Quiz on Statement of Cash Flows

Instruction: Select the best answer among the choices given.

1. “Cash flows” in the cash flow statement are
A. Inflows of cash and cash equivalents.
B. Outflows of cash and cash equivalents
C. Inflows and outflows of cash
D. Inflows and outflows of cash and cash equivalents

2. The statement of cash flows provides answers to all of the following questions
except
A. Where did the cash come from during the period?
B. What was the cash used for during the period?
C. What was the change in the cash balance during the period?
D. What is the impact of inflation on the cash balance at the end of the year?

3. Operating activities are

A. The principal revenue-producing activities of the entity and other activities that
are not investing or financing activities.
B. The acquisition and disposal of long-term assets and other investments not
included in cash equivalents.
C. Activities that result in changes in the size and composition of the
contributed equity and borrowings of the entity.
D. Original and planned investigation undertaken with the prospect of gaining new
scientific or technical knowledge and understanding.

4. Entities are encouraged to report cash flows from operating activities using
A. The direct method, whereby major classes of gross cash receipts and gross
cash payments are disclosed.
B. The indirect method, whereby profit or loss is adjusted for the effects of
transactions of a non- cash nature, any deferrals or accruals of past or future
operating cash receipts or payments, and items of income or expense
associated with investing or financing cash flows.
C. Either a or b.
D. Neither a nor b.

5. Interest paid may not be classified as cash outflow for

A. Operating activities
B. Investing activities
C. Financing activities
D. None of the above

6. Interest and dividend received may not be classified as cash inflows from
A. Operating activities
B. Investing activities
C. Financing activities
D. None of the above
7. Dividends paid to stockholders are reported on the cash flow statement as
A. Both financing and investing activity
B. Financing activity
C. Operating activity
D. Investing activity

8. In preparing a statement cash flows using the indirect method, cash flows from
operating activities
A. Are always equal to accrual accounting income
B. Are calculated as the differences between revenues and expenses
C. Can be calculated by appropriately adding to or deducting from net income those
items in the income statement that do affect cash
D. Can be calculated by appropriately adding to or deducting from net income those
items in the income statement that do not affect cash

9. Using the indirect method, cash flows from operating activities would be increased
by which of the following?
A. Gain on sale of investments
B. Increase in prepaid expenses
C. Decrease in accounts payable
D. Decrease in accounts receivable

10. Cash inflows from investing result from

A. Decreases in liabilities.
B. Increases in liabilities.
C. Decreases in noncurrent assets.
D. Increases in noncurrent assets.

11. The first step in the preparation of the statement of cash flows requires the use
of information included in which comparative financial statements?
A. Statements of cash flows
B. Statements of financial position
C. Income statements
D. Statements of retained earnings

12. PAS 7 requires that investing and financing transactions that do not
require the use of cash or cash equivalents should be
A. Excluded from a cash flow statement
B. Included in a cash flow statement before operating, investing and
financing activities
C. Presented in the cash flow statement after operating activities and
before investing and financing activities
D. Presented in a cash flow statement after the operating, investing and
financing activities have been presented
13. Which of the following items would be presented in a cash flow statement?
A. Payment of dividends through a share investment scheme
B. Acquisition of an investment in a subsidiary for consideration consisting of
an exchange of non-current assets and liabilities
C. Refinancing of long-term debt
D. Proceeds from the issue of debentures

14. PAS 7 requires an entity to disclose

A. The components of cash and cash equivalents and shall present a
reconciliation of the amounts in its statement of cash flows with the
equivalent items reported in the statement of financial position.
B. Together with a commentary by management, the amount of significant
cash and cash equivalent balances held by the entity that are not available
for use by the group.
C. Information about changes in its liabilities arising from financing
activities, including both changes arising from cash flows and non-cash
changes (such as foreign exchange gains or losses).
D. All of these.

15. The following item would not appear in a cash flow statement
A. Receipts of cash from customers
B. Conversion of preference shares to ordinary shares
C. Payment of creditors
D. Proceeds on disposal of non-current assets

Problems

The following is a list of the items to be included in the preparation of the current
year statement of cash flows for the Norhan Company:
a) Net income, P59,200
b) Payment for purchase of building, P98,000
c) Increase in accounts receivable, P7,400
d) Proceeds from issuance of ordinary shares, P37,100
e) Increase in accounts payable, P4,500
f) Proceeds from sale of land, P7,000
g) Depreciation expense, P12,600
h) Payment of dividends, P36,000
i) Gain on sale of land, P5,300
j) Decrease in inventory, P3,700
k) Payment for purchase of long-term investments, P9,600
l) Amortization of discount on bonds payable, P1,900
m) Proceeds from issuance of note, P18,000
n) Increase in deferred taxes payable, P5,000
o) Equipment acquired by finance lease, P19,500
p) Decrease in salaries payable, P2,300
q) Beginning cash balance, P20,300
Compute for the following.
16. Cash provided by operating activities
a. P68,100 c. P74,900
b. P89,900 d. P71,900

17. Cash used in investing activities

a. P120,100 c. P100,600
b. P107,600 d. P 9,600

18. Cash provided by financing activities

a. P19,100 c. P20,600
b. P38,600 d. P 1,100

19. Net decrease in cash

a. P19,600 c. P13,400
b. P 6,600 d. P 9,600

20. Cash balance, ending

a. P13,700 c. P 700
b. P10,700 d. P6,900

21. Word Corporation is preparing its statement of cash flows and has provided this
information:
Net income before taxes P400,000
Depreciation on property, plant and equipment 200,000
Loss on sale of building 100,000
Interest expense 150,000
Interest payable, beginning of the year 100,000
Interest payable, end of the year 50,000
Income taxes paid 100,000
Accounts receivable, beginning of the year 500,000
Accounts receivable, end of the year 850,000
Inventory, beginning of the year 500,000
Inventory, end of the year 400,000
Accounts payable, beginning of the year 200,000
Accounts payable, end of the year 500,000

The net cash provided by operating activities is

a. P750,000 c. P600,000
b. P700,000 d. P500,000
22. Warner Limited had the following cash flows during a reporting period:
• Acquisition of subsidiary, net of cash flows P250,000
• Dividends paid P65,000
• Repayment of borrowings P90,000
• Interest paid on borrowings P57,000
• Proceeds from sale of plant P215,000
What is the amount of the cash flows in relation to financing activities of Warner
Limited for the reporting period?
a. Net cash inflow P155,000
b. net cash inflow P212,000
c. Net cash outflow P155,000
d. net cash outflow P212,000

23. Capiz Company had the following activities during the current period:
 Acquired investment in ordinary shares classified as FA@FVTOCI for
P3,000,000.
 Sold investment in trading securities for P4,500,000 when the
carrying amount was P3,800,000.
 Acquired a P5,000,000 one-year certificate of deposit from a bank. During
the year, interest of P400,000 was received from the bank.
 Collected dividends of P800,000 on investments in equity securities.
In the current period statement of cash flows, net cash used in investing activities
should be
a. P8,000,000 c. P3,500,000
b. P6,800,000 d. P3,000,000

24. The transactions of Tsape Company for the current year included the following:
Cash borrowed from bank for purchase of land
P6,000,000
Purchase of land for cash 6,000,000
Sale of securities for cash 1,000,000
Dividend declared (of which P2,000,000 was paid during the year) 3,000,000
Issuance of ordinary shares for cash 7,000,000
Payment of bank loan including interest of P500,000
3,500,000
Increase in customers’ deposits 500,000
The current year statement of cash flows should report net cash provided by
financing activities at
a. P8,000,000 c. P8,500,000
b. P7,500,000 d. P7,000,000

25. Sales, P102,000; Cost of goods sold, P40,000; Wages, P31,800; Purchase of
land, P8,000; Increase in accounts receivable, P3,600; Depreciation expense,
P4,000; Gain on sale of equipment, P1,400; Issuance of bonds, P16,000 at face
value; Increase in accounts payable, P5,200; Patent amortization expense,
P2,600; Decrease in inventory, P2,000; Loss on sale of land P1,000; Decrease
in wages payable, P600; Declaration and payment of dividend, P6,800. Net cash
flows from operating activities is
a. P22,800 c. P38,000
b. P36,800 d. P33,200