Question 1

Kanaskas Corp.had the following activities during the year: $$\begin{array} { l r } 
\text { Proceeds from the sale of land } & \$ 300,000 \
\text { Gain on sale of land } & \$ 50,000 \
\text { Proceeds from the issue of common shares } & \$ 1,000,000 \
\text { Purchase of equipment } & \$ 450,000 \
\text { Repayment of mortgage outstanding on the sold land } & \$ 200,000 \
\text { Interest paid } & \$ 22,500 \
\text { Dividends paid } & \$ 10,000
\end{array}$$ What was Kanaskas' cash flow from investing activities for the year?

Accepted Answer

Cash flow from investing activities includes proceeds from the sale of land ($300,000) and the purchase of equipment ($450,000). The gain on sale of land ($50,000) is not included in cash flow calculation but is used to adjust the proceeds to find the book value of the land sold. Therefore, the net cash flow from investing activities is $300,000 (inflow) - $450,000 (outflow) = $150,000 outflow.

Question 2

Kanaskas Corp had the following activities during the year: $$\begin{array} { l r } 
\text { Proceeds from the sale of land } & \$ 300,000 \
\text { Gain on sale of land } & \$ 50,000 \
\text { Proceeds from the issue of common shares } & \$ 1,000,000 \
\text { Purchase of equipment } & \$ 450,000 \
\text { Repayment of mortgage outstanding on the sold land } & \$ 200,000 \
\text { Interest paid } & \$ 22,500 \
\text { Dividends paid } & \$ 10,000
\end{array}$$ What was Kanaskas' cash flow from financing activities for the year?

Accepted Answer

The answer of Kanaskas Corp had the following activities during...

Question 3

The following information pertains to Brockville Inc.for 2012.If Brockville prepares their cash flow statement using the direct method, what was their cash paid to suppliers for the year when calculating their cash flow from operations? $$\begin{array} { l r } 
\text { Inventory January 1 } & \$ 300,000 \
\text { Inventory December 31 } & \$ 335,000 \
\text { Accounts payable January 1 } & \$ 45,000 \
\text { Accounts payable December 31 } & \$ 48,000 \
\text { Cost of goods sold during 2012 } & \$ 2,400,000
\end{array}$$

Accepted Answer

To calculate cash paid to suppliers, we start with the cost of goods sold (COGS) and adjust for changes in inventory and accounts payable. The formula is: COGS + Increase in Inventory - Increase in Accounts Payable = Cash Paid to Suppliers. Here, it's $2,400,000 + ($335,000 - $300,000) - ($48,000 - $45,000) = $2,400,000 + $35,000 - $3,000 = $2,432,000.

Question 4

Cornwall Co reported a wage expense of $250,000 during 2014.Wages payable on January 1, 2014, were $5,000 and on December 31st were $7,500.If Cornwall prepares their cash flow statement using the direct method, what was their cash expenditure on wages for the year when calculating their cash flow from operations?

Accepted Answer

The answer of Cornwall Co reported a wage expense of...

Question 5

The following information was available for Kingston Co.for 2012. $\begin{array}{ll}
\text { Cash inflows from financing activities }&\$225,000\
\text { Cash outflows from investing activities }&\$415,000\
\text { Cash inflows from operations }&\$172,500
\end{array}$
 What was Kingston's change in cash for 2012?

Accepted Answer

The change in cash is calculated by adding cash inflows and subtracting cash outflows: $225,000 (financing inflows) + $172,500 (operating inflows) - $415,000 (investing outflows) = -$17,500$, indicating a decrease.

Question 6

Minnis Limited reported cash flow from operations of $103,000 for the year.A review of the company's balance sheet and income statement also showed the following: $\begin{array}{ll}
\text { Amortization expense for the year } & \$ 37,000 \
\text { Increase in accounts receivable } & \$ 19,000 \
\text { Decrease in inventory } & \$ 30,000 \
\text { Decrease in accounts payable } & \$ 30,000\
\end{array}$ What was Minnis's net income for the year?

Accepted Answer

The answer of Minnis Limited reported cash flow from operations...

Question 7

Minnis Limited reported revenues of $460,000 and total expenses of $375,000.A review of the company's balance sheet and income statement also showed the following: $\begin{array}{ll}
\text { Amortization expense for the year } & \$ 37,000 \
\text { Increase in accounts receivable } & \$ 19,000 \
\text { Decrease in inventory } & \$ 30,000 \
\text { Decrease in accounts payable } & \$ 30,000\
\end{array}$ What was the cash flow from operations for Minnis?

Accepted Answer

Cash flow from operations can be calculated by starting with net income and adjusting for non-cash expenses and changes in working capital. Net income is revenues minus expenses, which is $460,000 - $375,000 = $85,000. Add back the non-cash amortization expense of $37,000. Adjust for the increase in accounts receivable (a use of cash) by subtracting $19,000, add the decrease in inventory (a source of cash) of $30,000, and adjust for the decrease in accounts payable (a use of cash) by subtracting $30,000. The total cash flow from operations is $85,000 + $37,000 - $19,000 + $30,000 - $30,000 = $103,000.

Question 8

Bata Ltd.made sales of $500,000 during 2013.Accounts receivable on January 1, 2013, were $65,000, and on December 31st were $72,000.If Bata prepares their cash flow statement using the indirect method, what adjustment to the net income will be made for the year for Bata when calculating their cash flow from operations?

Accepted Answer

Accounts receivable increased from $65,000 to $72,000, indicating that not all sales were collected in cash. The increase of $7,000 in accounts receivable is deducted from net income when calculating cash flow from operations using the indirect method.

Question 9

Cornwall Co.reported a wage expense of $250,000 during 2014.Wages payable on January 1, 2014, were $5,000, and on December 31st were $7,500.If Cornwall prepares their cash flow statement using the indirect method, what adjustment to the net income will be made for the year for Cornwall when calculating their cash flow from operations?

Accepted Answer

The increase in wages payable from $5,000 to $7,500 indicates that not all of the wage expense was paid in cash. The difference of $2,500 ($7,500 - $5,000) represents the increase in wages payable, which means it is an amount that increased the expense on the income statement but was not paid in cash. Therefore, it should be added back to net income in the cash flow from operations section of the cash flow statement when using the indirect method.

Question 10

Cho Limited reported cash flow from operations of $136,000 for the year.A review of the company's balance sheet and income statement also showed the following: $\begin{array}{lr}
\text { Amortization expense for the year } & \$ 16,000 \
\text { Increase in accounts receivable } & \$ 30,000 \
\text { Decrease in inventory } & \$ 18,000 \
\text { Increase in accounts payable } & \$ 5,500 \
\text { Decrease in interest payable } & \$ 3,000
\end{array}$ What was Cho's net income for the year?

Accepted Answer

To calculate net income from cash flow from operations, we adjust for changes in working capital and non-cash expenses. Starting with the cash flow from operations of $136,000, we add back amortization expense ($16,000), subtract the increase in accounts receivable ($30,000), add the decrease in inventory ($18,000), add the increase in accounts payable ($5,500), and subtract the decrease in interest payable ($3,000). This results in a net income of $129,500.

Question 11

When using the indirect approach, which of the following would lead to a decrease in the cash flows from operations?

Accepted Answer

When using the indirect approach, an increase in accounts receivable would lead to a decrease in cash flows from operations because it indicates that the company is not collecting its revenues in a timely manner, leading to a negative impact on cash flows. A decrease in accounts receivable would have the opposite effect and increase cash flows from operations. An increase in accounts payable or dividends paid typically does not directly impact cash flows from operations under the indirect approach.

Question 12

Cho Limited reported net income of $129,500 for the year.A review of the company's balance sheet and income statement also showed the following: $\begin{array}{lr}
\text { Amortization expense for the year } & \$ 16,000 \
\text { Increase in accounts receivable } & \$ 30,000 \
\text { Decrease in inventory } & \$ 18,000 \
\text { Increase in accounts payable } & \$ 5,500 \
\text { Decrease in interest payable } & \$ 3,000
\end{array}$ What was Cho's cash flow from operations for the year?

Accepted Answer

Net income + Amortization expense + Increase in accounts receivable - Decrease in inventory - Increase in accounts payable + Decrease in interest payable = Cash flow from operations129,500 + 16,000 + 30,000 - 18,000 - 5,500 + 3,000 = 136,000

Question 13

When using the indirect approach, which of the following would lead to an increase in the cash flows from operations?

Accepted Answer

In the indirect approach, cash flows from operations are calculated by adjusting net income for changes in current assets and liabilities. An increase in accounts receivable means that there is more money owed to the company, which decreases cash flows from operations. Conversely, a decrease in accounts receivable means that the company is collecting more money from its customers, which increases cash flows from operations. So, the correct answer is B.

Question 14

The following information was available for Prescott Inc.for 2014. $\begin{array}{ll}
\text { Cash inflows from financing activities } & \$ 225,000 \
\text { Cash outflows from investing activities } & \$ 415,000\
\text { Change in cash for the year }&\$(17,500)
\end{array}$ What were Prescott's cash flows from operations for 2014?

Accepted Answer

To find the cash flows from operations, we use the formula: Change in cash = Cash flows from operations + Cash inflows from financing activities - Cash outflows from investing activities. Plugging in the given values: $-17,500 = Cash flows from operations + 225,000 - 415,000$. Solving for Cash flows from operations gives us $172,500 inflow.

Question 15

Bata Ltd.made sales of $500,000 during 2013.Accounts receivable on January 1, 2013, were $65,000, and on December 31st were $72,000.If Bata prepares their cash flow statement using the direct method, what was the cash collected from customers for the year for Bata?

Accepted Answer

To calculate cash collected from customers during the year, adjustments must be made to sales revenue for the change in accounts receivable. Using the direct method, the cash collected from customers is calculated as follows:

Cash collected from customers = Sales revenue + Decrease in accounts receivable - Increase in accounts receivable
Cash collected from customers = $500,000 + ($65,000 - $72,000)
Cash collected from customers = $500,000 - $7,000
Cash collected from customers = $493,000

Therefore, the correct choice is B) $493,000.

Question 16

A company had cash revenues of $200,000, cash expenses of $150,000, amortization expense of $15,000, and a gain on the sale of a piece of land of $4,000.What was their cash from operations for the year?

Accepted Answer

Cash from operations is calculated by subtracting cash expenses from cash revenues. In this case, $200,000 - $150,000 = $50,000. Amortization expense and gain on the sale of land are non-cash items and are not considered in the calculation of cash from operations.

Question 17

Lethbridge Ltd.had the following activities with creditors and shareholders during the year: $$\begin{array} { l r } 
\text { Proceeds from long-term bank loan } & \$ 200,000 \
\text { Cash dividends paid to shareholders } & \$ 80,000 \
\text { Interest paid on bank loan } & \$ 12,000
\end{array}$$ What was Lethbridge's cash flow from financing activities for the year?

Accepted Answer

The answer of Lethbridge Ltd.had the following activities with creditors...

Question 18

A company had cash revenues of $200,000, cash expenses of $150,000, amortization expense of $15,000, and a gain on the sale of a piece of land of $4,000.What was the difference between their net income and their cash from operations for the year?

Accepted Answer

To calculate the cash from operations, we need to add back the amortization expense of $15,000 and subtract the gain on sale of $4,000. This gives us cash from operations of $61,000 ($150,000 + $15,000 - $4,000 = $161,000). The difference between this and the net income of $50,000 ($200,000 - $150,000 - $15,000 + $4,000 = $39,000) is $11,000 lower net income.

Question 19

The following information pertains to Brockville Inc.for 2014.If Brockville prepares their cash flow statement using the indirect method, what adjustment to the net income will be made for the year for Brockville when calculating their cash flow from operations? $$\begin{array} { l r } 
\text { Inventory January 1, } & \$ 300,000 \
\text { Inventory December 31, } & \$ 335,000 \
\text { Accounts payable January 1 } & \$ 45,000 \
\text { Accounts payable December } 31 & \$ 48,000 \
\text { Cost of goods sold during 2014 } & \$ 2,400,000
\end{array}$$

Accepted Answer

The increase in inventory ($35,000) indicates that more inventory was purchased than sold, which is a use of cash and thus deducted from net income. The increase in accounts payable ($3,000) indicates that not all purchases were paid for in cash, reducing the cash outflow. The net adjustment is the increase in inventory ($35,000) minus the increase in accounts payable ($3,000), resulting in a $32,000 deduction from net income.

Question 20

Drumheller Inc.had the following activities during the year: $\begin{array}{lr}
\text { Proceeds from the sale of land } & \$ 346,000 \
\text { Gain on sale of land } & \$ 46,000 \
\text { Proceeds from the issue of common shares } & \$ 800,000 \
\text { Purchase of equipment } & \$ 450,000
\end{array}$ What was Drumheller's cash flow from investing activities for the year?

Accepted Answer

The answer of Drumheller Inc.had the following activities during the...

Quiz 5: Cash Flow, Profitability, and the Cash Flow Statement

When using the indirect approach, which of the following would lead to a decrease in the cash flows from operations?

When using the indirect approach, which of the following would lead to an increase in the cash flows from operations?

Bata Ltd.made sales of $500,000 during 2013.Accounts receivable on January 1, 2013, were $65,000, and on December 31st were $72,000.If Bata prepares their cash flow statement using the direct method, what was the cash collected from customers for the year for Bata?

A company had cash revenues of $200,000, cash expenses of $150,000, amortization expense of $15,000, and a gain on the sale of a piece of land of $4,000.What was their cash from operations for the year?

A company had cash revenues of $200,000, cash expenses of $150,000, amortization expense of $15,000, and a gain on the sale of a piece of land of $4,000.What was the difference between their net income and their cash from operations for the year?