Question

1. Which of the following statements is not accurate?
   1. Net income from the income statement will increase total stockholder’s equity on the statement of retained earnings
   2. Net loss from the income statement will decrease total stockholder’s equity on the statement of retained earnings
   3. Dividends reduce retained earnings-?
   4. Additional investment in the company increases retained earnings
2. All of the following accurately describe the balance sheet except…
   1. Reflects profitability of operations
   2. Is an expanded report of the accounting equation listing assets, liabilities, and equity accounts
   3. Provides a snapshot of financial standing on a specific date in time
   4. Used in determining liquidity and solvency
3. Which of the following items would not be included in the statement of cash flows?
   1. Cash paid to suppliers
   2. Sales on account-?
   3. Cash generated from issuing shares of stock
   4. Cash proceeds from loans
4. All of the following would be considered operating cash flows except:
   1. Cash receipts and disbursements resulting from core business activities
   2. Cash generated through sales
   3. Cash disbursed to vendors/suppliers
   4. Cash dividends to stockholders-?

ACCT 2020 Chapter 7 Statement of cash flows, self-check questions, making flashcards for finial exam could use some input. Thanks.

Answer 1

1)Correct answer:

d)Additional investment in the company increases retained earnings is incorrect answer because additional investment will the increase the assets and not the retained earnings.

Incorrect Answers:

a)Net income from the income statement will increase total stockholder’s equity on the statement of retained earnings is correct because the net income is gain to the company will positively affect the retained earnings and therefore, total stockholder’s equity increases.

b)Net loss from the income statement will decrease total stockholder’s equity on the statement of retained earnings is correct because the net loss is the expenses to the company will negatively affect on the retained earnings and therefore, total stockholder’s equity decreases

c)Dividends reduce retained earnings is correct because the company pays thee dividend to their stockholders from the retain earning of the company.

So answer is option (d)

2)Correct answer:

a)Reflects profitability of operations is not describe the balance sheet but it describes the income statement.

Incorrect Answers:

b) Is an expanded report of the accounting equation listing assets, liabilities, and equity accounts is correct describe the balance sheet because assets,liabilities, and equity accounts are the main elements of balance sheet.

c)Provides a snapshot of financial standing on a specific date in time is correct describe the balance sheet because it shows position for specific date generally December 31.

d)Used in determining liquidity and solvency is also the balance sheet because it shows the efficiency of the company to pay off their liabilities.

So answer is option (a)

3)Correct answer:

b)Sales on account is amount to be receivable from the customers and therefore there is no cash inflow or outflow . It is not included in the statement of cash flows

Incorrect Answers:  

a)Cash paid to suppliers is an out flow of cash, so it is included in the cash flow.

c) Cash generated from issuing shares of stock is the inflow of cash, so it is included in the cash flow.

d)Cash proceeds from loans is the inflow of cash, so it is included in the cash flow.

So answer is option (b)

4)Correct answer:

d)Cash dividends to stockholders is a cash flows from financing activities, therefore, it is not considered to be operating cash flows.

Incorrect Answers:  

a)Cash receipts and disbursements resulting from core business activities is routine business activity of the organisation so it is part of operating cash flows.

b)Cash generated through sales is routine business activity of the organisation so it is part of operating cash flows.

c)Cash disbursed to vendors/suppliers is day to day to activity, so it is included in the operating cash flows

So answer is option (d)