multiple choice conceptual 1 the primary purpose of the statement of cash flows is t 4314519

multiple choice conceptual 1 the primary purpose of the statement of cash flows is t 4314519

MULTIPLE CHOICE—Conceptual

1. The primary purpose of the statement of cash flows is to provide information

a) about an entity’s operating, investing, and financing activities during a period.

b) that is useful in assessing cash flow prospects.

c) about an entity’s cash receipts and cash payments during a period.

d) about an entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.

2. The information in a statement of cash flows enables stakeholders to assess the

a) amounts, timing and certainty of future cash flows.

b) liquidity and solvency of an entity.

c) change in working capital during the period.

d) reason(s) for the difference between net income and cash flows from financing activities.

3. The statement of cash flows is required to be included

a) only for financial statements prepared under IFRS.

b) only for financial statements prepared under ASPE.

c) for both financial statements prepared under IFRS and under ASPE.

d) for financial statements prepared under IFRS, but is optional under ASPE.

4. Cash equivalents include

a) treasury bills, equity investments and long-term bonds.

b) non-equity investments with short maturities and bank overdrafts repayable on demand.

c) treasury bills, commercial paper and all equity investments.

d) treasury bills, commercial paper, and money market funds purchased with excess cash.

5. Which of the following is NOT a significant non-cash transaction?

a) capital (finance) lease obligations

b) conversion of preferred shares to common shares

c) exchange of non-monetary assets

d) purchasing a building with a 10% cash down payment and mortgaging the balance

6. A successful company’s major source of cash should be

a) operating activities.

b) investing activities.

c) financing activities.

d) both operating activities and investing activities.

7. A statement of cash flows generally would NOT include the effects of

a) common shares issued at an amount greater than par value.

b) the purchase of treasury shares.

c) cash dividends paid.

d) stock dividends declared and issued.

8. In a statement of cash flows, which of the following would be reported in the cash flows from investing activities section?

a) issuance of common shares in exchange for a factory building

b) stock dividends received

c) development costs incurred (intangible asset)

d) declaration of cash dividends

9. On a statement of cash flows, additional cash invested by a sole proprietor would be disclosed in

a) operating activities.

b) investing activities.

c) financing activities.

d) both operating and financing activities.

Use the following information for questions 10–11.

Duncan Corp. purchased a building, paying part of the purchase price in cash and issuing a mortgage note payable to the seller for the balance.

10. In a statement of cash flows, what amount is included in investing activities for the above transaction?

a) the cash payment

b) the full purchase price

c) zero (but disclosed in the notes)

d) the amount mortgaged

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