Question 1

Which of the following is not reported as a cash flow from investing activities?

Accepted Answer

Purchasing land in exchange for common stock is not reported as a cash flow from investing activities because it involves a non-cash transaction. Cash flows from investing activities involve cash transactions related to the acquisition or disposal of long-term assets, such as property, plant, and equipment, long-term investments, and intangible assets. Choices A, C, and D involve cash transactions related to the acquisition or disposal of depreciable assets, long-term investments, and intangible assets, respectively.

Question 2

Atkins Corporation has provided the following information for the year ended December 31, 2016: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
Which of the following statements is correct with respect to determining cash flow from investing activities? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

The answer of Atkins Corporation has provided the following information...

Question 3

KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable. How would this transaction be reported within the cash flow from investing activities section of the cash flow statement?

Accepted Answer

The cash flow from investing activities section of the cash flow statement only includes actual cash transactions. Since KAJ Incorporated paid $35,000 in cash for the machine, this amount represents the cash outflow for investing activities. The note payable of $215,000 is a financing activity, not an investing activity.

Question 4

Which of the following would not be reported as a financing activities cash flow?

Accepted Answer

Purchasing a building by signing a note payable would be reported as a cash flow from investing activities, not financing activities. Financing activities include activities related to borrowing money (such as issuing bonds or signing a loan agreement) and raising equity capital (such as issuing common stock), payments to shareholders (such as cash dividends), and transactions related to treasury stock (such as repurchasing shares).

Question 5

Amanda Company reported income tax expense of $250,000. Beginning income taxes payable was $30,000, while ending income taxes payable was $25,000, and accounts payable decreased $10,000. How much cash was paid for taxes?

Accepted Answer

The cash paid for taxes can be calculated by adjusting the income tax expense for the change in income taxes payable. The calculation is as follows: Income tax expense ($250,000) + Decrease in income taxes payable ($30,000 - $25,000 = $5,000) = Cash paid for taxes ($250,000 + $5,000 = $255,000). The change in accounts payable is not relevant to the calculation of cash paid for taxes.

Question 6

Slipper Company sold a productive asset, a machine, for cash. It originally cost Slipper $20,000. The accumulated depreciation at the date of disposal was $15,000. A gain on the disposal of $2,000 was reported. What was the asset's selling price?

Accepted Answer

The answer of Slipper Company sold a productive asset, a...

Question 7

Bold Company's 2016 income statement reported total sales revenue of $250,000. During 2016, accounts receivable decreased by $20,000 and accounts payable increased $10,000. How much cash was collected from customers during 2016?

Accepted Answer

The decrease in accounts receivable indicates that more cash was collected than the sales revenue reported. Therefore, cash collected = Sales revenue + Decrease in accounts receivable = $250,000 + $20,000 = $270,000.

Question 8

Which of the following transactions is not reported in the statement of cash flows as a cash flow from investing activities?

Accepted Answer

This transaction is reported as a cash flow from financing activities, not investing activities, because it involves the issuance of common stock. Selling a depreciable asset for cash at a loss (A), purchasing a patent using cash (B), and purchasing shares of common stock of another company using cash (D) are all cash flows from investing activities.

Question 9

A company reported an increase in accounts payable and a decrease in inventory during 2016. Which of the following statements is correct?

Accepted Answer

The answer of A company reported an increase in accounts...

Question 10

The financial statements for World Company show the following: Cost of goods sold, $725,000.  How much cash was paid to suppliers?

Accepted Answer

The answer of The financial statements for World Company show...

Question 11

A company reported an increase in prepaid rent and an increase in accrued liabilities during 2016. Which of the following statements is correct?

Accepted Answer

When determining cash paid for operating expenses, the increase in prepaid rent is added to operating expenses, and the increase in accrued liabilities is subtracted from operating expenses. This is because prepaid rent is a cash outflow, so it needs to be added back to operating expenses to reflect the actual cash paid. On the other hand, accrued liabilities are expenses that have been incurred but not yet paid in cash, so they need to be subtracted from operating expenses to reflect the actual cash paid.

Question 12

A company's 2016 income statement reported total sales revenue of $1,200,000; accounts receivable increased by $25,000 and the unearned sales revenue account decreased $15,000 during 2016. How much cash was collected from customers during 2016?

Accepted Answer

The answer of A company's 2016 income statement reported total...

Question 13

During 2016, Tommy's Toys reported the following: long-term debt repayments, $503 million; interest paid, $143 million; proceeds from exercise of stock options, $27 million, and issue of common stock in exchange for land costing $10 million. What is the 2016 net cash flow from financing activities?

Accepted Answer

The net cash flow from financing activities is calculated as: long-term debt repayments ($503 million) + interest paid ($143 million) - proceeds from exercise of stock options ($27 million) = $619 million net cash outflow. However, the issue of common stock in exchange for land is a non-cash transaction and does not affect cash flow. Therefore, the correct net cash outflow is $476 million.

Question 14

A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2016. Which of the following statements is correct?

Accepted Answer

An increase in accounts receivable implies that sales have been made on credit and payment is expected in the future. Therefore, the amount of sales revenue reported for the year would be higher than the cash collected from customers. To calculate the cash collected from customers, we need to subtract the increase in accounts receivable from the reported sales revenue. On the other hand, an increase in unearned sales revenue implies that the company has received cash in advance for goods or services that will be delivered in the future. Therefore, the amount of cash collected from customers would be higher than the sales revenue reported for the year. To calculate the cash collected from customers, we need to add the increase in unearned sales revenue to the reported sales revenue. Therefore, the correct formula would be: Cash collected from customers = Sales revenues - Increase in accounts receivable + Increase in unearned sales revenues.

Question 15

Halbur Company reported the following for its recent year of operation:  No new equipment was purchased during the year. What was the selling price of the equipment?

Accepted Answer

The book value of the equipment at the end of the year was $900, which means that the equipment has been fully depreciated and has no value left for the company. Therefore, if the equipment was sold, the selling price would also be $900.

Question 16

A company reported an increase in accrued sales revenues and a decrease in unearned sales revenues during 2016. Which of the following statements is correct?

Accepted Answer

The answer of A company reported an increase in accrued...

Question 17

Madison Company had sales of $154,000. Additional information from the balance sheet is below:  How much cash was collected from customers?

Accepted Answer

The answer of Madison Company had sales of $154,000. Additional...

Question 18

Aaron Inc. reported operating expenses during 2017 of $765,000 (including $80,000 of depreciation expense). Prepaid expenses increased $25,000 while accrued liabilities increased $43,000. How much cash was paid for operating expenses during 2017?

Accepted Answer

To find the cash paid for operating expenses, adjust the reported operating expenses by changes in prepaid expenses and accrued liabilities, and exclude non-cash depreciation. Cash paid = $765,000 - $80,000 (depreciation) + $25,000 (increase in prepaid expenses) - $43,000 (increase in accrued liabilities) = $667,000.

Question 19

KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable. How would this transaction be reported within the cash flow from financing activities section of the cash flow statement?

Accepted Answer

The transaction involves acquiring a machine through a down payment and a note payable, which affects investing and financing activities respectively. However, the cash flow from financing activities only includes the inflows and outflows of cash related to borrowing and repaying debts, issuing and buying back shares, and paying dividends. Since the note payable represents a non-cash financing activity, it does not directly affect the cash flows and thus is not reported in the cash flow from financing activities section. The cash paid ($35,000) is related to the purchase of the machine, which is an investing activity, not a financing activity.

Question 20

Atkins Corporation has provided the following information for the year ended December 31, 2016: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

The incorrect statement is B. When using the indirect method, net income is adjusted for non-cash expenses, such as depreciation, and gains or losses on the sale of assets. Therefore, the $65,000 depreciation expense will be added back to net income, not increase it. The correct answer in regards to the equipment sale is D, as the sale resulted in a $50,000 cash inflow (the sale price) and a $10,000 gain, resulting in a total cash inflow of $60,000.

Quiz 12: Statement of Cash Flows