Question 1

Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year.Cash payments for income tax reported on the cash flow statement using the direct method is

Accepted Answer

The direct method of preparing the cash flow statement requires reporting of actual cash payments made during the year. 
Using the information given, the cash payments would be calculated as follows:

Income tax paid = Income tax payable at the beginning of the year + Income tax payable at the end of the year - Income tax expense for the year 
Income tax paid = $30,000 + $40,000 - $175,000 
Income tax paid = $-105,000

Since the result is negative, it means that the company received a tax refund of $105,000 during the year, rather than making cash payments for income tax.

Therefore, the correct answer is B) $165,000, which is the income tax expense ($175,000) minus the net income tax refund received ($-105,000).

Question 2

Cash dividends of $50,000 were declared during the year.Cash dividends payable were $10,000 and $5,000 at the beginning and end of the year,respectively.The amount of cash for the payment of dividends during the year is

Accepted Answer

Cash dividends declared during the year = $50,000
Cash dividends payable at the beginning of the year = $10,000
Cash dividends payable at the end of the year = $5,000
Total cash for the payment of dividends during the year = Cash dividends declared - Cash dividends payable at the beginning + Cash dividends payable at the end
= $50,000 - $10,000 + $5,000
= $45,000 + $10,000
= $55,000
Therefore, the correct answer is A) $55,000.

Question 3

Zenith Corporation sells some of its used store fixtures.The acquisition cost of the fixtures is $12,500,the accumulated depreciation on these fixtures is $9,750 at the time of sale.The fixtures are sold for $5,300.The value of this transaction in the Investing section of the statement of cash flows is:

Accepted Answer

The answer of Zenith Corporation sells some of its used...

Question 4

The following information is available from the current period financial statements:

The net cash flow from operating activities using the indirect method is

Accepted Answer

The answer of The following information is available from the...

Question 5

Operating expenses other than depreciation for the year were $400,000.Prepaid expenses increased by $17,000 and accrued expenses decreased by $30,000 during the year.Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be

Accepted Answer

The answer of Operating expenses other than depreciation for the...

Question 6

The following selected account balances appeared on the financial statements of the Washington Company:

The Washington Company uses the direct method to calculate net cash flow from operating activities.
Cash collections from customers are

Accepted Answer

The answer of The following selected account balances appeared on...

Question 7

Sales for the year were $600,000.Accounts receivable were $100,000 and $80,000 at the beginning and end of the year.Cash received from customers to be reported on the cash flow statement using the direct method is

Accepted Answer

The answer of Sales for the year were $600,000.Accounts receivable...

Question 8

Baxter Company reported a net loss of $13,000 for the year ended December 31,2010.During the year,accounts receivable decreased by $5,000,merchandise inventory increased by $8,000,accounts payable increased by $10,000,and depreciation expense of $4,000 was recorded.During 2010,operating activities

Accepted Answer

The answer of Baxter Company reported a net loss of...

Question 9

In calculating cash flows from operating activities using the indirect method,a gain on the sale of equipment is

Accepted Answer

When using the indirect method to calculate cash flows from operating activities, gains on the sale of equipment are deducted from net income because they are considered non-operating and do not involve cash. This adjustment is made to arrive at the cash flows from operating activities.

Question 10

On the statement of cash flows,the cash flows from operating activities section would include

Accepted Answer

The cash flows from operating activities section of the statement of cash flows includes cash receipts and payments related to the company's primary operations, such as sales, purchases, and operating expenses. Payment for interest on short-term notes payable is a cash outflow related to the financing of the company's operations and is included in the operating activities section. Receipts from the issuance of capital stock and payments for the purchase of investments are cash flows related to investing and financing activities, respectively, and would be included in those sections of the statement of cash flows. Payments for cash dividends are also a financing activity and would be included in the financing activities section.

Question 11

The net income reported on the income statement for the current year was $250,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Accepted Answer

The answer of The net income reported on the income...

Question 12

Rogers Company reported net income of $35,000 for the year.During the year,accounts receivable increased by $7,000,accounts payable decreased by $3,000 and depreciation expense of $8,000 was recorded.Net cash provided by operating activities for the year is

Accepted Answer

Net cash provided by operating activities can be calculated using the indirect method: 
Net Income + Depreciation expense - Increase in accounts receivable + Decrease in accounts payable
$35,000 + $8,000 - $7,000 + $3,000 = $39,000 - $6,000 = $33,000. Therefore, the correct answer is C.

Question 13

The following selected account balances appeared on the financial statements of the Washington Company:

The Washington Company uses the direct method to calculate net cash flow from operating activities.
Cash paid to suppliers is

Accepted Answer

The answer of The following selected account balances appeared on...

Question 14

A corporation uses the indirect method for preparing the Statement of Cash Flows.A fixed asset has been sold for $25,000 representing a gain of $4,500.The value in the operating activities section regarding this event would be:

Accepted Answer

Under the indirect method for preparing the Statement of Cash Flows, gains on the sale of fixed assets are deducted from net income in the operating activities section. Therefore, the value in the operating activities section regarding this event would be negative and equal to the gain on the sale, which is $4,500. So, the correct answer is B.

Question 15

Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of the year,respectively.Income reported on the income statement for the year was $120,000.Exclusive of the effect of other adjustments,the cash flows from operating activities to be reported on the statement of cash flows is

Accepted Answer

The answer of Accounts receivable resulting from sales to customers...

Question 16

The cost of merchandise sold during the year was $50,000.Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year,respectively.Accounts payable were $6,000 and $5,000 at the beginning and end of the year,respectively.Using the direct method of reporting cash flows from operating activities,cash payments for merchandise total

Accepted Answer

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

Question 17

Free cash flow is

Accepted Answer

Free cash flow is the cash flow generated by a company after deducting the capital expenditures required to maintain or expand its asset base. Therefore, the correct option is D, which states that free cash flow is cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends. Option A is incorrect because it implies that all cash in the bank is free cash flow, which is not the case. Option B is incomplete as it only considers cash from operations without deducting required capital expenditures. Option C is also incorrect as it includes cash from financing, which is not a part of free cash flow.

Question 18

A company had net income of $252,000.Depreciation expense is $26,000.During the year,Accounts Receivable and Inventory increased by $15,000 and $40,000,respectively.Prepaid Expenses and Accounts Payable decreased by $2,000 and $4,000,respectively.There was also a loss on the sale of equipment of $3,000.How much cash was provided by operating activities?

Accepted Answer

Cash from operating activities can be calculated by starting with net income and adjusting for non-cash expenses and changes in working capital.

Starting with net income: $252,000

Adding back depreciation: +$26,000

Adding back loss on sale of equipment: +$3,000

Adjusting for changes in working capital: 
Accounts Receivable: -$15,000 
Inventory: -$40,000 
Prepaid Expenses: +$2,000 
Accounts Payable: +$4,000

Cash provided by operating activities: $224,000

Question 19

If accounts payable have increased during a period

Accepted Answer

An increase in accounts payable indicates that the company has purchased goods or services on credit and has not paid for them yet. This means that expenses on an accrual basis have increased, as the company has incurred the cost of the goods or services even though payment has not been made yet. As a result, expenses on an accrual basis will be greater than expenses on a cash basis, since cash basis accounting only records expenses when payment is made.

Question 20

Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year,respectively.Income reported on the income statement for the year was $110,000.Exclusive of the effect of other adjustments,the cash flows from operating activities to be reported on the statement of cash flows is

Accepted Answer

The answer of Accounts receivable from sales to customers amounted...

Quiz 14: Statement of Cash Flows