Statement of Cash Flow Sections Flashcards
(16 cards)
True or False:
The statement of cash flows provides information that can be used to assess the entity’s ability to generate future cash flows.
True
True or False:
Transactions that mainly affect the determination of the net income are described as operating activities according to FASB.
True
For operating activities - think of the income statement.
True or False:
Information about the cash balance, cash flows, and the change in the cash balance during the reporting period can be obtained from the balance sheet.
False
That would be the statement of cash flows.
True or False:
Investing activities include (a) obtaining cash from creditors and repaying the amounts borrowed and (b) obtaining capital from owners and providing them with a return on, and return of, their investment.
False
Those would be financing activities.
True or False:
When a company sells PP&E, the cash received is reported in the investing activities section in the statement of cash flows, and any resulting gain or loss is reported on the income statement.
True
True or False:
In transactions of the same type, the cash inflows can be offset against cash outflows. For example, the cash inflow from the sale of equipment and the cash outflow from the purchase of equipment can be offset and reported at the net amount in the statement of cash flows.
False
FASB - such offsetting is prohibitted.
True or False:
The preparation of all financial statements, including the statement of cash flows, depends on the adjusted trial balance.
False
The statement of cash flows is mainly prepared using the income statement, comparative balance sheet, and selected transactions data.
True or False:
The issuance of equity securities for cash would be classified as an investing activity in the statement of cash flows.
False
This would be a financing activity.
All of the following are considered as examples of the benefits gained by investors and creditors from the presentation of cash flows except for:
a. assessing the reasons for differences between net income and associated cash receipts and payments.
b. assessing the enterprises ability to generate future cash flows during a period.
c. assessing the enterprises ability to meet its obligations, its ability to pay dividends, and its need for external financing.
d. assessing the enterprise’s ability to expand its operating facilities through the issuance of long-term debt.
d. assessing the enterprise’s ability to expand its operating facilities through the issuance of long-term debt.
Which of the following information could not be obtained from the statement of cash flows?
a. the use of cash during the period.
b. the cash’s sources during the period.
c. the change in the cash balance during the period.
d. whether all the expenditures incurred by the company have benefited it during the period.
d. whether all the expenditures incurred by the company have benefited it during the period.
According to GAAP, the basis recommended for the statement of cash flows is “cash and cash equivalents.” Which of the following best describes cash equivalents?
a. short term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of changes in interest rates.
b. all current assets that have no realization problems associated with them.
c. all cash and near cash that are highly liquid and can be sold or converted into cash within a year of investment.
d. all cash and near cash items that will be turned into cash within one operating period or one year, whichever is shorter.
a. short term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of changes in interest rates
Generally, which of the following statements best describes financing activities in the statement of cash flows?
a. cash outflow transactions to make loans to other entities.
b. transactions involving long term assets and including making and collecting loans and acquiring and disposing of investments and productive long-lived assets.
c. transactions involving liability and owners equity items and including obtaining cash from creditors and repaying the amounts borrowed and cash outflows to shareholders as dividends.
d. transactions that enter into the determination of net income and, thus help finance the operation of the business through the generation of cash.
c. transactions involving liability and owners equity items and including obtaining cash from creditors and repaying the amounts borrowed and cash outflows to shareholders as dividends.
The proper classification in the statement of cash flows of this transaction:
The cash payment to acquire property plant and equipment is:
a. investing and financing
b. investing
c. financing
d. operating
b. investing
Only one of the following is classified as an investing activity in the statement of cash flows:
a. cash paid to lenders for interest
b. cash received from the sale of goods and services
c. cash paid to suppliers for inventory
d. cash received from the sale of debt or equity securities of other entities
d. cash received from the sale of debt or equity securities of other entities
Which of the following items should be reported in the investing activities section in the statement of cash flows?
a. the collection of a three year note receivable
b. stock dividends
c. the issuance of common stock in exchange for legal services
d. declaration of dividends
a. the collection of a three year note receivable
Preparing the statement of cash flows starts by using information from one the the following financial statements:
a. statement of cash flows
b. statement of retained earnings
c. income statement
d. balance sheet
d. balance sheet
