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Statement of Cash Flows Practice Questions

Learn to analyze cash flow adjustments and reporting sections for various transactions in financial statements with this comprehensive practice guide. Identify non-cash transactions and their relevant footnotes.

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Statement of Cash Flows Practice Questions

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  1. Statement of Cash FlowsPractice Questions Chapter 12

  2. For each of the following transactions, indicate the direction of the cash flow adjustment [inflow or outflow, add or subtract] and the section in which each transaction should be reported on a Statement of Cash Flows [operating, investing, or financing]. Identify non-cash transactions as supplementary information to be found in the Footnotes of the Financial Statements. • The company purchases its own Common Stock in the open market answer:Cash Outflow; Financing • The company issues Preferred Stock in exchange for Land answer:Supplementary Information in Footnotes • The company borrowed cash from the bank by issuing a 90-day Note answer:Cash Inflow; Financing • Twenty-Year Bonds are issued answer:Cash Inflow; Financing

  3. Accounts Receivable decreased during the year. answer: Add back to Operating Section • Income Tax Payable decreased during the year. answer: Subtract from Operating Section • Accounts Payable increased during the year. answer: Add back to Operating Section • Cash Dividends are declared and paid to Common Stockholders. answer: Cash Outflow; Financing • Common Stock is issued to a creditor to pay off a long term loan. answer: Supplementary information in Footnotes

  4. A new piece of Machinery is acquired with cash. answer: Cash Outflow; Investing • Stock of another company is acquired as an Investment. answer: Cash Outflow; Investing • Interest Payable decreased during the year. answer:Subtract from Operating Section • Wages Payable decreased during the year. answer: Subtract from Operating Section • Gain on Sale of Equipment was recognized in Income. answer: Subtract from Operating Section

  5. Purchased a new Copier by issuing a 90-day Note answer: Supplementary information in Footnotes • Unearned Revenue increased during the year. answer: Add back to Operating Section • Prepaid Insurance increased during the year. answer: Subtract from Operating Section • Sold shares of a long-term investment in Nike Company. answer: Cash Inflow; Investing • Depreciation for Operating Equipment was reported on the Income Statement answer: Add back to Operating Section

  6. Loss on Sale of Land was reported on the Income Statement. answer: Add back to Operating Section

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