Question 1

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
A)$185,000.
B)$197,000.
C)$222,000.
D)$148,000.

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.

Question 2

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:
A)$34,000.
B)$24,700.
C)$30,900.
D)$27,800.

Accepted Answer

Net cash provided by operating activities can be calculated using the indirect method, which involves adjusting net income for non-cash items and changes in current assets and liabilities. However, since we are only given information about cash receipts and cash payments, we can use the following formula to calculate net cash provided by operating activities:
Net cash provided by operating activities = Cash receipts - Cash payments for operating expenses - Income taxes paid
Substituting the given values, we get:
Net cash provided by operating activities = $136,000 - $102,000 - ($9,300/3) = $30,900
Therefore, the correct answer is C) $30,900.

Question 3

All of the following statements about free cash flow are false except:
A)Significant free cash flow indicates less potential to finance new investments.
B)Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends.
C)Free cash flow is not reported on the statement of cash flows.
D)Significant free cash flow indicates less potential to pay additional dividends.

Accepted Answer

Free cash flow is often reported on the statement of cash flows as it is an important financial metric for investors and analysts. Choices A, B, and D are false statements about free cash flow.

Question 4

Which of the following items does not appear in the statement of cash flows under the direct method?
A)Cash payments to suppliers
B)Cash collections from customers
C)Depreciation Expense
D)Cash from the sale of equipment

Accepted Answer

Depreciation Expense is a non-cash expense and is added back in the operating activities section of the cash flow statement under the direct method. The other options (A, B, and D) all involve cash inflows and outflows and would therefore appear in the statement of cash flows under the direct method.

Question 5

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 Marke receive from its customers during the year?
A)$1,520,000
B)$1,120,000
C)$1,550,000
D)$780,000

Accepted Answer

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

Question 6

Which of the following would not appear in the operating activities section of a statement of cash flows prepared under the direct method?
A)Cash receipts from customers
B)Cash paid for income taxes
C)Gain on sale of equipment
D)Cash paid to employees

Accepted Answer

The gain on sale of equipment represents an investing activity and would be reported in the investing section of the statement of cash flows. The operating section only includes cash transactions directly related to the day-to-day operations of a business, such as cash receipts from customers and cash paid to employees. Income taxes may be included in either the operating or financing sections depending on the nature of the tax.

Question 7

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?
A)$775,000
B)$650,000
C)$525,000
D)$665,000

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 8

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?
A)$255,000
B)$265,000
C)$225,000
D)$295,000

Accepted Answer

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

Question 9

Which of the following statements concerning the statement of cash flows is true?
A)The statement of cash flows is usually more accurate when using the indirect method.
B)If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided.
C)The statement of cash flows reflects both earnings per share and cash per share.
D)The statement of cash flows is an optional financial statement for external reporting purposes.

Accepted Answer

The direct method requires a supplementary schedule reconciling the net income to net cash from operating activities. Option A is incorrect because the indirect method involves making adjustments to net income to arrive at net cash flow, which can make it less accurate than the direct method. Option C is incorrect because the statement of cash flows only reports cash flows and does not involve any measure of earnings per share. Option D is incorrect because the statement of cash flows is a required financial statement for external reporting purposes according to accounting standards.

Question 10

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
A)$150,000.
B)$158,000.
C)$126,000.
D)$174,000.

Accepted Answer

The increase in inventory of $16,000 means that Ale Company purchased $16,000 more in inventory than they actually used for Cost of Goods Sold. The increase in accounts payable of $8,000 means that they owe their suppliers $8,000 more at the end of the year than they did at the beginning. To find the cash payments made to suppliers, we need to subtract the increase in accounts payable from the cost of goods sold, and then add back the increase in inventory:

$150,000 (Cost of Goods Sold) - $8,000 (Increase in Accounts Payable) + $16,000 (Increase in Inventory) = $158,000

Therefore, the cash payments made to suppliers were $158,000.

Question 11

During 2015, 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, 2014 and 2015, respectively. Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2015?
A)$1,205,000
B)$1,425,000
C)$1,390,000
D)$1,355,000

Accepted Answer

Using the direct method, cash collected from customers is calculated as:

Cash sales + Cash collected from accounts receivable from credit sales - Increase in accounts receivable

Cash collected from accounts receivable from credit sales can be calculated as follows:

Accounts receivable at December 31, 2015 - Accounts receivable at December 31, 2014
= $215,000 - $180,000
= $35,000

Therefore, cash collected from customers is:

$150,000 + $35,000 - ($215,000 - $180,000)
= $150,000 + $35,000 - $35,000
= $150,000

Total cash collected from all customers during 2015 was $1,355,000 ($150,000 cash sales + $1,205,000 collected from credit sales). Thus, the correct answer is D.

Question 12

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?
A)$235,000
B)$220,000
C)$275,000
D)$300,000

Accepted Answer

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

Question 13

Each of the following would be reported under operating activities except cash receipts
A)from sales of goods.
B)from sales of investments.
C)of interest on loans.
D)of dividends from investments.

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 14

During the year, Salaries Payable decreased by $5,000. If Salary Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is
A)$179,000.
B)$174,000.
C)$169,000.
D)$184,000.

Accepted Answer

The cash paid to employees is calculated by adding the decrease in Salaries Payable to the Salary Expense. Since Salaries Payable decreased by $5000, it means $5000 was paid out, so $174000 (Salary Expense) + $5000 (decrease in Salaries Payable) = $179000.

Question 15

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?
A)$82,000
B)$81,000
C)$76,000
D)$95,000

Accepted Answer

The cash payment for income taxes is calculated as follows:

Income tax expense = Current income tax payable + Change in deferred tax assets/liabilities 
$82,000 = Current income tax payable - $6,000 + $7,000 
Current income tax payable = $81,000

Therefore, the cash payment for income taxes was $81,000.

Question 16

In the Garnet Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively. During the year, land costing $50,000 was sold for $50,000 cash, and land costing $92,000 was purchased for cash. The entries in the reconciling columns of the worksheet will include a:
A)credit to Land $50,000 and a debit to Sale of Land $50,000 under investing activities.
B)debit to Land $92,000 and a credit to Purchase of Land $92,000 under financing activities.
C)net debit to Land $42,000 and a credit to Purchase of Land $42,000 under investing activities.
D)credit to Land $50,000 and a debit to Sale of Land $50,000 under financing activities.

Accepted Answer

CThe correct answers are A and C. In A, the sale of land for cash is correctly classified as an investing activity, with a credit to Land for the cost of the land sold ($50,000) and a corresponding debit to Sale of Land, reflecting the cash inflow from the sale. In C, the net change in the Land account is a debit of $42,000, which is the difference between the purchase of land costing $92,000 and the sale of land costing $50,000. This net amount is correctly classified under investing activities, reflecting the net cash outflow for land transactions.

Question 17

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?
A)$81,000
B)$82,000
C)$69,000
D)$80,000

Accepted Answer

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

Question 18

Squeeze Company reports the following:  If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is
A)$227,000.
B)$205,000.
C)$193,000.
D)$247,000.

Accepted Answer

The given code (11eb12bc_a632_068c_94c2_93cfec551d54_TB6276_00) is irrelevant to the question. To calculate the cash paid to suppliers, we need to add the increase in accounts payable (if any) to the cost of goods sold and subtract the decrease in accounts payable (if any) from it. As no information is given about the changes in accounts payable, we assume it to be constant. Therefore, the amount of cash paid to suppliers is equal to the cost of goods sold, which is $220,000. Thus, the correct answer is option C.

Question 19

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 Christine's cash payments to suppliers?
A)$156,000
B)$61,000
C)$144,000
D)$101,000

Accepted Answer

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

Question 20

The cost of goods sold during the year was $183,000. Merchandise 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
A)$187,000.
B)$179,000.
C)$171,000.
D)$195,000.

Accepted Answer

The direct method of reporting cash flows from operating activities involves adjusting net income for changes in operating assets and liabilities. To calculate cash payments for merchandise, we need to start with the cost of goods sold of $183,000 and then adjust for the decrease in merchandise inventory of $8,000 (which means less cash was paid for inventory), and the decrease in accounts payable of $4,000 (which means more cash was paid to suppliers).

Cash payments for merchandise = Cost of goods sold - Decrease in merchandise inventory + Decrease in accounts payable

Cash payments for merchandise = $183,000 - $8,000 + $4,000 = $179,000

Therefore, the answer is B, $179,000.

Quiz 13: Statement of Cash Flows

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

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:

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

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

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 Marke receive from its customers during the year?

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

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?

Which of the following statements concerning the statement of cash flows is true?

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

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?

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

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

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?

In the Garnet Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively. During the year, land costing $50,000 was sold for $50,000 cash, and land costing $92,000 was purchased for cash. The entries in the reconciling columns of the worksheet will include a:

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?

Squeeze Company reports the following: If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is

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 Christine's cash payments to suppliers?

The cost of goods sold during the year was $183,000. Merchandise 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