Question 1

Carmen's Candies' Net Income was $40,000.Other accounts that changed included: Accounts Receivable decreased by $30,000;Merchandise Inventory increased by $20,000;Accounts Payable increased by $4,000;and Salaries Payable increased by $1,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

The net cash flow from operating activities is calculated by adjusting the net income for changes in working capital accounts. Starting with the net income of $40,000, add the decrease in accounts receivable ($30,000), subtract the increase in inventory ($20,000), add the increase in accounts payable ($4,000), and add the increase in salaries payable ($1,000). This results in a net cash flow of $55,000.

Question 2

Of the following,which has a negative effect on the computation of cash flow from operations using the indirect method?

Accepted Answer

An increase in accounts receivable means that the company is not receiving cash for its sales during the current period, which negatively impacts the cash flow from operations computed using the indirect method. Decrease in inventory, increase in accounts payable, and decrease in prepaid insurance all have a positive effect on the computation of cash flow from operations.

Question 3

The records of Ashley Boutique showed Net Loss,$25,000;Depreciation Expense,$35,000;and decrease in Supplies on Hand,$8,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

Net Cash Flow from Operating Activities = Net Loss + Depreciation Expense + Decrease in Supplies on Hand= -$25,000 + $35,000 + $8,000= $18,000

Question 4

There was a utility bill received but not paid.How would this nonpayment affect the statement of cash flows operations section-indirect method?

Accepted Answer

The answer of There was a utility bill received but...

Question 5

When comparing net cash provided by operating activities using the indirect versus direct methods:

Accepted Answer

The net cash provided by operating activities will be the same whether the indirect or direct method is used. The difference between the two methods lies in the presentation and the process of calculation, not in the final amount of net cash provided by operating activities.

Question 6

Big Toy Corporation's records show net income of $20,000;depreciation expense of $10,000;and cash dividends declared and paid of $4,000.The amount of cash provided by operating activities using the indirect method is:

Accepted Answer

The cash provided by operating activities using the indirect method starts with net income and adjusts for non-cash expenses and changes in working capital. Here, start with net income of $20,000, add back the non-cash depreciation expense of $10,000, resulting in $30,000. Dividends are not included in operating activities.

Question 7

The net income reported on the income statement for the current year was $40,000.Depreciation Expense recorded on fixed assets was $21,000.What is the net cash flow from operations that would appear on a cash flow statement using the indirect method?

Accepted Answer

To calculate net cash flow from operations using the indirect method, we start with net income and adjust for non-cash items, including depreciation expense. 
Net cash flow from operations = Net Income + Depreciation Expense = $40,000 + $21,000 = $61,000. 
Therefore, the correct answer is B.

Question 8

Accounts Receivable amounted to $215,000 at the beginning of the year and $215,000 at the end of the year.Net income reported on the income statement for the year was $300,000.The net cash flow from operating activities on the cash flow statement using the indirect method is:

Accepted Answer

Since accounts receivable did not change during the year, there is no adjustment needed for changes in working capital. Therefore, the net cash flow from operating activities is the same as the net income, which is $300,000.

Question 9

Smith Corporation reported net income of $54,000,depreciation expenses of $10,000,an increase in Accounts Payable of $3,000 and a decrease in Accounts Receivable of $1,500.Under the indirect method,net cash flow from operating activities is:

Accepted Answer

The answer of Smith Corporation reported net income of $54,000,depreciation...

Question 10

Collins Corporation reported net income of $35,000;depreciation expenses of $20,000;a decrease in Accounts Payable of $2,000;and an increase in Accounts Receivable of $3,000.Net cash flow from operating activities using the indirect method is:

Accepted Answer

Net cash flow from operating activities is calculated by adjusting net income for non-cash expenses and changes in working capital. Starting with net income of $35,000, add back depreciation of $20,000 (a non-cash expense), subtract the increase in Accounts Receivable of $3,000, and subtract the decrease in Accounts Payable of $2,000. This results in $35,000 + $20,000 - $3,000 - $2,000 = $50,000.

Question 11

The records of Ashley Boutique showed Net Loss,$30,000;Depreciation Expense,$25,000;and decrease in Supplies on Hand,$25,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

The answer of The records of Ashley Boutique showed Net...

Question 12

The Accounts Receivable balance has decreased during the year.How would this event affect the statement of cash flows operations section-indirect method?

Accepted Answer

A decrease in the Accounts Receivable balance means that the company has collected more cash from its customers during the year, which is considered a positive effect. This would be reflected in the operations section of the statement of cash flows using the indirect method, as a decrease in Accounts Receivable is added back to net income to calculate the cash flow from operations.

Question 13

Management has authorized the purchase of a large quantity of inventory for early December.The purchase will have credit terms of 2/10,n/30,and they will authorize payment by the discount date.How will this decision affect the period's cash flows from operations-indirect method?

Accepted Answer

The purchase of inventory will require cash outflows, which will decrease cash flows from operations in the period. However, if payment is made within the discount period, there will be a reduction in the cash outflows due to the discount received, but this will not completely offset the initial decrease in cash flows from operations. Therefore, the overall effect will be a decrease in cash flows from operations for the period.

Question 14

Even though the cost of fuel oil is rising,management is considering using up the business's reserves and not ordering any more this period.How will this decision affect the period's cash flows from operations-indirect method?

Accepted Answer

Using up reserves without purchasing more fuel oil reduces the cash outflow for inventory purchases, thus increasing cash flows from operations under the indirect method.

Question 15

Which of the following items would be subtracted from Net Income to compute Net Cash Flow from Operating Activities under the indirect method?

Accepted Answer

A decrease in Accounts Payable indicates that cash was used to pay off liabilities, thus reducing cash flow from operating activities.

Question 16

Trundle Corporation reported net income of $40,000;depreciation expense of $11,000;sales of additional common shares of $20,000;and an increase in Accounts Payable of $7,000.Net cash flow from operating activities using the indirect method is:

Accepted Answer

The answer of Trundle Corporation reported net income of $40,000;depreciation...

Question 17

Rick Corporation's Accounts Receivable increased by $25,000 during the year.What is the adjustment to the cash flow statement when it is prepared by the indirect method?

Accepted Answer

When using the indirect method, an increase in accounts receivable is subtracted from net income in the operating activities section. This adjustment is made to account for the fact that the increase in accounts receivable represents cash that has not yet been received, and therefore should not be included in the calculation of net income.

Question 18

Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?

Accepted Answer

When using the indirect method to compute cash from operations, an increase in Accounts Receivable is subtracted from net income, not added. This is because an increase in Accounts Receivable represents sales that have not yet been collected in cash, thus not affecting the cash flow.

Question 19

Of the following,which has a positive effect on the computation of cash flow from operations using the indirect method?

Accepted Answer

Depreciation Expense is added back to the net income under the indirect method of cash flow from operations since it is a non-cash expense. This increases the cash flow from operations.

Question 20

Fidelity Furniture's Net Income was $25,000.Other accounts that changed included: Accounts Receivable increased by $18,000;Merchandise Inventory decreased by $7,000;Accounts Payable increased by $4,000;and Salaries Payable decreased by $3,000.The amount of Net Cash Flow from Operating Activities using the indirect method is:

Accepted Answer

The answer of Fidelity Furniture's Net Income was $25,000.Other accounts...

Quiz 21: Statement of Cash Flows