Question 1

An example of a financing activity on the statement of cash flows is the conversion of debt to common stock.

Accepted Answer

The conversion of debt to common stock is considered a non-cash financing activity and therefore is not reported in the cash flows from financing activities section of the statement of cash flows.

Question 2

Bob Company reported sales of $200,000,an increase in accounts receivable of $15,000,and a decrease in cash of $20,000.How much cash was collected from customers?

Accepted Answer

The cash collected from customers is calculated by adjusting the sales figure for the change in accounts receivable. Since accounts receivable increased by $15,000, it means that $15,000 of the sales were not collected in cash. Therefore, cash collected = $200,000 (sales) - $15,000 (increase in accounts receivable) = $185,000.

Question 3

Hollander Company gave a long-term note payable in the amount of $285,000 to acquire a new piece of equipment.This transaction will be reported on the statement of cash flows as a ________.

Accepted Answer

The transaction involves a long-term note payable and does not involve cash, so it is reported as a noncash transaction on the statement of cash flows.

Question 4

For the year ending December 31,2012,Magadena Company reports net income of $23,000 and depreciation expense of $17,000.The income tax expense for the year ending December 31,2012 is $20,000.The following data is available:  What is the net cash provided(used)by operating activities for the year ended December 31,2012? Assume the indirect method is used.

Accepted Answer

Net cash provided by operating activities can be calculated using the indirect method by adjusting net income for non-cash items, such as depreciation, and changes in current assets and liabilities.

Net cash provided by operating activities = Net income + Depreciation - Increase in current assets + Increase in current liabilities

Using the information given, we can calculate:

Net cash provided by operating activities = $23,000 + $17,000 - 0 + 0 - $20,000
Net cash provided by operating activities = $69,000

Therefore, the correct answer is D.

Question 5

The wages expense of Ben Corporation was $45,000.Beginning wages payable was $6,000.Ending wages payable was $3,000.The cash paid to employees was ________.

Accepted Answer

The cash paid to employees can be calculated by adding the beginning wages payable ($6,000) to the wages expense ($45,000) and subtracting the ending wages payable ($3,000). 
Therefore, cash paid to employees = $6,000 + $45,000 - $3,000 = $48,000. 
Hence, the correct option is C.

Question 6

For the year ending December 31,2012,Maydak Company reports net income of $23,000 and depreciation expense of $17,000.The income tax expense for the year ending December 31,2012 is $20,000.The following data is available:  What is the net cash provided by operating activities for the year ended December 31,2012? Assume the indirect method is used.

Accepted Answer

The answer of For the year ending December 31,2012,Maydak Company...

Question 7

When calculating the net cash provided by operating activities,which procedure should NOT be carried out? Assume the indirect method is used.

Accepted Answer

The decrease in prepaid expenses should be added back to calculate net cash provided by operating activities as it represents an increase in cash flows that were previously recorded as an outflow when the expenses were initially paid. The other options (A, B, D) are all correctly included or excluded in the calculation.

Question 8

Fabulous Company had the following information for the year ended December 31,2015 and December 31,2016.
  Depreciation expense for the year ended December 31,2016 was $18,000.Equipment that cost $20,000 was sold at a $3,000 loss.The equipment had accumulated depreciation of $10,000.
Required:
Prepare the investing section of the statement of cash flows for the year ended December 31,2016.Use the direct method.

Accepted Answer

The answer of Fabulous Company had the following information for...

Question 9

A gain on the sale of a fixed asset is reported on the statement of cash flows ________.

Accepted Answer

Gains on the sale of fixed assets are deducted from net income in the operating activities section when using the indirect method, as they are included in net income but do not affect cash flow from operating activities.

Question 10

Steve Company reported cost of goods sold of $910,000,an increase in inventory of $100,000,and a decrease in accounts payable of $40,000.How much cash was paid to suppliers?

Accepted Answer

The cash paid to suppliers is calculated as: Cost of Goods Sold ($910,000) + Increase in Inventory ($100,000) - Decrease in Accounts Payable ($40,000) = $1,050,000.

Question 11

Lopez Company's income statement reported income tax expense of $18,000.Income tax payable at the beginning of the year was $1,000.Income tax payable at the end of the year was $4,000.The cash paid for taxes was ________.

Accepted Answer

Income tax expense = $18,000Income tax payable at the beginning of the year = $1,000Income tax payable at the end of the year = $4,000Cash paid for taxes = Income tax expense + Income tax payable at the beginning of the year - Income tax payable at the end of the year= $18,000 + $1,000 - $4,000= $15,000

Question 12

The major operating activity on the statement of cash flows that decreases cash is ________.

Accepted Answer

Payment for inventory purchases decreases cash because it involves outflow of cash from the company to the supplier for the purchase of inventory.

Question 13

Listed below are selected accounts for Spence Corporation:  For the year ended December 31,2011,net income was $42,000 and depreciation expense was $0.The net cash provided by operating activities for the year ending December 31,2011 was ________.Assume the indirect method is used.

Accepted Answer

The answer of Listed below are selected accounts for Spence...

Question 14

The major operating activity on the statement of cash flows that increases cash is ________.

Accepted Answer

Collections from sales to customers are an operating activity that directly increases cash. This is because cash is received from customers as a result of selling goods or services, and is recorded as an increase in cash on the statement of cash flows. Sales on account, proceeds from the sale of common stock, and proceeds from the issue of bonds payable are all financing activities or investing activities, respectively, and may or may not result in an increase in cash depending on the circumstances.

Question 15

Colorado Company reported cost of goods sold of $650,000.Beginning inventory was $150,000 and ending inventory was $140,000.How much inventory did the company purchase?

Accepted Answer

Cost of goods sold = Beginning inventory + Purchases - Ending inventory$650,000 = $150,000 + Purchases - $140,000Purchases = $650,000 - $150,000 + $140,000Purchases = $640,000

Question 16

Yesterday Company reports the following information:  Depreciation expense for the year ending December 31,2012 is $17.No fixed assets were sold during 2012.What is the net cash flow from investing activities for the year ending December 31,2012?

Accepted Answer

The depreciation expense is added back to net income in the operating activities section of the statement of cash flows, as it is a non-cash expense. Since no fixed assets were sold during 2012, there would be no cash inflow from investing activities. However, the depreciation expense would be factored into the calculation of cash flow from operating activities. Therefore, the net cash flow from investing activities for the year ending December 31, 2012 would be a cash outflow of $17 (the amount of the depreciation expense). Hence, option C is the correct answer.

Question 17

Today Corporation reports the following data:  Depreciation expense for the year ending December 31,2012 is $27.The company sold a fixed asset for $10 cash on December 1,2012.The cost of the fixed asset sold was $20 and the accumulated depreciation on the fixed asset sold was $10.What is the net cash flow from investing activities for the year ending December 31,2012?

Accepted Answer

The answer of Today Corporation reports the following data: ...

Question 18

Hope Company reported sales on account of $250,000,an increase in inventory of $70,000,and a decrease in accounts receivable of $40,000.How much cash was collected from customers?

Accepted Answer

The cash collected from customers is calculated by adding the decrease in accounts receivable to the sales on account: $250,000 + $40,000 = $290,000. The change in inventory does not affect cash collection from customers.

Question 19

Austin Company reported cost of goods sold of $700,000,a decrease in inventory of $60,000,and an increase in accounts payable of $35,000.How much cash was paid to suppliers?

Accepted Answer

The cash paid to suppliers can be calculated using the formula: Cost of goods sold - Decrease in inventory + Increase in accounts payable.

Cash paid to suppliers = $700,000 - $60,000 + $35,000 = $675,000.

Therefore, the best choice is B) $675,000.

Question 20

An example of an investing activity on the statement of cash flows is the purchase of equipment for cash.

Accepted Answer

The purchase of equipment for cash is an example of an investing activity because it involves a long-term investment in assets that will be used to generate income for the business over time. This would be reflected in the investing section of the statement of cash flows.

Quiz 16: Understanding Corporate Annual Reports: Basic Financial Statements