Question 1

The cost of goods sold during the year was $183,000.Inventory decreased by $8,000 during the year and accounts payable decreased by $4,000 during the year.Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

Accepted Answer

Using the direct method, we start with the cost of goods sold and make adjustments for changes in inventory and accounts payable.
Cash payments for merchandise = Cost of goods sold - decrease in inventory + decrease in accounts payable
= $183,000 - (-$8,000) - (-$4,000)
= $183,000 + $8,000 + $4,000
= $195,000
Therefore, the correct answer is B ($179,000).

Question 2

All of the following statements about free cash flow are false except:

Accepted Answer

Free cash flow is reported on the statement of cash flows. Option A, B, and D are all false statements about free cash flow.

Question 3

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?

Accepted Answer

The operating activities section of the statement of cash flows prepared under the direct method only includes cash receipts and cash payments related to operating activities, such as cash receipts from customers and cash paid to employees. A gain on sale of equipment relates to investing activities and would not appear in the operating activities section. Therefore, choice C is the correct answer.

Question 4

Marke Inc.had cash sales of $400,000 and credit sales of $1,150,000.The accounts receivable balance increased $30,000 during the year.How much cash did Hark receive from its customers during the year?

Accepted Answer

The answer of Marke Inc.had cash sales of $400,000 and...

Question 5

Christine Company had an increase in inventory of $55,000.The cost of goods sold was $95,000.There was a $6,000 decrease in accounts payable from the prior period.What were Thomas' cash payments to suppliers?

Accepted Answer

The answer of Christine Company had an increase in inventory...

Question 6

LRRP Company had credit sales of $650,000.The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance was $140,000.What were the cash collections from customers during the period?

Accepted Answer

Cash collections from customers can be calculated using the formula: Cash Collections = Beginning Accounts Receivable + Credit Sales - Ending Accounts Receivable. Plugging in the given values: Cash Collections = $15,000 + $650,000 - $140,000 = $525,000.

Question 7

Tomas Pest Control Products has the following information available: $$\begin{array} { l r } 
\text { Net Income } & \$ 25,000 \
\text { Cash Provided by Operations } & 33,000 \
\text { Cash Sales } & 65,000 \
\text { Capital Expenditures } & 10,000 \
\text { Dividends Paid } & 2,000
\end{array}$$ What is Tomas' free cash flow?

Accepted Answer

The answer of Tomas Pest Control Products has the following...

Question 8

Ale Company reports a $16,000 increase in inventory and a $8,000 increase in accounts payable during the year.Cost of Goods Sold for the year was $150,000.The cash payments made to suppliers were

Accepted Answer

The increase in inventory and accounts payable are both added to cost of goods sold to calculate cash payments made to suppliers using the formula: 
Cash Payments to Suppliers = COGS + Increase in Inventory - Increase in Accounts Payable 
Cash Payments to Suppliers = $150,000 + $16,000 - $8,000 
Cash Payments to Suppliers = $158,000

Question 9

During 2017, Harvey Industries reported cash provided by operations of $670,000, cash used in investing of $1,039,000, and cash used in financing of $145,000.In addition, cash spent for fixed assets during the period was $404,000.No dividends were paid.Based on this information, what was Harvey's free cash flow?

Accepted Answer

Free cash flow (FCF) can be calculated using the formula FCF = Cash from Operations - Capital Expenditures. Therefore, FCF = $670,000 - $404,000 = $266,000. We do not need to consider cash used in investing or financing activities or any information about dividends paid to calculate FCF. Choice C is the correct answer.

Question 10

During the year, Salaries and Wages Payable decreased by $5,000.If Salaries and Wages Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is

Accepted Answer

The answer of During the year, Salaries and Wages Payable...

Question 11

Which of the following items does not appear in the statement of cash flows under the direct method?

Accepted Answer

Depreciation Expense is a non-cash expense and therefore does not appear in the statement of cash flows under the direct method. The other options involve actual cash transactions and would appear in the statement.

Question 12

Ale Company has other operating expenses of $80,000.There has been a decrease in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger than in the prior period.What were Ale's cash payments for operating expenses?

Accepted Answer

The answer of Ale Company has other operating expenses of...

Question 13

Lager Company has other operating expenses of $260,000.There has been an increase in prepaid expenses of $20,000 during the year, and accrued liabilities are $15,000 lower than in the prior period.Using the direct method of reporting cash flows from operating activities, what were Lager's cash payments for operating expenses?

Accepted Answer

The answer of Lager Company has other operating expenses of...

Question 14

Each of the following would be reported under operating activities except cash receipts

Accepted Answer

Cash receipts from sales of investments would be reported under investing activities, not operating activities. The other options would be reported under operating activities.

Question 15

During 2017, Zuma Company had $150,000 in cash sales and $1,240,000 in credit sales.The accounts receivable balances were $180,000 and $215,000 at December 31, 2016 and 2017, respectively.Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2017?

Accepted Answer

The total credit sales during the year were $1,240,000. Of this amount, the increase in accounts receivable was $215,000 - $180,000 = $35,000. Therefore, cash collections from credit sales were $1,240,000 - $35,000 = $1,205,000. Adding the cash sales, the total cash collected from all customers during 2017 was $1,205,000 + $150,000 = $1,355,000. Therefore, the correct answer is D.

Question 16

Ware Company had purchases of $260,000.The comparative balance sheet analysis revealed a $15,000 decrease in inventory and a $25,000 increase in accounts payable.What were Ware's cash payments to suppliers?

Accepted Answer

The answer of Ware Company had purchases of $260,000.The comparative...

Question 17

In the Papyrus Corporation, cash receipts from customers were $136,000, cash payments for operating expenses were $102,000, and one-third of the company's $9,300 income taxes were paid during the year.Net cash provided by operating activities is:

Accepted Answer

Net cash provided by operating activities can be calculated using the indirect method. Starting with net income, add back any non-cash expenses (like depreciation), and adjust for changes in working capital (like accounts receivable and accounts payable).

Net income = $9,300
Add back depreciation (assumed to be $0) = $9,300
Adjust for changes in working capital:
Increase in accounts receivable = -$10,000
Increase in accounts payable = $2,000
Net change in working capital = -$8,000
Net cash provided by operating activities = $9,300 + $0 - $8,000 = $1,300
Add back income taxes paid = $1,300 + ($9,300/3) = $30,900

Therefore, the correct answer is C) $30,900.

Question 18

Squeeze Company reports the following: $$\begin{array} { l c c } 
& \text { End of Year } & \text { Beginning of Year } \
\text { Inventory } & \$ 25,000 & \$ 42,000 \
\text { Accounts Payable } & 22,000 & 12,000
\end{array}$$ If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is

Accepted Answer

The answer of Squeeze Company reports the following: \[\begin{array} {...

Question 19

Beane Corporation shows income tax expense of $82,000.There has been a $6,000 decrease in federal income taxes payable and a $7,000 increase in state income taxes payable during the year.What was Beane's cash payment for income taxes?

Accepted Answer

The cash payment for income taxes can be calculated as:
Income tax expense + increase in income taxes payable - decrease in income taxes payable = cash payment for income taxes
$82,000 + $7,000 - $6,000 = $83,000 - $6,000 = $77,000
Therefore, the closest answer choice is B) $81,000.

Question 20

Gonzo Company reports a $25,000 increase in inventory and a $12,000 decrease in accounts payable during the year.Cost of Goods Sold for the year was $185,000.Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were

Accepted Answer

Cash payments made to suppliers = Cost of Goods Sold + Increase in Inventory - Decrease in Accounts Payable = $185,000 + $25,000 - $12,000 = $198,000.

Quiz 13: Financial Analysis: the Big Picture