Question 1 All of the following statements about free cash flow are false except: Significant free cash flow indicates less potential to finance new investments. Significant free cash flow indicates less potential to pay additional dividends. Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends. Free cash flow is not reported on the statement of cash flows. Question 2 In Numar Company, Treasury Stock increased $25,000 from a cash purchase, and Retained Earnings increased $75,000 as a result of net income of $120,000 and cash dividends paid of $45,000. Net cash used by financing activities is: $120,000. $25,000. $45,000. $70,000. Question 3 The statement of cash flows will not report the sources of cash in the current period. uses of cash in the current period. amount of checks outstanding at the end of the period. change in the cash balance for the current period. Question 4 The net income reported on the income statement for the current year was $225,000. Depreciation recorded on plant assets was $38,000. Accounts receivable and inventories increased by $2,000 and $8,000, respectively. Prepaid expenses and accounts payable decreased by $1,000 and $11,000 respectively. How much cash was provided by operating activities? $243,000 $225,000 $259,000 $205,000 Question 5 Using the indirect method, if equipment is sold at a gain, the sale proceeds received are deducted in the operating activities section. amount of the gain is added in the operating activities section. amount of the gain is deducted in the operating activities section. sale proceeds received are added in the operating activities section Question 6 A company had net income of $210,000. Depreciation expense is $26,000. During the year, Accounts Receivable and Inventory increased $15,000 and $40,000, respectively. Prepaid Expenses and Accounts Payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities? $256,000 $268,000 $176,000 $182,000 Question 7 In Stretch Company, there was an increase in the land account during the year of $48,000. Analysis reveals that the change resulted form a cash sale of land at cost $110,000, and a cash purchase of land for $158,000. In the statement of cash flows, the change in the land account should be reported in the investment section: as a purchase of land $158,000 and a sale of land $110,000. only as a purchase of land $158,000. only as a sale of land $110,000. as a net purchase of land, $48,000 Question 8 If a company reports a net loss, it will not be able to get a loan. will not be able to make capital expenditures. may still have a net increase in cash. will not be able to pay cash dividends. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is cash flows from operating activities. cash flows from investing activities. usually different from year to year. cash flows from financing activities. Question 10 Which of the following would not be an adjustment to net income using the indirect method? Depreciation Expense An increase in Land Amortization Expense An increase in Prepaid Insurance Question 11 The acquisition of land by issuing common stock is a noncash transaction and would be reported in the body of a statement of cash flows. a noncash transaction which is not reported in the body of a statement of cash flows. a cash transaction and would be reported in the body of a statement of cash flows. only reported if the statement of cash flows is prepared using the direct method Question 12 Each of the following is added to net income in computing net cash provided by operating activities except amortization expense. a decrease in inventory. an increase in accrued expenses payable. a gain on sale of equipment. Question 13 In addition to the three basic financial statements, which of the following is also a required financial statement? the "Cash Budget" the Statement of Cash Flows the Statement of Cash Inflows and Outflows the "Cash Reconciliation" Question 14 Joan?s Vegetable Market had the following transactions during 2013: 1. Issued $60,000 of par value common stock for cash. 2. Repaid a 6 year note payable in the amount of $21,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $5,000. 5. Sold a long-term investment (cost $63,000) for cash of $6,000. 6. Acquired an investment in IBM stock for cash of $10,000. What is the net cash provided by financing activities? $0 $80,000

Question 1 All of the following statements about free cash flow are false except: Significant free cash flow indicates less potential to finance new investments. Significant free cash flow indicates less potential to pay additional dividends. Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends. Free cash flow is not reported on the statement of cash flows. Question 2 In Numar Company, Treasury Stock increased $25,000 from a cash purchase, and Retained Earnings increased $75,000 as a result of net income of $120,000 and cash dividends paid of $45,000. Net cash used by financing activities is: $120,000. $25,000. $45,000. $70,000. Question 3 The statement of cash flows will not report the sources of cash in the current period. uses of cash in the current period. amount of checks outstanding at the end of the period. change in the cash balance for the current period. Question 4 The net income reported on the income statement for the current year was $225,000. Depreciation recorded on plant assets was $38,000. Accounts receivable and inventories increased by $2,000 and $8,000, respectively. Prepaid expenses and accounts payable decreased by $1,000 and $11,000 respectively. How much cash was provided by operating activities? $243,000 $225,000 $259,000 $205,000 Question 5 Using the indirect method, if equipment is sold at a gain, the sale proceeds received are deducted in the operating activities section. amount of the gain is added in the operating activities section. amount of the gain is deducted in the operating activities section. sale proceeds received are added in the operating activities section Question 6 A company had net income of $210,000. Depreciation expense is $26,000. During the year, Accounts Receivable and Inventory increased $15,000 and $40,000, respectively. Prepaid Expenses and Accounts Payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much cash was provided by operating activities? $256,000 $268,000 $176,000 $182,000 Question 7 In Stretch Company, there was an increase in the land account during the year of $48,000. Analysis reveals that the change resulted form a cash sale of land at cost $110,000, and a cash purchase of land for $158,000. In the statement of cash flows, the change in the land account should be reported in the investment section: as a purchase of land $158,000 and a sale of land $110,000. only as a purchase of land $158,000. only as a sale of land $110,000. as a net purchase of land, $48,000 Question 8 If a company reports a net loss, it will not be able to get a loan. will not be able to make capital expenditures. may still have a net increase in cash. will not be able to pay cash dividends. The category that is generally considered to be the best measure of a company's ability to continue as a going concern is cash flows from operating activities. cash flows from investing activities. usually different from year to year. cash flows from financing activities. Question 10 Which of the following would not be an adjustment to net income using the indirect method? Depreciation Expense An increase in Land Amortization Expense An increase in Prepaid Insurance Question 11 The acquisition of land by issuing common stock is a noncash transaction and would be reported in the body of a statement of cash flows. a noncash transaction which is not reported in the body of a statement of cash flows. a cash transaction and would be reported in the body of a statement of cash flows. only reported if the statement of cash flows is prepared using the direct method Question 12 Each of the following is added to net income in computing net cash provided by operating activities except amortization expense. a decrease in inventory. an increase in accrued expenses payable. a gain on sale of equipment. Question 13 In addition to the three basic financial statements, which of the following is also a required financial statement? the "Cash Budget" the Statement of Cash Flows the Statement of Cash Inflows and Outflows the "Cash Reconciliation" Question 14 Joan's Vegetable Market had the following transactions during 2013: 1. Issued $60,000 of par value common stock for cash. 2. Repaid a 6 year note payable in the amount of $21,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $5,000. 5. Sold a longterm investment (cost $63,000) for cash of $6,000. 6. Acquired an investment in IBM stock for cash of $10,000. What is the net cash provided by financing activities? $0 $80,000 $39,000 $34,000 Question 15 Indicate where the event purchased land for cash would appear, if at all, on the indirect statement of cash flows. Investing activities section Does not represent a cash flow Operating activities section Financing activities