Accounting Cash Flow MCQs

Accounting Cash Flow MCQs

These Accounting Cash Flow multiple-choice questions and their answers will help you strengthen your grip on the subject of Accounting Cash Flow. You can prepare for an upcoming exam or job interview with these 70+ Accounting Cash Flow MCQs.
So scroll down and start answering.

1: Equity in the undistributed earnings of a recognized affiliate would appear in which of the following sections of the cash flow statement?


A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

2: Which of the following would be shown in the investing section of a cash flow statement?


A.   Acquisition of equipment through a capital lease

B.   Acquisition of treasury stock

C.   Retirement of long-term debt

D.   None of the above

3:

In 2007, XYZ Company had a net loss of $160,000 and reported the following:

Dividends paid: $40,000

Depreciation expense: $30,000

Increase in accounts payable: $15,000

Issuance of stock: $100,000

Retirement of debt: $50,000

Given this data, the amount of cash flow from operations was ______________.

A.   ($115,000)

B.   $205,000

C.   ($75,000)

D.   $65,000

4:

Dividends paid for the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

5:

Equity income from an affiliate would be shown _____________________.

A.   as an add-back to net income in the operations section

B.   as a deduction from net income in the operations section

C.   in the investing section

D.   None of the above

6:

Issuing ten-year bonds will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

7:

A cash flow statement is typically prepared _____________________.

A.   before the balance sheet is prepared

B.   after the balance sheet is prepared but before the income statement is prepared

C.   after the income statement is prepared but before the balance sheet is prepared

D.   after both the balance sheet and the income statement are prepared

8:

Which of the following would be shown in the investing section of a cash flow statement?

A.   Retirement of long-term debt

B.   Retirement of preferred stock

C.   Acquisition of treasury stock

D.   None of the above

9:

The sale of equipment for cash with a recognized loss would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

10:

An increase in the accounts payable balance would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement

11:

Pre-paying a one-year insurance policy will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

12:

Warranties payable that increased during the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

13:

The acquisition of a building and/or land by entering into a lease that meets the capital lease criteria would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

14:

Depreciation recorded on equipment would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

15:

Cash borrowed from a bank by issuing a short-term note payable would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

16:

Collecting receivables will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

17:

In 2007, XYZ Company had a net income of $150,000 and reported the following:

Depreciation expense: $21,000

Issuance of debt: $120,000

Loss on sale of equipment: $23,000

Purchase of building: $110,000

Increase in inventory: $12,000

Given this data, the amount of cash flow from operations was ______________.

A.   $182,000

B.   $171,000

C.   $159,000

D.   $138,000

18:

Preferred stock issued for cash would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

A.   direct method

B.   operations method

C.   indirect method

D.   funds method

20:

The amortization of a recorded patent would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

21:

Preferred stock converted into common stock would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

22:

An amortization of a bond discount would be shown __________________.

A.   as an add-back to net income when determining cash flow from operations

B.   as a deduction from net income when determining cash flow from operations

C.   in the financing section

D.   None of the above

23:

When determining cash flow from operations, which of the following would NOT be deducted from net income?

A.   Increase in accounts receivable

B.   Loss on sale of equipment

C.   Amortization of bond premium

D.   Decrease in accounts payable

24:

Which of the following statements about depreciation expense is true?

A.   Depreciation expense increases the expense for a period but does not use cash.

B.   When determining funds from operations, depreciation expense that had originally been subtracted in computing net income is added back to net income, but it is not a use of cash.

C.   Depreciation expense is not a source of funds.

D.   All of the above statements are true.

25:

An investment in the stock of another company would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

26:

Which of the following typically happens during the maturation phase of a product's life cycle?

A.   Cash outflow exceeds cash inflow from operations.

B.   Cash outflow exceeds cash inflow from investing activities.

C.   Cash inflow exceeds cash outflow from financing activities.

D.   All of the above

27:

Paying previously declared dividends will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

28:

Treasury stock purchased for cash would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

29:

The use of a bond sinking fund to retire a long-term debt at maturity would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

30:

When determining cash flow from operations, which of the following would be added back to net income?

A.   Depreciation expense

B.   Amortization of patent

C.   Loss on sale of marketable securities

D.   All of the above

31:

 XYZ reported balances in the Accumulated Depreciation account of $130,000 on 01/01/07 and $120,000 on 12/31/07. During 2007, an asset costing $100,000 (with an accumulated depreciation of $80,000) was sold for $20,000.

Given this data, the depreciation expense for 2007 was _____________.

A.   $10,000

B.   $90,000

C.   $110,000

D.   $70,000

32:

A payment made from accounts payable will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

33:

Cash paid for land would be shown as ________________.

A.   cash flow from operations

B.   cash flow from investing

C.   cash flow from financing

D.   a non-cash transaction

34:

Declaring dividends will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

35:

Amortized discount on bonds payable would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

36:

In 2007, XYZ Company had a net income of $100,000 and reported the following account changes on its balance sheet:

Accounts Receivable: $6,000 increase

Accounts Payable: $2,000 increase

Building: $8,000 decrease

Accumulated Depreciation: $3,000 increase

Bonds Payable: $16,000 increase

Given this data, the amount of cash flow from operations was ______________.

A.   $100,000

B.   $99,000

C.   $119,000

D.   $103,000

37:

At the beginning and end of 2007, XYZ Company reported the following balances for Bonds Payable:

Jan 1: $100,000

Dec 31: $140,000

In addition, $60,000 In bonds was retired In 2007.

Given the above data, the amount of Bonds Payable issued during the year was ______________.

A.   $100,000

B.   $20,000

C.   $160,000

D.   $180,000

38:

Deferred income tax payable that increased during the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

39:

Recording a depreciation expense will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

40:

A cash payment for land acquisition would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

41:

Which of the following typically happens during the growth phase of a product's life cycle?

A.   Cash outflow exceeds cash inflow from operations.

B.   Cash outflow exceeds cash inflow from investing activities.

C.   Cash inflow exceeds cash outflow from financing activities.

D.   All of the above

42:

When determining cash flow from operations, which of the following would be a deduction from net income?

A.   Depreciation expense

B.   Increased accounts receivable

C.   Decreased accounts receivable

D.   Increased accounts payable

43:

Which of the following would be shown in the financing section of a cash flow statement?

A.   Long-term bonds payable issued

B.   Long-term notes payable issued

C.   Short-term notes payable issued

D.   All of the above

44:

Salaries paid during the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

45:

Long-term investments sold for cash with a recognized gain would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

46:

Which of the following would be included in the investing section of a cash flow statement?

A.   Proceeds from sale of equipment

B.   Proceeds from sale of long-term investments

C.   Proceeds from sale of marketable securities

D.   All of the above would be included in the investing section.

47:

In most countries, the preparation of a __________________ is a common practice.

A.   cash flow statement

B.   financing activities statement

C.   investing activities statement

D.   statement of sources and uses of funds

48:

On their income statement, XYZ Company reported $600,000 in sales, $320,000 in depreciation expense, $60,000 in income taxes, and $100,000 in other expenses. In addition, $80,000 of common stock was issued for cash during the year. Assuming that the company's non-cash working capital balances did not change during the year, the total amount of cash from operations was ____________.

A.   $20,000

B.   $100,000

C.   $420,000

D.   $440,000

49:

Accounts receivable that increased during the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

50:

Unearned revenue that had been reduced during the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

51:

In determining cash flow from operations, which of the following would be an add-back to net income?

A.   Gain on sale of building

B.   Loss on sale of building

C.   Decrease in inventories

D.   All of the above

52:

Accruing an income tax liability will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

53:

Prepaid rent that increased during the year would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

54:

Cash received from sale of investment would be shown on a cash flow statement as ___________.

A.   cash flow from operations

B.   cash flow from investing

C.   cash flow from financing

D.   a non-cash transaction

55:

During 2007, XYZ Company experienced the following changes:

Current liabilities: $75,000 increase

Non-current liabilities: $45,000 decrease

Owners' equity: $51,000 decrease

Non-current assets: $42,000 increase

Current assets (other than Cash): $18,000 increase

Given the above data, the change in cash for 2007 was ____________.

A.   ($57,000)

B.   $30,000

C.   $39,000

D.   ($81,000)

56:

The acquisition of a patent would be shown __________________.

A.   as an add-back to net income in the operations section

B.   as a deduction from net income in the operations section

C.   in the investing section

D.   None of the above

57:

Land acquired by issuing preferred stock would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

58:

When determining cash flow from operations, which of the following would NOT be added back to net income?

A.   Loss on sale of equipment

B.   Equity in affiliate's losses

C.   Amortization of bond premium

D.   All of the above

59:

Which of the following is NOT a characteristic of growing firms?

A.   Significant increase in inventories

B.   Reporting in the cash flow statement a deduction adjustment to net income for change in deferred taxes

C.   Significant increase in accounts receivable

D.   All of the above

60:

Which of the following typically happens during the introduction phase of a product's life cycle?

A.   Cash outflow exceeds cash inflow from operations.

B.   Cash outflow exceeds cash inflow from investing activities.

C.   Cash inflow exceeds cash outflow from financing activities.

D.   All of the above

61:

On a cash flow statement, depreciation expense ________________.

A.   provides cash from operations

B.   should be added to net income when determining cash provided by operations

C.   should be deducted from net income when determining cash provided by operations

D.   is an example of cash expense

62:

The major components of a cash flow statement are ________________________.

A.   cash flow from operations, cash flow from investing, and cash flow from financing

B.   cash flow from operations, other sources of cash, and other uses of cash

C.   sources of cash from investments, application of cash for financing activities, and other cash transactions

D.   cash received from customers, cash paid to customers, and other sources of cash

63:

Which of the following statements does NOT illustrate a proper interpretation of information in a cash flow statement?

A.   Capital-intensive firms would likely show a substantially smaller add-back to net income for depreciation than service firms would show.

B.   The product life cycle concept provides useful insights into the relation between cash flows from operating, investing, and financing activities.

C.   The adjustments for changes in operating working capital accounts depend in part on a firm's rate of growth.

D.   All of the above

64:

Paying cash to retire preferred stock will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

65:

When preparing cash flow statements, the practice of presenting cash from operations by listing all cash-generating revenues followed by all cash expenses is called the ______________.

A.   direct method

B.   operations method

C.   indirect method

D.   funds method

66:

In determining cash flow from operations, which of the following would be added to net income?

A.   Increased accounts receivable

B.   Increased merchandise inventory

C.   Increased accounts payable

D.   Decreased notes payable to suppliers

67:

In 2007, XYZ Company had a net loss of $160,000 and reported the following:

Dividends paid: $40,000

Depreciation expense: $30,000

Increase in accounts payable: $15,000

Issuance of stock: $100,000

Retirement of debt: $50,000

Given this data, the net change in cash for 2007 was ______________.

A.   ($105,000)

B.   $10,000

C.   $215,000

D.   ($165,000)

68:

Which of the following would NOT be shown in the investing section of a cash flow statement?

A.   Acquisition of equipment

B.   Acquisition of a building

C.   Proceeds from sale of equipment

D.   All of the above are shown in the investing section of a cash flow statement

69:

Treasury stock sold for an amount greater than its repurchase price would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

70:

Acquisition of treasury stock would be shown _____________________.

A.   as an adjustment to net income for the difference in price paid versus the original issue price

B.   in the financing section

C.   in the investing section

D.   None of the above

71:

Which of the following statements expresses the objective of a cash flow statement?

A.   To report the amount of cash flow from a firm's operating activities

B.   To report the principal inflows and outflows of cash from investing activities

C.   To report the principal inflows and outflows of cash from financing activities

D.   All of the above

72:

New equipment purchased by issuing a long-term note payable would appear in which of the following sections of the cash flow statement?

A.   Operating section

B.   Investing section

C.   Financing section

D.   It would not appear on the statement.

73:

Purchasing inventory with a check will cause cash to ______________ .

A.   increase

B.   decrease

C.   show no change

D.   The effect on cash cannot be determined based on given information.

74:

XYZ Company reported the following information on its balance sheet:

01/01/07 Building: $800,000 Accumulated Depreciation: $200,000

12/31/07 Building: $785,000 Accumulated Depreciation: $225,000

In 2007, the company also purchased a building at a cost of $100,000.

Considering the above data, did the company sell any building during the year, and if so, what was its original cost?

A.   No building was sold in 2007.

B.   Yes, but its cost cannot be determined.

C.   Yes, and its original cost was $85,000.

D.   Yes, and its original cost was $115,000.

75:

Cash received from the issue of debt would be shown as ____________________.

A.   cash flow from operations

B.   cash flow from investing

C.   cash flow from financing

D.   a non-cash transaction

76:

In 2007, XYZ Company had a net income of $312,000 and reported the following:

Decrease in accounts receivable: $10,000

Gain on sale of building: $14,000

Increase in accounts payable: $12,000

Issuance of common stock: $90,000

Retirement of debt: $45,000

Given this data, the amount of cash flow from operations was ______________.

A.   $334,000

B.   $322,000

C.   $320,000

D.   $324,000

77:

Which of the following transactions would be shown as a cash flow from financing?

A.   Cash paid for investments acquisition

B.   Cash received from sale of property, plant, and equipment

C.   Cash received from customers

D.   Cash paid for dividends

78:

Which of the following transactions would be shown on a cash flow statement, but does not affect cash?

A.   Sale of bonds for cash

B.   Exchange of land for stock

C.   Collection of customer accounts

D.   Payment of dividends to owners