Accounting Skills Test (Cash Flow) Answer

Accounting Skills Test (Cash Flow) Answer

Which of the following would NOT be shown in the investing section of a cash flow statement?
a. Acquisition of equipment
b. Acquisition of a building
c. Proceeds from sale of equipment
d. All of the above are shown in the investing section of a cash flow statement
Treasury stock purchased for cash would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
During 2007, XYZ Company experienced the following changes:
Current liabilities: $75,000 increase
Non-current liabilities: $45,000 decrease
Owners' equity: $51,000 decrease
Non-current assets: $42,000 increase
Current assets (other than Cash): $18,000 increase
Given the above data, the change in cash for 2007 was ___________.
a. ($57,000)
b. $30,000
c. $39,000
d. ($81,000)
Which of the following would be shown in the financing section of a cash flow statement?
a. Long-term bonds payable issued
b. Long-term notes payable issued
c. Short-term notes payable issued
d. All of the above
A payment made from accounts payable will cause cash to __________ .
a. increase
b. decrease
c. show no change
d. The effect on cash cannot be determined based on given information.
Long-term investments sold for cash with a recognized gain would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
In most countries, the preparation of a ___________ is a common practice.
a. cash flow statement
b. financing activities statement
c. investing activities statement
d. statement of sources and uses of funds
Preferred stock issued for cash would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
When determining cash flow from operations, which of the following would NOT be added back to net income?
a. Loss on sale of equipment
b. Equity in affiliate's losses
c. Amortization of bond premium
d. All of the above
When determining cash flow from operations, which of the following would NOT be deducted from net income?
a. Increase in accounts receivable
b. Loss on sale of equipment
c. Amortization of bond premium
d. Decrease in accounts payable
At the beginning and end of 2007, XYZ Company reported the following balances for Bonds Payable:
Jan 1: $100,000
Dec 31: $140,000
In addition, $60,000 In bonds was retired In 2007.

Given the above data, the amount of Bonds Payable issued during the year was ___________.
a. $100,000
b. $20,000
c. $160,000
d. $180,000
When determining cash flow from operations, which of the following would be deducted from net income?
a. Decrease in warranties payable
b. Increase in inventories
c. Increase in accounts payable
d. All of the above
In determining cash flow from operations, which of the following would be added to net income?
a. Increased accounts receivable
b. Increased merchandise inventory
c. Increased accounts payable
d. Decreased notes payable to suppliers
Issuing ten-year bonds will cause cash to __________ .
a. increase
b. decrease
c. show no change
d. The effect on cash cannot be determined based on given information.
Depreciation recorded on equipment would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
XYZ reported balances in the Accumulated Depreciation account of $130,000 on 01/01/07 and $120,000 on 12/31/07. During 2007, an asset costing $100,000 (with an accumulated depreciation of $80,000) was sold for $20,000.

Given this data, the depreciation expense for 2007 was ___________.
a. $10,000
b. $90,000
c. $110,000
d. $70,000
Which of the following statements about depreciation expense is true?
a. Depreciation expense increases the expense for a period but does not use cash.
b. When determining funds from operations, depreciation expense that had originally been subtracted in computing net income is added back to net income, but it is not a use of cash.
c. Depreciation expense is not a source of funds.
d. All of the above statements are true.
In determining cash flow from operations, which of the following would be an add-back to net income?
a. Gain on sale of building
b. Loss on sale of building
c. Decrease in inventories
d. All of the above
Salaries paid during the year would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
Which of the following typically happens during the maturation phase of a product's life cycle?
a. Cash outflow exceeds cash inflow from operations.
b. Cash outflow exceeds cash inflow from investing activities.
c. Cash inflow exceeds cash outflow from financing activities.
d. All of the above
Preferred stock converted into common stock would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
Which of the following typically happens during the growth phase of a product's life cycle?
a. Cash outflow exceeds cash inflow from operations.
b. Cash outflow exceeds cash inflow from investing activities.
c. Cash inflow exceeds cash outflow from financing activities.
d. All of the above
Accruing an income tax liability will cause cash to ___________ .
a. increase
b. decrease
c. show no change
d. The effect on cash cannot be determined based on given information.

The most popular method of presenting cash from operations in a cash flow statement is the ___________.
a. direct method
b. operations method
c. indirect method
d. funds method
A cash flow statement is typically prepared ____________.
a. before the balance sheet is prepared
b. after the balance sheet is prepared but before the income statement is prepared
c. after the income statement is prepared but before the balance sheet is prepared
d. after both the balance sheet and the income statement are prepared
Which of the following transactions would be shown on a cash flow statement, but does not affect cash?
a. Sale of bonds for cash
b. Exchange of land for stock
c. Collection of customer accounts
d. Payment of dividends to owners
Recording a depreciation expense will cause cash to ____________ .
a. increase
b. decrease
c. show no change
d. The effect on cash cannot be determined based on given information.

Paying cash to retire preferred stock will cause cash to ___________ .
a. increase
b. decrease
c. show no change
d. The effect on cash cannot be determined based on given information.
An increase in the accounts payable balance would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement
Declaring dividends will cause cash to _____________ .
a. increase
b. decrease
c. show no change
d. The effect on cash cannot be determined based on given information.
New equipment purchased by issuing a long-term note payable would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
Which of the following typically happens during the introduction phase of a product's life cycle?
a. Cash outflow exceeds cash inflow from operations.
b. Cash outflow exceeds cash inflow from investing activities.
c. Cash inflow exceeds cash inflow from financing activities.
d. All of the above
Which of the following typically happens during the introduction phase of a product's life cycle?
a. Cash outflow exceeds cash inflow from operations.
b. Cash outflow exceeds cash inflow from investing activities.
c. Cash inflow exceeds cash inflow from financing activities.
d. All of the above
Which of the following statements does NOT illustrate a proper interpretation of information in a cash flow statement?
a. Capital-intensive firms would likely show a substantially smaller add-back to net income for depreciation than service firms would show.
b. The product life cycle concept provides useful insights into the relation between cash flows from operating, investing, and financing activities.
c. The adjustments for changes in operating working capital accounts depend in part on a firm's rate of growth.
d. All of the above
When preparing cash flow statements, the practice of presenting cash from operations by listing all cash-generating revenues followed by all cash expenses is called the ___________.
a. direct method
b. operations method
c. indirect method
d. funds method
Equity in the undistributed earnings of a recognized affiliate would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
Unearned revenue that had been reduced during the year would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
An amortization of a bond discount would be shown ____________.
a. as an add-back to net income when determining cash flow from operations
b. as a deduction from net income when determining cash flow from operations
c. in the financing section
d. None of the above
Which of the following would be included in the investing section of a cash flow statement?
a. Proceeds from sale of equipment
b. Proceeds from sale of long-term investments
c. Proceeds from sale of marketable securities
d. All of the above would be included in the investing section.
The sale of equipment for cash with a recognized loss would appear in which of the following sections of the cash flow statement?
a. Operating section
b. Investing section
c. Financing section
d. It would not appear on the statement.
When determining cash flow from operations, which of the following would NOT be added back to net income?
a. Decrease in deferred income tax liability
b. Decrease in prepaid insurance
c. Decrease in accounts receivable
d. Increase in accounts payable

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