Question 1

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?
A) $27000
B) $23000
C) $21000
D) $10000

Accepted Answer

The given information is not sufficient to calculate the free cash flow. Additional financial information is required.

Question 2

Christine Company had an increase in inventory of $55000. The cost of goods sold was $95000. There was a $6000 decrease in accounts payable from the prior period. What were Christine's cash payments to suppliers?
A) $156000
B) $61000
C) $144000
D) $101000

Accepted Answer

Christine's cash payments to suppliers can be calculated by adding the cost of goods sold ($95,000) to the increase in inventory ($55,000) and then subtracting the decrease in accounts payable ($6,000), resulting in $156,000.

Question 3

Lager Company has other operating expenses of $260000. There has been an increase in prepaid expenses of $20000 during the year and accrued liabilities are $15000 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) $255000
B) $265000
C) $225000
D) $295000

Accepted Answer

The cash payments for operating expenses are calculated by adjusting the operating expenses for changes in prepaid expenses and accrued liabilities. The increase in prepaid expenses ($20,000) is added to the operating expenses, and the decrease in accrued liabilities ($15,000) is also added. Thus, $260,000 + $20,000 + $15,000 = $295,000.

Question 4

Ale Company reports a $16000 increase in inventory and a $8000 increase in accounts payable during the year. Cost of Goods Sold for the year was $150000. The cash payments made to suppliers were
A) $150000.
B) $158000.
C) $126000.
D) $174000.

Accepted Answer

The increase in inventory of $16,000 would mean that inventory was purchased during the year, while the increase in accounts payable of $8,000 would mean that some of the inventory was purchased on credit. To determine the cash payments made to suppliers, we need to adjust Cost of Goods Sold for the change in inventory and then add any increase in accounts payable.

Adjusted COGS = COGS + Increase in Inventory 
Adjusted COGS = $150,000 + $16,000 
Adjusted COGS = $166,000

Cash Payments Made to Suppliers = Adjusted COGS + Increase in Accounts Payable 
Cash Payments Made to Suppliers = $166,000 + $8,000 
Cash Payments Made to Suppliers = $174,000

Therefore, the correct answer is B) $158,000.

Question 5

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

According to GAAP, if the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided. The statement of cash flows is required, not optional, for external reporting purposes. The statement of cash flows does not reflect earnings per share or cash per share, as it reports cash inflows and outflows, not earnings or share values. The indirect method may be used, but there is no general rule that it is more accurate than the direct method.

Question 6

In the Papyrus Corporation cash receipts from customers were $136000 cash payments for operating expenses were $102000 and one-third of the company's $9300 income taxes were paid during the year. Net cash provided by operating activities is:
A) $34000.
B) $24700.
C) $30900.
D) $27800.

Accepted Answer

Net cash provided by operating activities can be calculated as follows:
Cash receipts from customers - Cash payments for operating expenses - Income taxes paid = Net cash provided by operating activities

$136,000 - $102,000 - ($9,300/3) = $30,900

Therefore, the correct answer is C.

Question 7

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 $220000 the amount of cash paid to suppliers is
A) $227000.
B) $205000.
C) $193000.
D) $247000.

Accepted Answer

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

Question 8

Marke Inc. had cash sales of $400000 and credit sales of $1150000. The accounts receivable balance increased $30000 during the year. How much cash did Marke receive from its customers during the year?
A) $1520000
B) $1120000
C) $1550000
D) $780000

Accepted Answer

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. So, the total cash received from customers during the year is $400,000 + $1,150,000 - $30,000 = $1,520,000.

Question 9

During the year Salaries Payable decreased by $5000. If Salary Expense amounted to $174000 for the year the cash paid to employees (including deductions from gross pay) is
A) $179000.
B) $174000.
C) $169000.
D) $184000.

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 10

During 2016 Harvey Industries reported cash provided by operations of $670000 cash used in investing of $1039000 and cash used in financing of $145000. In addition cash spent for fixed assets during the period was $404000. No dividends were paid. Based on this information what was Harvey's free cash flow?
A) ($369000)
B) $1450000
C) $266000
D) ($918000)

Accepted Answer

Free cash flow (FCF) is calculated as cash provided by operations minus capital expenditures. 
Therefore, FCF = Cash provided by operations – Cash spent for fixed assets = $670,000 - $404,000 = $266,000. 
Cash used in investing and financing activities is not relevant for calculating FCF.

Question 11

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 12

Gonzo Company reports a $25000 increase in inventory and a $12000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $185000. Using the direct method of reporting cash flows from operating activities cash payments made to suppliers were
A) $185000.
B) $197000.
C) $222000.
D) $148000.

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 13

Ale Company has other operating expenses of $80000. There has been a decrease in prepaid expenses of $6000 during the year and accrued liabilities are $5000 larger than in the prior period. What were Ale's cash payments for operating expenses?
A) $81000
B) $82000
C) $69000
D) $80000

Accepted Answer

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

Question 14

LRRP Company had credit sales of $650000. The beginning accounts receivable balance was $15000 and the ending accounts receivable balance was $140000. What were the cash collections from customers during the period?
A) $775000
B) $650000
C) $525000
D) $665000

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 15

Beane Corporation shows income tax expense of $82000. There has been a $6000 decrease in federal income taxes payable and a $7000 increase in state income taxes payable during the year. What was Beane's cash payment for income taxes?
A) $82000
B) $81000
C) $76000
D) $95000

Accepted Answer

Beane Corporation's cash payment for income taxes can be determined using the formula:
Income tax expense = Taxes payable at the beginning of the year + Current year tax expense - Taxes payable at the end of the year
Here, Beane Corporation has shown income tax expense of $82000, and there has been a $6000 decrease in federal income taxes payable and a $7000 increase in state income taxes payable during the year. Using the above formula, we can calculate:
$82000 = Taxes payable at the beginning of the year + (Current year tax expense) - (Taxes payable at the end of the year)
$82000 = X + (X-($6000+$7000)) - X
$82000 = X - $13000
X = $95000
Therefore, Beane Corporation's cash payment for income taxes was $95000. The closest option is B, $81000, which is incorrect. The correct answer is $95000.

Question 16

The cost of goods sold during the year was $183000. Merchandise inventory decreased by $8000 during the year and accounts payable decreased by $4000 during the year. Using the direct method of reporting cash flows from operating activities cash payments for merchandise total
A) $187000.
B) $179000.
C) $171000.
D) $195000.

Accepted Answer

The answer of The cost of goods sold during the...

Question 17

Ware Company had purchases of $260000. The comparative balance sheet analysis revealed a $15000 decrease in inventory and a $25000 increase in accounts payable. What were Ware's cash payments to suppliers?
A) $235000
B) $220000
C) $275000
D) $300000

Accepted Answer

To find cash payments to suppliers, adjust purchases for changes in inventory and accounts payable: $260,000 (purchases) - $15,000 (decrease in inventory) - $25,000 (increase in accounts payable) = $235,000.

Question 18

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 reported on the statement of cash flows. The other statements are false except for C.

Question 19

During 2017 Zuma Company had $150000 in cash sales and $1240000 in credit sales. The accounts receivable balances were $180000 and $215000 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?
A) $1205000
B) $1425000
C) $1390000
D) $1355000

Accepted Answer

The answer of During 2017 Zuma Company had $150000 in...

Question 20

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 does not appear in the statement of cash flows under the direct method because it is a non-cash expense. The direct method only includes items that directly affect cash, such as cash receipts from customers and cash payments to suppliers and employees.

Quiz 17: Statement of Cash Flows

Christine Company had an increase in inventory of $55000. The cost of goods sold was $95000. There was a $6000 decrease in accounts payable from the prior period. What were Christine's cash payments to suppliers?

Ale Company reports a $16000 increase in inventory and a $8000 increase in accounts payable during the year. Cost of Goods Sold for the year was $150000. The cash payments made to suppliers were

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

In the Papyrus Corporation cash receipts from customers were $136000 cash payments for operating expenses were $102000 and one-third of the company's $9300 income taxes were paid during the year. Net cash provided by operating activities is:

Marke Inc. had cash sales of $400000 and credit sales of $1150000. The accounts receivable balance increased $30000 during the year. How much cash did Marke receive from its customers during the year?

During the year Salaries Payable decreased by $5000. If Salary Expense amounted to $174000 for the year the cash paid to employees (including deductions from gross pay) is

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

Gonzo Company reports a $25000 increase in inventory and a $12000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $185000. Using the direct method of reporting cash flows from operating activities cash payments made to suppliers were

Ale Company has other operating expenses of $80000. There has been a decrease in prepaid expenses of $6000 during the year and accrued liabilities are $5000 larger than in the prior period. What were Ale's cash payments for operating expenses?

LRRP Company had credit sales of $650000. The beginning accounts receivable balance was $15000 and the ending accounts receivable balance was $140000. What were the cash collections from customers during the period?

Beane Corporation shows income tax expense of $82000. There has been a $6000 decrease in federal income taxes payable and a $7000 increase in state income taxes payable during the year. What was Beane's cash payment for income taxes?

The cost of goods sold during the year was $183000. Merchandise inventory decreased by $8000 during the year and accounts payable decreased by $4000 during the year. Using the direct method of reporting cash flows from operating activities cash payments for merchandise total

Ware Company had purchases of $260000. The comparative balance sheet analysis revealed a $15000 decrease in inventory and a $25000 increase in accounts payable. What were Ware's cash payments to suppliers?

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?