MCQ questions with answers on topic cashflow statement asked in US CMA course
## Operating Activities Example
ABC Corporation reported net income of $150,000, depreciation expense of $30,000, a $25,000 increase in accounts receivable, a $10,000 decrease in accounts payable, and a $5,000 loss on sale of equipment. The net cash provided by operating activities is
**A)** $140,000
**B)** $150,000
**C)** $170,000
**D)** $200,000
**Answer:
## Activity Classification
Which of the following is **not** an operating cash flow?
**A)** Collection of cash from receivables
**B)** Payment of income tax
**C)** Payment of cash for operating expenses
**D)** Purchase of equipment for cash
**Answer:
## Indirect Method Adjustment
Under the indirect method, depreciation expense affects
**A)** The operating activities section
**B)** The investing activities section
**C)** The financing activities section
**D)** The notes to the financial statements
**Answer:
## Cash Collected from Customers
Care Company had accounts receivable of $60,000 on Dec 31, 2016, $40,000 on Dec 31, 2017, and net credit sales of $200,000 in 2017. Net cash collected from customers is..
**A)** $180,000
**B)** $220,000
**C)** $240,000
**D)** $260,000
**Answer:
## Non-Cash Investing Activity
Significant non-cash investing and financing activities are reported in the [2].
**A)** Operating activities section
**B)** Investing activities section
**C)** Footnotes or separate notes
**D)** Financing activities section
**Answer:
Here are 10 questions on cash flow statements, drawn from US CMA-relevant topics like indirect method adjustments, activity classifications, and cash flow calculations. These align with management accounting principles covered in the US CMA course.
## Operating Activities
Net income is $150,000, depreciation expense is $30,000, increase in accounts receivable is $25,000, decrease in accounts payable is $10,000, and loss on sale of equipment is $5,000. What is the net cash provided by operating activities under the indirect method?
Answer
A company's net income is $25,000, depreciation is $2,000, loss on sale of equipment is $100, increase in accounts receivable is $1,000, increase in accounts payable is $2,000, and decrease in inventory is $400. What is net cash from operating activities?
Answer
## Investing Activities
Which of the following is **not** an investing cash flow?
- A) Collection of cash from receivables
- B) Payment of income tax
- C) Payment of cash for operating expenses
- D) Purchase of equipment for cash
A company sells old equipment for $5,000 cash (book value $4,500). Under the indirect method, the $500 gain affects which section?
- A) Operating activities section
- B) Investing activities section
- C) Financing activities section
- D) Notes to financial statements
## Financing Activities
Dividend paid by a manufacturing company is classified under which activity?
- A) Cash flow from investing activities
- B) Cash flow from financing activities
- C) No cash flow
- D) Cash flow from operating activities[1]
## Key Concepts
A statement of cash flows has how many sections?
- A) 2 sections
-B) 3 sections
- C) 4 sections
- D) 5 sections
Under the indirect method, depreciation expense affects which section?[3]
- A) Operating activities section
- B) Investing activities section
- C) Financing activities section
- D) Notes
Significant non-cash investing and financing activities (e.g., conversion of bonds to stock) are reported in the:
- A) Operating activities section
- B) Investing activities section
- C) Footnotes or separate notes
- D) Financing activities section[3]
## Calculations
Accounts receivable: Dec 31, 2016 $60,000; Dec 31, 2017 $40,000. Net credit sales 2017: $200,000. Net cash collected from customers?
Answer
Income tax expense $30,500; tax payable Dec 31, 2016 $4,000; Dec 31, 2017 $6,500. Cash payment for income tax?
Answer
Here are 25 MCQs with answers on Cash Flow Statement (US GAAP) – aligned with US CMA Part 1 & Part 2 exam pattern
🔹 MCQs – Cash Flow Statement (US GAAP)
1. Which of the following is classified as an operating activity under US GAAP?
A. Issuance of bonds
B. Payment of dividends
C. Interest paid
D. Purchase of equipment
✅ Answer:
2. Which of the following is an investing activity?
A. Sale of inventory
B. Purchase of land
C. Issuance of shares
D. Payment of wages
✅ Answer:
3. Dividend received under US GAAP is classified as:
A. Operating
B. Investing
C. Financing
D. Non-cash
✅ Answer:
4. Under indirect method, an increase in accounts receivable is:
A. Added to net income
B. Deducted from net income
C. Ignored
D. Financing activity
✅ Answer:
5. Decrease in inventory under indirect method:
A. Deducted
B. Added
C. Ignored
D. Financing
✅ Answer:
6. Gain on sale of equipment should be:
A. Added to net income
B. Deducted from net income
C. Investing inflow
D. Financing inflow
✅ Answer:
7. Amortization expense under indirect method:
A. Deducted
B. Added
C. Ignored
D. Financing
✅ Answer:
8. Payment of long-term debt principal is:
A. Operating
B. Investing
C. Financing
D. Non-cash
✅ Answer:
9. Conversion of bonds into equity is:
A. Operating
B. Investing
C. Financing
D. Non-cash investing & financing
✅ Answer:
10. Which method starts with net income?
A. Direct
B. Indirect
C. Hybrid
D. None
✅ Answer:
11. Purchase of treasury stock is:
A. Operating
B. Investing
C. Financing outflow
D. Non-cash
✅ Answer:
12. Which item is added back under indirect method?
A. Increase in prepaid expenses
B. Decrease in accounts payable
C. Depreciation expense
D. Gain on sale
✅ Answer:
13. Increase in accounts payable results in:
A. Decrease in operating cash
B. Increase in operating cash
C. Investing inflow
D. Financing inflow
✅ Answer:
14. Purchase of available-for-sale debt securities is:
A. Operating
B. Investing
C. Financing
D. Non-cash
✅ Answer:
15. Unrealized gain on AFS securities affects:
A. Operating cash
B. Investing cash
C. Financing cash
D. Does not affect cash
✅ Answer:
16. Which of the following is TRUE under US GAAP?
A. Interest paid can be financing
B. Dividend paid is operating
C. Interest received is operating
D. Dividend received is investing
✅ Answer:
17. If net income is $100, depreciation is $20, AR increases by $15, CFO equals:
A. $105
B. $95
C. $115
D. $85
✅ Answer:
18. Sale of equipment for $50, book value $40. Gain $10.
Cash flow from investing:
A. $10
B. $40
C. $50
D. $60
✅ Answer:
19. Under direct method, cash paid to suppliers equals:
A. COGS + Increase in AP
B. COGS – Increase in inventory + Decrease in AP
C. COGS + Increase in inventory – Increase in AP
D. COGS only
Correct formula:
COGS + Increase in Inventory – Increase in AP
✅ Answer:
20. Which is financing inflow?
A. Issuance of common stock
B. Purchase of equipment
C. Interest received
D. Dividend paid
✅ Answer:
21. If prepaid expense increases, operating cash flow:
A. Increases
B. Decreases
C. No impact
D. Financing
✅ Answer:
22. Which activity affects free cash flow?
A. Net income
B. Capital expenditure
C. Dividend paid
D. Depreciation
✅ Answer:
23. Free Cash Flow (basic formula) equals:
A. CFO – CapEx
B. NI – CapEx
C. CFO + CapEx
D. CFO – Dividends
✅ Answer:
24. Under indirect method, decrease in accrued expenses:
A. Added
B. Deducted
C. Ignored
D. Investing
✅ Answer:
25. Which transaction appears in supplemental disclosure?
A. Depreciation
B. Cash paid for interest
C. Stock issued for land
D. Net income
✅ Answer:
🔥 INTEGRATED CASE SIMULATION – CASH FLOW STATEMENT (US GAAP)
📘 Case Background
Omega Manufacturing Inc. reported the following for Year 2025:
Income Statement Data:
Net Income = $450,000
Depreciation Expense = $120,000
Amortization of Patent = $30,000
Gain on Sale of Equipment = $20,000
Interest Expense = $40,000
Additional Information:
1. Equipment (Cost $200,000, Accumulated Depreciation $120,000) was sold for $100,000.
2. Land was purchased for $150,000 cash.
3. Bonds payable of $300,000 were issued at par.
4. Dividends of $80,000 were declared and paid.
5. Treasury stock was purchased for $60,000.
6. Bonds worth $100,000 were converted into common stock (non-cash transaction).
Working Capital Changes:
Item Beginning Ending
Accounts Receivable 180,000 220,000
Inventory 250,000 230,000
Prepaid Expenses 40,000 50,000
Accounts Payable 150,000 170,000
Accrued Liabilities 60,000 55,000
🔎 REQUIRED (CMA STYLE)
Part 1: Compute Net Cash Flow from Operating Activities (Indirect Method)
Start with Net Income:
= ?
Step 1: Add Non-Cash Expenses
Depreciation = ?
Amortization = ?
Subtotal = ?
Step 2: Remove Gain
Gain on Sale = ?
Subtotal = ?
Step 3: Adjust Working Capital
Increase in AR
Decrease in Inventory →
Increase in Prepaid (10,000) →
Increase in AP (20,000) →
Decrease in Accrued Liabilities →
Net WC Adjustment =
= ?
✅ Net Cash from Operating Activities:
=
👉 $?
📊 Part 2: Investing Activities
Sale of Equipment =?
Purchase of Land =?
✅ Net Cash from Investing:
= ?
💰 Part 3: Financing Activities
Issue of Bonds =?
Dividends Paid = ?
Purchase of Treasury Stock =?
✅ Net Cash from Financing:
= ?
(Bond conversion excluded – non-cash)
📈 Final Answer Summary
Section Cash Flow
Operating ******
Investing ******
Financing *****
🔥 Net Increase in Cash:
= ?
🎯 CMA Trap Areas Tested
Gain removal in operating section
Full proceeds shown in investing
Working capital direction logic
Non-cash bond conversion disclosure
Treasury stock classification
Dividend paid = Financing
🔥 Advanced CMA Analytical MCQs Based on Case
1. If equipment had been sold at a loss of $20,000 instead, CFO would:
A. Increase by 20,000
B. Decrease by 20,000
C. Remain same
D. Increase by 100,000
✅ Answer:
2. If AR had decreased by $40,000 instead of increased, CFO would be:
✅ Answer:
3. Free Cash Flow (CFO – CapEx):
CapEx = 150,000
FCF = 565,000 – 150,000
= 415,000
www.gmsisuccess.in
No comments:
Post a Comment