Part Two-Analyzing Concepts and Procedures for
Statement of Cash Flows
Directions: For each of the following items, select the choice that best completes the
statement. Print the letter
identifying your choice in the Answers column.
1. Which of the following is NOT a source of cash? (A) depreciation, (B) sales of merchandise
for cash, (C
) sale of a plant asset, (D) interest income.
2. Accounts Receivable last year had a $40,000.00 balance. At the end of the current year,
the balance in Accounts
Receivable is $45,000.00. This represents a (A) $5,000.00 source
of cash, (B) $5,000.00 use of cash
, (C) $45,000.00 source of cash, (D) $45,000.00 use of cash.
3. Issuing capital stock is a(n) (A) financing activity and cash
inflow, (B) financing activity and
cash outflow, (C) investing activity
and cash inflow, (D) investing activity and cash outflow.
4. The retirement of bond principal is a(n) (A) financing activity and cash inflow, (B) financing
activity and cash outflow, (C) investing
activity and cash inflow, (D) investing activity
and cash outflow.
5. The sale of a building is an (A) operating activity and cash inflow, (B) operating activity and
cash outflow, (C) investing activity and cash
inflow, (D) investing activity and cash outflow.
6. Using the indirect method of preparing the statement of cash flows, the first item listed
under Cash Flows from Operating Activities is (A)
Cash, (B) Accounts Receivable, (C) Net
Income, (D) Cash Flows from Investing Activities.
7. An increase in the balance of capital stock for the year represents a(n) (A) investing activity
and use of cash, (B) investing activity and source of cash, (C) financing
activity and use
of cash, (D) financing activity and source of cash.
8. An increase in the balance of merchandise inventory for the year represents an
(A) investing activity and use of cash, (B) investing activity
and source of cash
,
(C) operating activity and use of cash, (D) operating activity and
source of cash.
9. Purchases of equipment are an (A) operating activity and cash inflow, (B) operating
activity and cash outflow, (C) investing activity and cash inflow, (D) investing activity
and cash outflow.
10. Activities that involve borrowing money from creditors and repaying the principal or
acquiring capital from owners and providing a return on investment are (A
) financing
activities, (B) investing activities, (C) operating activities, (D) none of these.
Answers
1.
2.
3.
4.
5.
6.
7.
10.