Question 1

Vital Corporation reports beginning accounts receivable of $70,200 and ending accounts receivable of $67,900.If sales revenue on account is $950,200,how much cash must have been collected from customers during the period?

Accepted Answer

To find the cash collected from customers, we start with the sales on account and adjust for the change in accounts receivable. The beginning accounts receivable is $70,200 and the ending accounts receivable is $67,900, which means $2,300 was collected (reduction in accounts receivable). Adding this to the sales on account of $950,200 gives us $952,500 ($950,200 + $2,300).

Question 2

Cash payments for income tax equals the income tax expense less the decrease in income tax payable.

Accepted Answer

Cash payments for income tax equals the increase in income tax payable minus the income tax expense.

Question 3

If accounts receivable increases,then sales exceeded cash receipts on account.

Accepted Answer

Accounts receivable represents the amount owed by customers to a company for goods or services that have been sold but not yet paid for. If accounts receivable increases, it means that the amount that customers owe the company has increased, which suggests that sales exceeded cash receipts on account. This is because customers have purchased goods or services on credit, which increases the company's accounts receivable balance.

Question 4

Cash collections from customers equals sales on account less the increase in accounts receivable.

Accepted Answer

Cash collections from customers represent the amount of money received from customers for goods or services sold on account. Sales on account are the total amount of sales made to customers on credit. The increase in accounts receivable is the difference between the beginning and ending balances of accounts receivable. Therefore, cash collections from customers equals sales on account less the increase in accounts receivable.

Question 5

Cash payments to suppliers equals purchases plus the:

Accepted Answer

Cash payments to suppliers equal purchases plus the decrease in accounts payable because a decrease in accounts payable indicates that cash has been used to pay off some of the outstanding liabilities to suppliers.

Question 6

Cash collections from customers equals sales on account plus the:

Accepted Answer

Cash collections from customers are the amount that a company receives from its customers for the goods or services provided. This amount is equal to the sum of the sales made on account and the decrease in accounts receivable. When accounts receivable decrease, it means that customers are paying off their debts to the company, which results in an increase in the company's cash collections. Therefore, the correct answer is C, decrease in accounts receivable.

Question 7

Dodge Corporation reported cash collections on account of $90,700 and an increase of $13,500 in accounts receivable for the same period.Sales on account for the period were:

Accepted Answer

The correct sales on account for the period is calculated by adding the cash collections on account to the increase in accounts receivable: $90,700 + $13,500 = $104,200.

Question 8

We use the income statement and changes in the related balance sheet accounts to compute the cash effect for the cash flow statement.

Accepted Answer

This statement is true. The income statement provides information about revenues and expenses, while changes in balance sheet accounts (such as accounts receivable, accounts payable, inventory, etc.) affect the amount of cash that flows in or out of a company. By analyzing both the income statement and changes in balance sheet accounts, we can determine the cash effect and prepare the cash flow statement.

Question 9

If salary expense has an ending balance of $48,000 and salary payable shows a decrease of $500,then the cash payment for salaries for the period was $47,500.

Accepted Answer

The ending balance of salary expense only shows the total amount of salary expense incurred during the period, but it does not provide information about the cash payment for salaries. 
The decrease in salary payable could be due to payments made during the period, but it could also be due to other factors such as adjustments or refunds. Therefore, it cannot be assumed that the cash payment for salaries was $47,500 based on this information alone.

Question 10

If accounts receivable increased $15,000 during the period,and sales totalled $135,000 for the same period,cash collections from customers were $120,000.

Accepted Answer

The increase in accounts receivable indicates that not all sales were collected in cash. If sales were $135,000 and accounts receivable increased by $15,000, it means $15,000 of sales were not collected in cash, so cash collections from customers were $135,000 - $15,000 = $120,000.

Question 11

Pinto Corporation reported sales of $895,000 and its accounts receivable balance decreased $13,500 during the same period.Cash collections from customers for the period were:

Accepted Answer

Cash collections from customers are calculated by adding the decrease in accounts receivable to the sales. Therefore, $895,000 + $13,500 = $908,500.

Question 12

The Cleaver Corporation has beginning inventory of $100,000 and ending inventory of $80,000.Cost of goods sold is $307,500.Beginning accounts payable is $52,500 and ending accounts payable is $40,000.How much are cash payments to suppliers for inventory?

Accepted Answer

Cash payments to suppliers can be calculated using the formula: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Rearranging for Purchases gives: Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory. Then, Cash Payments = Purchases + Beginning Accounts Payable - Ending Accounts Payable. Substituting the values: Purchases = $307,500 + $80,000 - $100,000 = $287,500. Cash Payments = $287,500 + $52,500 - $40,000 = $300,000.

Question 13

Cost of goods sold,inventory,and accounts receivable are all analyzed to determine cash payments for inventory.

Accepted Answer

Cost of goods sold, inventory, and accounts receivable are analyzed to determine cash flow and financial health, but cash payments for inventory are specifically determined by inventory purchases and payment terms with suppliers.

Question 14

Cash payments to suppliers equals purchases plus the decrease in accounts payable.

Accepted Answer

Cash payments to suppliers are used to pay for purchases. If accounts payable decreases, it means that the company has paid more to suppliers than it has purchased, so the cash payments to suppliers must be greater than purchases.

Question 15

Retained earnings contains a debit of $10,000 representing dividends while the dividends payable account decreased $500.Cash paid for dividends during the period amounted to $10,500.

Accepted Answer

The fact that the dividend account has a debit of $10,000 and the dividends payable account decreased by $500 indicates that $10,500 was paid out during the period, which matches the amount stated as being paid in cash for dividends. Therefore, the statement is true.

Question 16

As the accountant at O'Donnell Industries,you are responsible for preparing the cash flow statement.You have decided to prepare the statement using the direct method and have gathered the following data from the accounting records:
 payment of long-term debt$\quad$$\quad$$\quad$$\quad$$200,000
Collections on accounts receivable$\quad$$\quad$210,600 Acquisition of equipment by issuing
  Cash received from sale of property,plant,and equipment,
  Prepare the cash flow statement for the year ended December 31,2017,using the direct method,and include a schedule of noncash investing and financing activities if necessary.

Accepted Answer

The answer of As the accountant at O'Donnell Industries,you are...

Question 17

Accounts receivable increased $13,000 during the current period.Sales on account for the current period were $175,000.The amount to be reported on the cash flow statement using the direct method under operating activities is:

Accepted Answer

Under the direct method, accounts receivable is adjusted by adding the increase in accounts receivable and subtracting the decrease in accounts receivable from sales on account. In this case, there is only an increase in accounts receivable of $13,000 and no decrease, therefore we add the increase to sales on account ($175,000 + $13,000) to get the total amount of cash received from customers, which is $188,000. However, the question asks specifically for the amount to be reported on the cash flow statement under operating activities, and to arrive at that amount we need to subtract any non-operating and non-cash items included in sales. Since there is no information about any such items, we assume that the full amount of sales on account is from operating activities, and therefore the answer is $175,000.

Question 18

Cost of goods sold,plus increase in inventory,plus the decrease in accounts payable equals the cash paid to suppliers of inventory.

Accepted Answer

The equation is a variation of the accounting equation: Assets = Liabilities + Equity. In this case, the assets are inventory and accounts payable, the liabilities are the cash paid to suppliers, and the equity is the cost of goods sold.

Question 19

If the cash collections from customers amounted to $634,800,and the accounts receivable account decreased $19,400 during the same period,sales for the period were:

Accepted Answer

The answer of If the cash collections from customers amounted...

Question 20

Quincy Industries began the year with $46,700 in accounts receivable and ended the year with $31,900 in accounts receivable.If sales for the year were $687,000,the cash collected from customers during the year amounted to:

Accepted Answer

To calculate the cash collected from customers, you start with the sales for the year and adjust for the change in accounts receivable. The change in accounts receivable is the beginning balance minus the ending balance, which is $46,700 - $31,900 = $14,800. This amount represents the net cash collected over and above sales. Therefore, cash collected is sales plus the decrease in accounts receivable: $687,000 + $14,800 = $701,800.

Quiz 6: The Cash Flow Statement