Multiple Choice Questions
1. The statement of cash flows reports:
A) Assets, liabilities, and equity.
B) Revenues, gains, expenses, and losses.
C) Cash inflows and cash outflows for an accounting period.
D) Equity, net income, and dividends.
E) Changes in equity.
2. The statement of cash flows reports:
A) Cash flows from operating activities.
B) Cash flows from financing activities.
C) Cash flows from investing activities.
D) Significant noncash financing and investing activities.
E) All of the above.
3. The statement of cash flows is:
A) Another name for the statement of financial position.
B) A financial statement that presents information about changes in equity during a period.
C) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.
D) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.
E) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.
4. A cash equivalent is an investment that:
A) Is readily convertible to a known amount of cash.
B) Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes.
C) Generally is within 3 months of its maturity date.
D) Is highly liquid.
E) All of the above.
5. The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:
A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Schedule of noncash investing or financing activity.
E) None of these. This is not reported on the statement of cash flows.
6. Typical cash flows from investing activities include:
A) Payments to purchase property, plant and equipment or other productive assets (excluding inventory).
B) Proceeds from the sale (discounting) of notes receivable made by the company.
C) Proceeds from collecting the principal amount of notes receivable.
D) Payments to acquire held-to maturity securities of other entities, except cash equivalents.
E) All of the above.
7. The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:
A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Schedule of noncash investing or financing activity.
E) None of these. This is not reported on the statement of cash flows.
8. An example of a transaction that must be disclosed as a noncash investing and financing activity includes:
A) The retirement of debt by issuance of equity.
B) The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance.
C) The leasing of assets in a transaction that qualifies as a capital lease.
D) The purchase of noncash assets in exchange for equity or debt securities.
E) All of the above.
9. The statement of cash flows helps analysts evaluate the:
A) Source of cash for debt repayments.
B) Source of cash for plant expansion.
C) Differences between net income and net operating cash flow.
D) Means used to finance investing activities.
E) All of the above.
10. The statement of cash flows helps address questions such as
A) How is the increase in investments financed?
B) What is the source of cash for new plant assets?
C) How much cash is generated from or used in operations?
D) Why is cash flow from operations different from income?
E) All of the above.