin sting g activ ctiv ctivity? ity? a. Sale of equipment at book value b. Sale of merchandise on credit c. Declaration of a cash dividend d. Issuance of bonds payable at a discount Answer: A

10 10..

Pre Prepar par paring ing the state statement ment of cas cash h flow flows s invo involve lve lves s all of the foll followin owin owing g excep exceptt de determi termi terminin nin ning g th the e a. cash provided by operations. b. cash provided by or used in investing and financing activities. c. change in cash during the period. d. cash collections from customers during the period. Answer: D

11 11..

One o off th the e ben benefits efits o off tthe he sstate tate tateme me ment nt o off ca cash sh flow flows s is tha thatt it help helps su user ser sers s ev evalu alu aluate ate finan financia cia ciall fle flexibi xibi xibility. lity. Which of the fol followi lowi lowing ng exp explana lana lanatio tio tions ns is a des descrip crip cription tion o off fina financi nci ncial al flexi flexibili bili bility? ty? a. The nearness to cash of assets and liabilities. b. The firm's ability to respond and adapt to financial adversity and unexpected needs and opportunities. c. The firm's ability to pay its debts as they mature. d. The firm's ability to invest in a number of projects with different objectives and costs. Answer: B

12 12..

Kei Keisler sler Cor Corpo po poratio ratio ration n re report port ports: s: Cash provided by operating activities $280,000 Cash used by investing activities 110,000 Cash provided by financing activities 140,000 Beginning cash balance 90,000 What is Keisler’s ending cash balance? a. $370,000. b. $400,000. c. $530,000. d. $620,000. Answer: B

13 13..

Du During ring 2020 the DLD Com Company pany had a net inco income me of $ 85,00 ,000. 0. In addi addition tion tion,, sele selected cted acc accoun oun ounts ts show showed ed the foll followi owi owing ng chan changes: ges: Acc Accou ou ounts nts Rec Receiva eiva eivable ble $3 $3,000 ,000 incr increa ea ease se Acc Accou ou ounts nts Pay Payable able 1,00 1,000 0 iincre ncre ncrease ase Buil Buildin din dings gs 4,00 4,000 0d decre ecre ecrea ase Dep Depre re reciatio ciatio ciation nE Expe xpe xpens ns nse e 1,50 1,500 0 iincre ncre ncrease ase Bon Bonds ds Pay Payabl abl able e 8,00 8,000 0 iincre ncre ncrease ase Wha Whatt w was as the a amoun moun mountt o off ca cash sh p provi rovi rovide de ded d by op opera era erating ting ac activitie tivitie tivities? s? a. $84,500 b. $85,000 c. $86,500 d. $94,500 Answer: A

14 14..

Ha Hardin rdin rding g Co Corp rp rpora ora oration tion rep report ort orts s the foll followin owin owing g infor informa ma mation tion tion:: Net inc income ome Dep Depre re reciatio ciatio ciation ne exp xp xpense ense Incr Increa ea ease se in a accou ccou ccount nt nts s rece receivable ivable

15 15..

$53 $530,00 0,00 0,000 0 140 140,000 ,000 60 60,000 ,000

Hard Harding ing sh shoul oul ould d rep report ort ca cash sh p prov rov rovided ided b by y opera operating ting ac activitie tivitie tivities s of a. $330,000. b. $450,000. c. $610,000. d. $730,000. Answer: C Sau Sauder der C Corpo orpo orporati rati ration on rrep ep eport ort orts s the foll follow ow owing ing infor informa ma mation tion tion:: Net inc income ome $38 $380,00 0,00 0,000 0 Dep Depre re reciatio ciatio ciation ne exp xp xpense ense 70 70,000 ,000 Incr Increa ea ease se in a accou ccou ccount nt nts s rece receivable ivable 30 30,000 ,000 Sau Sauder der sh should ould re report port ca cash sh p prov rov rovide ide ided d by opera operating ting ac activitie tivitie tivities so off a. $280,000. b. $340,000. c. $420,000. d. $480,000. Answer: C

16.

In a state stateme me ment nt of cash flow flows, s, rec receipt eipt eipts s fro from m sale sales s of pr prop op operty erty erty,, pla plant, nt, an and d equip equipme me ment nt and oth other er pro produ du ductiv ctiv ctive ea asset sset ssets s sho should uld ge gener ner nerally ally be cla classi ssi ssified fied as ca cash sh iinfl nfl nflow ow ows s fr from om a. operating activities. b. financing activities. c. investing activities. d. selling activities.

Answer: C 17 17..

In a state stateme me ment nt of ca cash sh flows, inter interest est pay payme me ments nts to lend lenders ers and other cre creditor ditor ditors s shoul should d be cla classi ssi ssified fied as ca cash sh out outflow flow flows s for a. operating activities. b. borrowing activities. c. lending activities. d. financing activities.

Answer: A 18 18..

In a stat statem em ement ent of cas cash h flow flows, s, pro proce ce ceeds eds fro from m issui ssuing ng equi equity ty instr instrument ument uments s sho should uld be classi classifie fie fied d as ca cash sh iinflow nflow nflows s fro from m a. lending activities. b. operating activities. c. investing activities. d. financing activities.

Answer: D 19 19..

In a st state ate ateme me ment nt of cas cash h flo flows, ws, pay payment ment ments s to acq acquire uire debt in instr str strum um ument ent ents so off oth other er entit entitie ie ies s (ot (other her tha than n ca cash sh eq equiv uiv uivalent alent alents) s) sho should uld be cl classi assi assifie fie fied da as s ca cash sh out outflow flow flows s for a. operating activities. b. investing activities. c. financing activities. d. lending activities.

Answer: B EXERCISES 20. The information shown below is taken from the accounts of Waverly Corporation for the year ended December 31, 2020 Net income Amortization of patent Proceeds from issuance of common stock Decrease in inventory Sale of building at a $15,000 gain Decrease in accounts payable Purchase of equipment Payment of cash dividends Depreciation expense Decrease in accounts receivable Payment of mortgage Increase in short-term notes payable Sale of land at a $5,000 loss Purchase of delivery van Cash at beginning of year

$314,000 12,000 103,000 27,000 85,000 15,000 185,000 24,000 55,000 23,000 75,000 8,000 40,000 33,000 205,000

Inst Instru ru ructio ctio ctions ns Prepare a statement of cash flows for Robinson Corporation for the year ended December 31, 2020. Sol Soluti uti ution on 20 Waver Waverly ly C Compa ompa ompany ny Statem Statement ent of C Cash ash Fl Flows ows For th the e Ye Years ars E Ended nded D Dece ece ecember mber 3 31, 1, 20 2020 20 Cash flows from operating activities Net income ................................................................... Adjustments to reconcile net income to net Cash provided by operating activities: Depreciation expense .......................................... Amortization expense .......................................... Gain on sale of building ....................................... Loss on sale of land ............................................. Decrease in inventory .......................................... Decrease in accounts payable ............................. Increase in short-term notes ................................ Decrease in accounts receivable ......................... Net cash provided by operations .................................

Cash flows from investing activities ............................. Sale of building .................................................... Sale of land ......................................................... Purchase of equipment ........................................ Purchase of delivery van ..................................... Net cash used by investing activities ................... Cash flows from financing activities ................................ Issuance of common stock ..................................... Payment of cash dividends ..................................... Payment of mortgage.............................................. Net cash provided by financing activities ................ Net increase in cash ....................................................... Cash at beginning of year ............................................... Cash at end of year .........................................................

21.

314,000

$55,000 12,000 (15,000) 5,000 27,000 (15,000) 8,000 23,000

100,000 414,000

85,000 40,000 (185,000) (33,000) (93,000) 103,000 (24,000) (75,000) 4,000 325,000 205,000 530,000

A comparative balance sheet for Talkington Corporation is presented below. Asset Assets s Cash Accounts receivable Inventory Land Equipment Accumulated depreciation–equipment Total

Decem December ber 31 20 2020 20 20 2019 19 $ 68,000 $ 22,000 82,000 66,000 170,000 189,000 71,000 110,000 280,000 200,000 (74,000) (42,000) $597,000 $545,000

Liabilities and Stockholders’ Equity Accounts payable Bonds payable

$ 34,000 150,000

$ 47,000 200,000

Common stock ($1 par) Retained earnings Total

164,000 249,000 $597,000

164,000 134,000 $545,000

Ad Additi diti ditional onal in infor for formati mati mation: on: 1. Net income for 2020 was $155,000; there were no gains or losses. 2. Cash dividends of $40,000 were declared and paid. 3. Bonds payable of $50,000 were retired. Inst Instru ru ructio ctio ctions: ns: Compute each of the following: 1. Net cash provided by operating activities 2. Net cash provided (used) by investing activities 3. Net cash provided (used) by financing activities Sol Soluti uti ution on 21 1.

Net income + Depr. expense ($74,000 – $42,000) – Increase in accounts receivable + Decrease in inventory – Decrease in accounts payable Net cash provided by operating activities

$155,000 32,000 (16,000) 19,000 (13,000) $177,000

2.

Sale of land Purchase of equipment Net cash used by investing activities

$39,000 (80,000) $(41,000)

3.

Retirement of bonds Payment of cash dividends Net cash used by financing activities

$(50,000) (40,000) $(90,000)

22. Select Select financi inform additi prese ected ed financi ancial al stat statem em ement ent inform formation ation and additi dition on onal al d data ata for S Stani tani tanislaus slaus Co. is prese esente nte nted d bel below. ow. Prep Prepare are a stat statem em ement ent of ca cash sh flow flows s ffor or tthe he yyear ear en ending ding D Dec ec ecem em ember ber 31, 2020. December 31 2019

2020

Cash....................................................... $42,000 Accounts receivable (net) ....................... 84,000 Inventory ................................................ 168,000 Land ....................................................... 58,800 Equipment .............................................. 504,000 TOTAL ........................................$856,800

$60,000 144,200 206,600 26,000 789,600 $1,226,400

Accumulated depreciation ...................... $84,000 Accounts payable ................................... 50,400 Notes payable - short-term ..................... 67,200 Notes payable - long-term ...................... 168,000 Common stock ....................................... 420,000 Retained earnings .................................. 67,200 TOTAL ........................................$856,800

$110,600 91,000 29,400 302,400 487,200 205,800 $1,226,400

Ad Additi diti ditional onal d data ata for 2020 2020:: 1. Net income was $230,200. 2. Depreciation was $26,600. 3. Land was sold at its original cost. 4. Dividends of $91,600 were paid. 5. Equipment was purchased for $84,000 cash. 6. A long-term note for $201,600 was used to pay for an equipment purchase. 7. Common stock was issued to pay a $67,200 long-term note payable. Sol Soluti uti ution on 22 Stanislaus Co. Statement of Cash Flows For the year ended December 31, 2020 Net Income Cash flow from operating activities Depreciation expense Increase in accounts receivable Increase in inventory Increase in accounts payable Decrease in short-term notes payable Net cash provided by operating activities Cash flow from investing activities Purchase equipment Sale of land Net cash used by investing activities Cash flow from financing activities Payment of cash dividend Net cash used by financing activities Net increase in cash Cash at beginning of year Cash at end of the year

23.

$230,200 26,600 (60,200) (38,600) 40,600 (37,800)

(69,400) 160,800

(84,000) 32,800 (51,200) (91,600) (91,600) 18,000 42,000 60,000

An ob objec jec jective tive of tthe he sta stateme teme tement nt of ccash ash flow flows s is tto o a. disclose changes during the period in all asset and all equity accounts. b. disclose the change in working capital during the period. c. provide information about the operating, investing, and financing activities of an entity during a period. d. None of these answers are correct. Answer: C

24.

The pri primary mary purp purpose ose of the sta statem tem temen en entt o off ca cash sh flow flows s is to p provi rovi rovide de in infor for forma ma mation tion a. about the operating, investing, and financing activities of an entity during a period. b. that is useful in assessing future cash flow prospects. c. about the cash receipts and cash payments of an entity during a period. d. about the entity's ability to meet its obligations and to pay dividends. Answer: C

25 25..

Of the followin following g que questio stio stions, ns, whi which ch one wou would ld not be answ answere ere ered d by the state statement ment of cas cash h flflow ow ows? s? a. Where did the cash come from during the period? b. What was the cash used for during the period? c. Were all the cash expenditures of benefit to the company during the period? d. What was the change in the cash balance during the period? Answer: C

26 26..

Th The e fir irst st step in the prep prepara ara aration tion of the state stateme me ment nt of cash flows requ requires ires the use of info informa rma rmation tion in includ clud cluded ed iin nw which hich co compa mpa mpara ra rative tive fina financia ncia nciall st state ate atemen men ments? ts? a. Statements of cash flows b. Balance sheets c. Income statements d. Statements of retained earnings Answer: B

27 27..

Ca Cash sh e equiv quiv quivale ale alent nt nts s ar are e a. treasury bills, commercial paper, and money market funds purchased with excess cash. b. investments with original maturities of three months or less. c. readily convertible into known amounts of cash. d. All of these answers are correct. Answer: D

28 28..

A comp company any borro borrows ws $10 $10,000 ,000 and sign signs s a 90-day nontr nontrade ade note pay payable able able.. In pre prepari pari paring ng a state stateme me ment nt of ca cash sh flows (indir (indirect ect met method hod hod), ), th this is ev event ent would be re reflecte flecte flected d as a a(n) (n) a. addition adjustment to net income in the cash flows from operating activities section. b. cash outflow from investing activities. c. cash inflow from investing activities. d. cash inflow from financing activities. Answer: D

29. 29.

Xan Xanthe the Co Corpo rpo rpora ra ration tion had the follo followin win wing g tran transac sac saction tion tions so occu ccu ccurr in the cur current rent yyear: ear: 1. 2. 3. 4. 5. 6.

Cas Cash h sale of mer merchan chan chandis dis dise e inv inven en entory tory tory.. Sal Sale eo off deli delivery very truc truck k at boo book k valu value. e. Sal Sale eo ...