Question 1

Land costing $125,000 was sold for $325,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Accepted Answer

The answer of Land costing $125,000 was sold for $325,000...

Question 2

Free cash flow provides an indication of a company's ability to

Accepted Answer

Free cash flow is the cash generated by a company after deducting capital expenditures, which can be used to invest in new capital expenditures as well as to pay dividends to shareholders. Therefore, options (a) and (c) are both correct. Free cash flow is not the same as net income (option B).

Question 3

Laser Performance Inc. has the following information available (amount in thousands).  What is the current cash debt coverage?

Accepted Answer

The answer of Laser Performance Inc. has the following information...

Question 4

If a loss of $27,000 is incurred in selling (for cash) office equipment having a book value of $200,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The answer of If a loss of $27,000 is incurred...

Question 5

The current cash debt coverage is used to evaluate

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The answer of The current cash debt coverage is used...

Question 6

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's current cash debt coverage?

Accepted Answer

The answer of During 2014, Ecuyer Industries reported cash provided...

Question 7

The statement of cash flows will not provide insight into

Accepted Answer

The statement of cash flows provides information about past cash flows, not future ones. Therefore, it cannot provide exact proceeds of a future bond issue.

Question 8

Each of the following is an adjustment to convert net income to net cash provided by operating activities except

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The answer of Each of the following is an adjustment...

Question 9

The current cash debt coverage is computed by dividing

Accepted Answer

The current cash debt coverage ratio is calculated by dividing cash provided by operating activities (found in the statement of cash flows) by average current liabilities (found in the balance sheet). This ratio measures a company's ability to repay its current liabilities from its operating cash flows.

Question 10

The cash debt coverage is computed by dividing net cash provided by operating activities by

Accepted Answer

The cash debt coverage ratio measures the ability of a company to repay its total liabilities from its operating cash flow. Therefore, the ratio is calculated by dividing net cash provided by operating activities by the average total liabilities. Choice A is incorrect because it only considers current liabilities, while choice B is incorrect because net sales are not directly related to the calculation of the ratio. Choice C is also incorrect because it only considers long-term liabilities.

Question 11

Minette Company reported net income of $120,000 for the year ended December 31, 2014. During the year, inventories decreased by $24,000, accounts payable decreased by $36,000, depreciation expense was $27,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2014 using the indirect method was

Accepted Answer

Net cash provided by operating activities using the indirect method can be calculated as:
Net Income + Depreciation Expense + Losses - Gains + Decrease in Current Assets - Increase in Current Liabilities
Plugging in the given values:
$120,000 + $27,000 - $9,000 - $24,000 + $36,000 = $150,000
Therefore, the correct answer is B) $126,000, which is closest to $150,000.

Question 12

All of the following adjustments are added to net income in computing net cash provided by operating activities except

Accepted Answer

The answer of All of the following adjustments are added...

Question 13

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's free cash flow?

Accepted Answer

Free cash flow = Cash provided by operations - Cash spent on fixed assets
Free cash flow = $397,000,000 - $138,000,000
Free cash flow = $259,000,000

Question 14

When using the indirect method to compute cash provided by operating activities

Accepted Answer

Under the indirect method, amortization expense is added back to net income because it is a non-cash expense that was deducted from revenue to calculate net income. Option A is incorrect because income taxes paid are a component of operating cash flows and need to be included in the cash flow statement. Option C is incorrect because decreases in inventory are added back to net income, not subtracted. Option D is incorrect because increases in accounts receivable are subtracted from net income because they represent cash that has not yet been received, and therefore should not be counted as operating cash flows.

Question 15

If a gain of $13,500 is incurred in selling (for cash) office equipment having a book value of $100,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash inflow from the sale of office equipment is $113,500 ($100,000 book value + $13,500 gain). This amount will be reported in the cash flows from investing activities section of the statement of cash flows.

Question 16

Laser Performance Inc. has the following information available (amount in thousands).  What is the cash debt coverage?

Accepted Answer

The answer of Laser Performance Inc. has the following information...

Question 17

All of the following adjustments would be deducted in determining net cash provided by operating activities except a(n)

Accepted Answer

The answer of All of the following adjustments would be...

Question 18

A transaction involving a gain on the sale of equipment affects cash provided (used) by

Accepted Answer

A gain on the sale of equipment is a non-operating activity as it does not relate to the core operations of the business. It would be reported in the investing section of the statement of cash flows as it involves the sale of a long-term asset. Therefore, it affects cash provided (used) by operating and investing activities. It does not affect cash provided (used) by financing activities as it does not involve the issuance or repayment of debt or equity.

Question 19

If a gain of $45,000 is incurred in selling (for cash) office equipment having a book value of $180,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash proceeds from the sale of office equipment is $180,000 + $45,000 = $225,000. Therefore, the total amount reported in the cash flows from investing activities section of the statement of cash flows is $225,000.

Question 20

If a loss of $9,000 is incurred in selling (for cash) office equipment having a book value of $80,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The answer of If a loss of $9,000 is incurred...

Quiz 12: Statement of Cash Flows