30 MCQ The statement of cash flows

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Question 1

The statement of cash flows
Answer

must be prepared on a daily basis.

summarizes the operating, financing, and investing activities of an entity.

is another name for the income statement.

is a special section of the income statement.
10 points
Question 2

Which one of the following items is not generally used in preparing a statement of cash flows?
Answer

Adjusted trial balance.

Comparative balance sheets.

Current income statement.

Additional information.
10 points
Question 3

If a company reports a net loss, it
Answer

may still have a net increase in cash.

will not be able to pay cash dividends.

will not be able to get a loan.

will not be able to make capital expenditures.
10 points
Question 4

The statement of cash flows will not report the
Answer

amount of checks outstanding at the end of the period.

sources of cash in the current period.

uses of cash in the current period.

change in the cash balance for the current period.
10 points
Question 5

Which of the following transactions does not affect cash during a period?
Answer

Write-off of an uncollectible account.

Collection of an accounts receivable.

Sale of treasury stock.

Redeeming bonds before maturity.
10 points
Question 6

Zoum Corporation had the following transactions during 2014:
1. Issued $125,000 of par value common stock for cash.
2. Recorded and paid wages expense of $60,000.
3. Acquired land by issuing common stock of par value $50,000.
4. Declared and paid a cash dividend of $10,000.
5. Sold a long-term investment (cost $3,000) for cash of $3,000.
6. Recorded cash sales of $400,000.
7. Bought inventory for cash of $160,000.
8. Acquired an investment in Zynga stock for cash of $21,000.
9. Converted bonds payable to common stock in the amount of $500,000.
10. Repaid a 6 year note payable in the amount of $220,000.
What is the net cash provided by operating activities?
Answer

$305,000.

$290,000.

$240,000.

$180,000.
10 points
Question 7

Zoum Corporation had the following transactions during 2014:
1. Issued $125,000 of par value common stock for cash.
2. Recorded and paid wages expense of $60,000.
3. Acquired land by issuing common stock of par value $50,000.
4. Declared and paid a cash dividend of $10,000.
5. Sold a long-term investment (cost $3,000) for cash of $3,000.
6. Recorded cash sales of $400,000.
7. Bought inventory for cash of $160,000.
8. Acquired an investment in Zynga stock for cash of $21,000.
9. Converted bonds payable to common stock in the amount of $500,000.
10. Repaid a 6 year note payable in the amount of $220,000.
What is the net cash provided by financing activities?
Answer

$<105,000>.

$395,000.

$115,000.

$<605,000>.

Question 8

Accounts receivable arising from sales to customers amounted to $120,000 and $105,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $407,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is
Answer

$407,000.

$422,000.

$512,000.

$392,000.
10 points
Question 9

Which one of the following affects cash during a period?
Answer

Recording depreciation expense.

Declaration of a cash dividend.

Write-off of an uncollectible account receivable.

Payment of an accounts payable.
10 points
Question 10

Peninsula Company reported net income of $260,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is
Answer

$275,000.

$245,000.

$227,000.

$260,000.
10 points
Question 11

An extraordinary item must meet which of the following two criteria?
Answer

Foreseeable and material

Infrequent and unusual

Substantial and measurable

Unusual and measurable
10 points
Question 12

All of the following are reported on the income statement net of tax except
Answer

irregular items.

other comprehensive income items.

income from operations.

extraordinary items.
10 points
Question 13

An income statement would not include
Answer

other revenue and gains.

extraordinary items.

discontinued operations.

dividends paid.
10 points
Question 14

When a change in depreciation method occurs
Answer

prior years’ financial statements should be changed to reflect the newly adopted method.

the change should be reported in current and future years.

the cumulative effect of the change should be reflected on the income statement as of the beginning of the next year.

the cumulative effect of the change in accounting principle should be classified as an extraordinary item on the income statement.
10 points

Question 15

Which of the following is not an irregular item on the income statement?

Answer

Discontinued operations

Extraordinary items

Other revenues and expenses

Loss on disposal of a significant component of a business

10 points

Question 16

Horizontal analysis is also known as

Answer

vertical analysis.

linear analysis.

trend analysis.

common size analysis.

10 points

Question 17

Comparative balance sheets

Answer

are usually prepared for at least one year.

are usually prepared for at least two years.

do not show both dollar amount and percentage changes.

do not show a comparison of total stockholders’ equity.

10 points

Question 18

In a common size income statement, the 100% figure is

Answer

net income.

cost of goods sold.

gross profit.

net sales.

10 points

Question 19

Cochran Corporation, Inc. has the following income statement (in millions):
COCHRAN CORPORATION, INC.
Income Statement
For the Year Ended December 31, 2014
Net Sales $240
Cost of Goods Sold 80
Gross Profit 160
Operating Expenses 65
Net Income $ 95
Using vertical analysis, what percentage is assigned to net income?

Answer

100%

60%

40%

33%

10 points

Question 20

Which one of the following is not a characteristic generally evaluated in ratio analysis?

Answer

Liquidity

Profitability

Marketability

Solvency

10 points

Question 21

When expenses exceed revenues, which of the following is true?

Answer

a net loss results

a net income results

assets equal liabilities

assets are increased

10 points

Question 22

Dividends are reported on the

Answer

income statement.

retained earnings statement.

balance sheet.

income statement and balance sheet.

10 points

Question 23

Liabilities of a company are owed to

Answer

debtors.

owners.

creditors.

stockholders.

10 points

Question 24

Stockholders’ equity

Answer

is equal to liabilities and retained earnings.

is usually equal to cash on hand.

includes retained earnings and common stock.

is shown on the income statement.

10 points

Question 25

Elston Company compiled the following financial information as of December 31, 2014:
Service revenue $700,000
Common stock 150,000
Equipment 200,000
Operating expenses 625,000
Cash 175,000
Dividends 50,000
Supplies 25,000
Accounts payable 100,000
Accounts receivable 75,000
Retained earnings, 1/1/14 375,000

Elston’s assets on December 31, 2014 are

Answer

$1,175,000.

$850,000.

$400,000.

$475,000.

10 points

Question 26

Elston Company compiled the following financial information as of December 31, 2014:
Service revenue $700,000
Common stock 150,000
Equipment 200,000
Operating expenses 625,000
Cash 175,000
Dividends 50,000
Supplies Inventory 25,000
Accounts payable 100,000
Accounts receivable 75,000
Retained earnings, 1/1/14 375,000

Elston’s retained earnings on December 31, 2014 are

Answer

$450,000.

$375,000.

$400,000.

$ 25,000.

10 points

Question 27

Benedict Company compiled the following financial information as of December 31, 2014:
Service revenue $560,000
Common stock 120,000
Equipment 160,000
Operating expenses 500,000
Cash 140,000
Dividends 40,000
Supplies 20,000
Accounts payable 80,000
Accounts receivable 60,000
Retained earnings, 1/1/14 300,000

Benedict’s assets on December 31, 2014 are

Answer

$940,000.

$680,000.

$320,000.

$380,000.

10 points

Question 28

An annual report includes all of the following except

Answer

management discussion and analysis section.

notes to the financial statements.

an auditor’s report.

salary information for all the executives.

10 points

Question 29

In the annual report, where would a financial statement reader find out if the company’s financial statements give a fair depiction of its financial position and operating results?

Answer

Notes to the financial statements

Management discussion and analysis section

Balance sheet

Auditor’s report

10 points

Question 30

Which of the following statements is true?

Answer

Publicly traded U.S. companies must provide an annual report to their shareholders when operating conditions change significantly.

An unqualified independent auditor’s report must be included in the annual report.

Notes to the financial statements do not need to be included in the annual report because that information is only for internal users.

None of these answer choices are correct.

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