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Principles of Accounting, Volume 1: Financial Accounting

Multiple Choice

Principles of Accounting, Volume 1: Financial AccountingMultiple Choice

Multiple Choice

1.

LO 16.1Which of the following statements is false?

  1. Noncash activities should be reported in accrual basis financial statements.
  2. Net cash flow from operating activities relates to normal business operations.
  3. Net income usually equals net cash flow from operating activities.
  4. The statement of cash flows is an essential part of the basic financial statements.
2.

LO 16.2Which of these transactions would not be part of the cash flows from the operating activities section of the statement of cash flows?

  1. credit purchase of inventory
  2. sales of product, for cash
  3. cash paid for purchase of equipment
  4. salary payments to employees
3.

LO 16.2Which is the proper order of the sections of the statement of cash flows?

  1. financing, investing, operating
  2. operating, investing, financing
  3. investing, operating, financing
  4. operating, financing, investing
4.

LO 16.2Which of these transactions would be part of the financing section?

  1. inventory purchased for cash
  2. sales of product, for cash
  3. cash paid for purchase of equipment
  4. dividend payments to shareholders, paid in cash
5.

LO 16.2Which of these transactions would be part of the operating section?

  1. land purchased, with note payable
  2. sales of product, for cash
  3. cash paid for purchase of equipment
  4. dividend payments to shareholders, paid in cash
6.

LO 16.2Which of these transactions would be part of the investing section?

  1. land purchased, with note payable
  2. sales of product, for cash
  3. cash paid for purchase of equipment
  4. dividend payments to shareholders, paid in cash
7.

LO 16.3What is the effect on cash when current noncash operating assets increase?

  1. Cash increases by the same amount.
  2. Cash decreases by the same amount.
  3. Cash decreases by twice as much.
  4. Cash does not change.
8.

LO 16.3What is the effect on cash when current liabilities increase?

  1. Cash increases by the same amount.
  2. Cash decreases by the same amount.
  3. Cash decreases by twice as much.
  4. Cash does not change.
9.

LO 16.3What is the effect on cash when current noncash operating assets decrease?

  1. Cash increases by the same amount.
  2. Cash decreases by the same amount.
  3. Cash decreases by twice as much.
  4. Cash does not change.
10.

LO 16.3What is the effect on cash when current liabilities decrease?

  1. Cash increases by the same amount.
  2. Cash decreases by the same amount.
  3. Cash decreases by twice as much.
  4. Cash does not change.
11.

LO 16.3Which of the following would trigger a subtraction in the indirect operating section?

  1. gain on sale of investments
  2. depreciation expense
  3. decrease in accounts receivable
  4. decrease in bonds payable
12.

LO 16.3Which of the following represents a source of cash in the investing section?

  1. sale of investments
  2. depreciation expense
  3. decrease in accounts receivable
  4. decrease in bonds payable
13.

LO 16.3Which of the following would be included in the financing section?

  1. loss on sale of investments
  2. depreciation expense
  3. increase in notes receivable
  4. decrease in notes payable
14.

LO 16.4If beginning cash equaled $10,000 and ending cash equals $19,000, which is true?

  1. Operating cash flow 9,000; Investing cash flow (3,500); Financing cash flow (2,500)
  2. Operating cash flow 4,500; Investing cash flow 9,000; Financing cash flow (4,500)
  3. Operating cash flow 2,000; Investing cash flow (13,000); Financing cash flow 2,000
  4. none of the above
15.

LO 16.5Which of the following is a stronger indicator of cash flow flexibility?

  1. cash flow from operating activities
  2. cash flow to sales ratio
  3. free cash flow
  4. all three indicate comparable degrees of flexibility
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