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Exam 12: Statement of Cash Flows

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Question 31

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Which of the following statements best explains the correct handling of depreciation on the statement of cash flows when using the indirect method?

A) Depreciation expense is a noncash expense that is added to net income to derive cash flows from operating activities.
B) Depreciation is subtracted in the cash flows from investing activities section because it reduces the book value of the corresponding plant asset.
C) Depreciation is subtracted from net income because it causes a loss when the related plant asset is sold.
D) Depreciation adds to the company's Cash account to help pay for new equipment.

E) B) and C)
F) A) and D)

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Question 32

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Under the indirect method,which of the following items would be added to net income to determine the cash flow from operating activities?

A) Gain on the sale of equipment.
B) Depreciation expense.
C) Accrued interest receivable.
D) Decrease in the balance of accounts payable.

E) C) and D)
F) A) and B)

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Question 33

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Companies report significant noncash investing and financing activities on a schedule that accompanies the statement of cash flows.

When using the indirect method to complete the cash flows from operating activities section of the statement of cash flows,what is the proper disposition of a loss on disposal of equipment?

Use the following to answer questions The Jackson Company issued a one-year $80,000 face value interest-bearing note with a stated interest rate of 9%.The note was issued to the Galaxy Bank on August 1,2016. -The amount of interest expense and total cash outflows related to the note shown on the December 31,2017 financial statements would be:

Indicate whether each of the following statements is true or false. _____ a)It is possible for a growing business to have substantial earnings,but yet be short of cash. _____ b)It is possible for a well-established business to report large operating losses,but have positive cash flow from operating activities. _____ c)A merchandising firm adding new stores must report the additional inventory purchases as investing activities. _____ d)When equipment is bought to replace old equipment,the transaction is reported as an operating activity. _____ e)FASB requires companies to disclose significant investing and financing activities even if these transactions do not affect cash.

The Belvedere Corporation had a balance in its Equipment account on January 1,2016 of $320,000.During the year,equipment originally costing $85,000 and having Accumulated Depreciation of $20,000 was sold for $67,000.The ending balance of the Equipment Account was $275,000.How much did the company spend to purchase additional equipment during 2016?

Weymouth Company uses the indirect method to prepare its statement of cash flows.Indicate whether each of the following statements is true or false. _____ a)Depreciation expense would be subtracted from net income when determining the amount of cash flow from operating activities. _____ b)Losses would be added to net income when determining the amount of cash flow from operating activities. _____ c)Cash flow from investing activities would be reported the same as if the direct method were used. _____ d)The amount of net cash flow from operations will be higher than it would be if the direct method were used. _____ e)With the indirect method,a decrease in accounts receivable is added to net income in calculating the amount of cash flows from operating activities.

Statler Corporation has beginning and ending accounts payable balances of $400 and $800,respectively.Inventory had beginning and ending balances of $700 and $600,respectively.If cost of goods sold was $2,800,how much cash was spent to purchase inventory?

If cash from operations was $48,000,cash used for investing activities was ($88,000) and the net change in cash was $96,000,what was cash from/used for financing activities?

Ervin Company began the accounting period with $64,000 in accounts receivable.The ending balance in accounts receivable was $40,000.If the credit sales during the period were $588,000,what is the amount of cash received from customers?

Baird Corp.had beginning Accounts Receivable of $254,000 and ending Accounts Receivable of $228,000.If total sales were $1,440,000,what amount of cash was collected from customers,in what category,with what description would the collections be reported on the statement of cash flows using the indirect method? What amount,and in what category,and with what description would the collections be reported using the direct method?

For the year ended December 31,2016,Fields Company made cash payments of $50,000 for dividends,paid interest of $20,500,paid $30,000 cash to suppliers,and purchased equipment for $64,000 cash.The amount of cash used by investing activities for 2016 is:

Investing activities on the statement of cash flows always involve long-term assets,including investments.

During the 2016 accounting period the Mallard Company earned $165,000 of sales revenue on account and accrued $122,500 of operating expenses.The company also earned $26,400 of service revenue that had previously been recorded as unearned revenue.In addition,a $2,200 stock dividend was issued to the stockholders.What can be said about cash flows considering these transactions?

Use the following to answer questions During 2016 the El Paso Company had the following changes in account balances: 1) The Accumulated Depreciation account had a beginning balance of $25,000 and an ending balance of $35,000.The increase was due to depreciation expense. 2) The Long-Term Notes Payable account had a beginning balance of $40,000 and an ending balance of $15,000.The decrease was due to repayment of debt. 3) The Equipment Account had a beginning balance of $25,000 and an ending balance of $92,500.The increase was due to the purchase of other operational assets. 4) The Long Term Investments Account (Marketable Securities) had a beginning balance of $18,000 and an ending balance of $12,500.The decrease was due to the sale of investments at cost. 5) The Dividends Payable account had a beginning balance of $12,000 and an ending balance of $10,000.There were $20,000 of dividends declared during the period. 6) The Interest Payable account had a beginning balance of $2,250 and an ending balance of $1,250.The difference was due to the payment of interest. -What is the net cash flow from financing activities?

What is the major advantage of using the direct method of preparing the operating activities section of the statement of cash flows?

Valdez Co.sold land that had cost $48,000 for $60,000 cash.

Middleton Corporation reported utilities expense of $18,200 on its income statement for 2016.For the year,the beginning balance in Utilities Payable was $2,500 and the ending balance was $1,500.The amount of cash that Mayes paid for utilities in 2016 was $19,200.

Howard Co.purchased land by issuing a note payable in the amount of $150,000.