Intermediate Accounting Exam Script 2026 Exam Prep Questions With Full Answers 100% Correct

INTERMEDIATE ACCOUNTING EXAM SCRIPT
2026 EXAM PREP QUESTIONS WITH FULL
ANSWERS 100% CORRECT

◉ Statements about statement of cash flows. Answer: - the
statement of cash flows presents information about cash flows that
the other statements either do not provide or provide only indirectly
- noncash transactions sometimes are reported also
- either the direct or the indirect method can be used to calculate
and present the net cash increase or decrease from operating
activities


◉ Indirect Method starting point. Answer: - net income not sales
revenue


◉ Stock dividends are reported in connection with a statement of
cash flows. Answer: - are not reported on the statement of cash
flows
- stock dividends do not involve a cash outflow and doesn't
represent a signficant operating, investing or financing activity and
therefore are not reported in the statement of cash flows


◉ property dividends are reported in connection with a statement of
cash flows as. Answer: - a noncash activity

,- property dividend does not involve a cash outflow and therefore is
reported as a noncash activity


◉ Interest paid to bondholders is reported in connection with a
statement of cash flows as. Answer: - an operating activity
- since interest expense is reported in the income statement under
GAAP, it is reported in the operating activities section of the
statement of cash flows


◉ Investment revenue is reported in connection with a statement of
cash flows as. Answer: - an operating activity
- since interest revenue is reported in the income statement under
GAAP, it is reported in the operating activities section of the
statement of cash flows


◉ On January 4, Childers Corporation issued $200 million of bonds
for $193 million. During the same year, $500,000 of the bond
discount was amortized. On a statement of cash flows prepared by
the indirect method, Childers Corporation should report. Answer: -
an addition to net income of $500,000
- the amortization of the bond is added back to net income under the
indirect method under the cash flows from operations


◉ Sun Company owns 14.5 million shares of stock of Center
Company classified as available for sale. During 2016, the fair value

,of those shares increased by $19 million. What effect did this
increase have on Sun's 2016 statement of cash flows. Answer: - no
effect
- there w as no flow of cash


◉ Eastern Manufacturing Company owns 40% of the outstanding
common stock of Southern Supply Company. During 2016, Eastern
received a $50 million cash dividend from Southern. What effect did
this dividend have on Eastern's 2016 statement of cash flows?.
Answer: - cash flows from operating activities increased
- even though the equity method is used to account of the
investment, cash dividends are received and therefore reported in
the operating section of the statement of cash flows


◉ In determining cash flows from operating activities (indirect
method), gain on equipment should or should not be an addition to
net income?. Answer: - a subtraction for a gain on sale of equipment
- the gain would be a deduction from net income


◉ The net income for World Class Corporation was $140 million for
the year ended December 31, 2016. Related information follows:
Amortization of patent, $1 million. Cash dividends paid, $14 million.
Decrease in accounts receivable, $9 million Decrease in salaries
payable, $1 million. Depreciation expense, $20 million. Increase in
long-term notes payable, $13 million. Sale of preferred stock for

, cash, $17 million. Cash flows from operating activities during 2016
should be reported as:. Answer: - 169 million


- Cash flows from operating activities = $140 + $1 (amortization of
patent) + $9 (decrease in accounts receivable) - $1 (decrease in
salaries payable) + $20 (depreciation expense).


◉ A statement of cash flows and its related disclosure note typically
do not report:. Answer: - stock dividends
- stock dividends do not affect assets or liabilties and are not
considred investing or financing activities


◉ Sean-McDonald Company sold a printer with a cost of $34,000
and accumulated depreciation of $21,000 for $10,000 cash. This
transaction would be reported as:. Answer: - an investing activity
- selling (as well as buying) fixed assets are considered investing
activities


◉ In a statement of cash flows (indirect method), a decrease in
inventory should be reported as:. Answer: - an addition to net
income in determining cash flows from operating activities


◉ In a statement of cash flows (indirect method), an increase in
available-for-sale securities should be reported as:. Answer: - an
investing activity