ACCT 252
CHAPTER 14 PRACTICE QUESTIONS – ANSWERS
1. The sale of a long-term investment for cash would be classified as an investing activity in the statement of cash flows.
TRUE
2. Paying cash to retire bonds p
...
ACCT 252
CHAPTER 14 PRACTICE QUESTIONS – ANSWERS
1. The sale of a long-term investment for cash would be classified as an investing activity in the statement of cash flows.
TRUE
2. Paying cash to retire bonds payable would be considered a financing activity on the statement of cash flows.
TRUE
3. A gain on the sale of equipment would be included as part of a company's financing activities on the statement of cash flows.
FALSE
4. The investing and financing sections of the statement of cash flows record net cash flows rather than gross cash flows.
FALSE
5. A company can increase its net cash flow by increasing the depreciation expense it records during the period.
FALSE
6. Free cash flow increases when a company issues common stock for cash.
FALSE
7. A newly formed company with enormous growth prospects would be expected to have negative free cash flow during its start-up phase.
TRUE
8. The change in the cash balance must equal the changes in all other balance sheet accounts other than cash.
TRUE
9. Which of the following should be shown on a statement of cash flows under the financing activity section?
a. the purchase of a long-term investment in the common stock of another company
b. the payment of cash to retire a long-term note
c. the proceeds from the sale of a building
d. the issuance of a long-term note to acquire land
e. an increase in Accounts Payable
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