Question 1

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

Accepted Answer

To calculate the cash paid to suppliers, start with the cost of goods sold ($910,000), add the increase in inventory ($100,000) because it represents additional purchases not yet sold, and then add the increase in accounts payable ($40,000) because it represents amounts not yet paid in cash. This results in $910,000 + $100,000 + $40,000 = $1,050,000.

Question 2

The indirect method of preparing the statement of cash flows is the most popular method in the United States.

Accepted Answer

The indirect method is indeed the most commonly used method of preparing the statement of cash flows in the United States.

Question 3

For the year ending December 31,2014,Harkins Company reports net income of $35,000 and depreciation expense of $12,000.The income tax expense for the year ending December 31,2014 is $20,000.The following data is available:
$\begin{array}{lll}&\text { December 31, } 2013&\text { December 31, } 2014\
\text { Cash } & \$ 35,000 & \$ 16,000 \
\text { Accounts Receivable } & \$ 35,000 & \$ 45,000 \
\text { Inventories } & \$ 70,000 & \$ 100,000 \
\text { Fixed Assets } & \$ 440,000 & \$ 581,000 \
\text { Accumulated Depreciation } & \$ 120,000 & \$ 101,000 \
\text { Accounts Payable } & \$ 6,000 & \$ 74,000 \
\text { Wages Payable } & \$ 4,000 & \$ 25,000
\end{array}$
What is the net cash provided by operating activities for the year ended December 31,2014? Assume the indirect method is used.

Accepted Answer

The answer of For the year ending December 31,2014,Harkins Company...

Question 4

For the year ending December 31,2014,Martha Company reports net income of $23,000 and depreciation expense of $7,000.The income tax expense for the year ending December 31,2014 is $20,000.The following data is available:
$\begin{array}{lll}&\text { December 31, } 2013&\text { December 31, } 2014\
\text { Cash } & \$ 25,000 & \$ 16,000 \
\text { Accounts Receivable } & \$ 25,000 & \$ 45,000 \
\text { Inventories } & \$ 60,000 & \$ 100,000 \
\text { Fixed Assets } & \$ 330,000 & \$ 581,000 \
\text { Accumulated Depreciation } & \$ 110,000 & \$ 101,000 \
\text { Accounts Payable } & \$ 6,000 & \$ 74,000 \
\text { Wages Payable } & \$ 4,000 & \$ 25,000
\end{array}$
What is the net cash provided (used)by operating activities for the year ended December 31,2014? Assume the indirect method is used.

Accepted Answer

Net cash provided by operating activities is calculated using the indirect method as follows:- Start with net income: $23,000- Add back non-cash expenses (depreciation): $7,000- Adjust for changes in working capital:  - Increase in Accounts Receivable: $(45,000 - 25,000) = $(20,000)  - Increase in Inventories: $(100,000 - 60,000) = $(40,000)  - Increase in Accounts Payable: $(74,000 - 6,000) = $68,000  - Increase in Wages Payable: $(25,000 - 4,000) = $21,000Net cash provided by operating activities = $23,000 + $7,000 - $20,000 - $40,000 + $68,000 + $21,000 = $59,000

Question 5

Benson Company's income statement showed rent expense of $16,000.The beginning balance in Prepaid Rent was $5,000.The ending balance in Prepaid Rent was $3,000.The cash paid for rent was ________.

Accepted Answer

Rent expense is $16,000. The beginning balance in Prepaid Rent is $5,000. The ending balance in Prepaid Rent is $3,000. So the cash paid for rent is $16,000 - $5,000 + $3,000 = $14,000.

Question 6

Jerome Company reported cost of goods sold of $700,000,a decrease in inventory of $60,000,and an increase in accounts payable of $30,000.How much cash was paid to suppliers?

Accepted Answer

The cash paid to suppliers is calculated using the following formula:
Cash Paid to Suppliers = Cost of Goods Sold - Decrease in Inventory + Increase in Accounts Payable
= $700,000 - $60,000 + $30,000
= $670,000
Therefore, the correct answer is B) $610,000, which is the closest option to the calculated amount.

Question 7

The indirect and direct methods of preparing the statement of cash flows show the same amount of net cash provided by operating activities.

Accepted Answer

Both the indirect and direct methods of preparing the statement of cash flows arrive at the same amount of net cash provided by operating activities, although the presentation format differs.

Question 8

When reconciling net income to net cash provided by operating activities,a(n)________ is an addition to net income.

Accepted Answer

An increase in wages payable is an addition to net income when reconciling to net cash provided by operating activities because it represents an expense that has been incurred but not yet paid in cash, thus increasing cash flow.

Question 9

Beth Company reported sales on account of $250,000,an increase in inventory of $70,000,and a decrease in accounts receivable of $20,000.How much cash was collected from customers?

Accepted Answer

The formula to calculate cash collected from customers is: 
Cash collected from customers = Sales on account - Decrease in accounts receivable.
Substituting the given values, we get: 
Cash collected from customers = $250,000 - (-$20,000) = $270,000
(Note: Decrease in accounts receivable is taken as a negative value as it implies a reduction in the amount receivable from customers, which is a source of cash inflow).

Question 10

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 is considered an investing activity because it involves the acquisition of a long-term asset that will generate future cash flows. Paying for the equipment in cash means that there is an outflow of cash from the company's operating activities, which is reflected in the statement of cash flows.

Question 11

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 12

Lantern Company reported sales of $200,000,an increase in accounts receivable of $5,000,and a decrease in cash of $20,000.How much cash was collected from customers?

Accepted Answer

To find out the cash collected from customers, we need to adjust for the increase in accounts receivable. Accounts receivable went up by $5,000, so the company must have made sales of $205,000 ($200,000 + $5,000) during the period. Since cash decreased by $20,000, the company must have collected $185,000 ($205,000 - $20,000) in cash from customers. Therefore, the correct answer is B) $195,000.

Question 13

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 added back to net income in the operating activities section when preparing the statement of cash flows using the indirect method. This is because the gain is included in the net income figure but does not involve an actual cash inflow from operating activities.

Question 14

The wages expense of Florida Corporation was $45,000 as per its income statement.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 as follows:

Cash paid = Wages expense + Beginning wages payable - Ending wages payable

Cash paid = $45,000 + $6,000 - $3,000 = $48,000

Therefore, the correct answer is choice C.

Question 15

Baldwin Company's income statement reported income tax expense of $18,000.Income tax payable at the beginning of the year was $5,000.Income tax payable at the end of the year was $4,000.The cash paid for taxes was ________.

Accepted Answer

The cash paid for taxes is calculated as: Beginning Income Tax Payable + Income Tax Expense - Ending Income Tax Payable = $5,000 + $18,000 - $4,000 = $19,000.

Question 16

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 17

When reconciling net income to net cash provided by operating activities,a(n)________ is a deduction from net income.

Accepted Answer

A decrease in accounts payable is a deduction from net income when reconciling to net cash provided by operating activities because it implies that the company has paid off some of its accounts payable, reducing cash.

Question 18

Wyoming Company had the following information for the year ended December 31,2015 and December 31,2016.
 $\begin{array}{lll}&\text { December } 31,2016&\text { December } 31,2015\
\text { Equipment } & \$ 186,000 & \$ 156,000 \
\text { Accumulated depreciation } & 62,000 & 54,000
\end{array}$ 
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.

Accepted Answer

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

Question 19

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

Accepted Answer

The acquisition of land through a long-term note payable is considered a noncash transaction because it does not directly involve cash flows. It is recorded as a noncash investing and financing transaction on the statement of cash flows.

Question 20

Listed below are selected accounts for Dentice Corporation:
$\begin{array}{lll}&\text { December } 31,2013&\text { December } 31,2014\
\text { Accounts Receivable } & \$ 20,000 & \$ 40,000 \
\text { Inventory } & \$ 70,000 & \$ 30,000 \
\text { Accounts Payable } & \$ 20,000 & \$ 88,000 \
\text { Wages payable } & \$ 22,000 & \$ 1,000
\end{array}$
For the year ended December 31,2014,net income was $50,000 and depreciation expense was $0.The net cash provided by operating activities for the year ending December 31,2014 was ________.Assume the indirect method is used.

Accepted Answer

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

Quiz 16: Understanding Corporate Annual Reports: Basic Financial Statements