Question 1

The cost of goods sold during the year was $380,000.Inventory increased by $12,000 during the year and accounts payable decreased by $19,000 during the year.Using the direct method of reporting cash flows from operating activities, cash payments for inventory total

Accepted Answer

The cash payments for inventory can be calculated by adjusting the cost of goods sold for changes in inventory and accounts payable. The formula is: Cash Payments = Cost of Goods Sold + Increase in Inventory - Decrease in Accounts Payable. Therefore, $380,000 + $12,000 + $19,000 = $411,000.

Question 2

If a gain of $225,000 is realized in the cash sale of a building having a book value of $900,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The total amount reported in the cash flows from investing activities is the cash received from the sale, which is the book value plus the gain: $900,000 + $225,000 = $1,125,000.

Question 3

When using the indirect method to compute cash provided by operating activities

Accepted Answer

Amortization expense is a non-cash charge, so it is added back to net income in the indirect method to adjust for cash flow.

Question 4

All of the following statements about free cash flow are false except

Accepted Answer

Free cash flow is not reported on the statement of cash flows; it is a measure derived from the cash flow statement to assess the cash a company generates after accounting for capital expenditures.

Question 5

Bradford Company reports a $48,000 increase in inventory and a $12,000 increase in accounts payable during the year.Cost of goods sold for the year was $285,000.Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were

Accepted Answer

The cash payments to suppliers are calculated as: Cost of Goods Sold ($285,000) + Increase in Inventory ($48,000) - Increase in Accounts Payable ($12,000) = $321,000.

Question 6

All of the following adjustments are added to net income in computing net cash provided by operating activities except

Accepted Answer

An increase in prepaid expenses is subtracted from net income when computing net cash provided by operating activities, as it represents a cash outflow.

Question 7

The cost of goods sold during the year was $305,000.Inventory decreased by $10,000 during the year and accounts payable decreased by $12,000 during the year.Using the direct method of reporting cash flows from operating activities, cash payments for inventory total

Accepted Answer

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

Question 8

Authentic Exposure Company had the following transactions that took place during the year: I.Recorded credit sales of $2,500.
II)Collected $1,500 from customers.
III)Recorded sales returns of $500 and credited the customer's account.
What is the total effect of these transactions on free cash flow?

Accepted Answer

The answer of Authentic Exposure Company had the following transactions...

Question 9

Authentic Exposure Company had the following transactions that took place during the year: I.Paid amount owing to suppliers $2,750.
II)Purchased new equipment for $5,000 by signing a long-term note payable.
III)Purchased a patent and paid $15,000 cash for the asset.
How what is the total effect of these transactions on free cash flow?

Accepted Answer

The free cash flow decreases by $17,750 due to cash outflows: $2,750 paid to suppliers and $15,000 for the patent. The equipment purchase does not affect cash flow as it was financed through a note payable.

Question 10

Minette Company reported net income of $200,000 for the year ended December 31, 2022.During the year, inventories decreased by $40,000, accounts payable decreased by $60,000, depreciation expense was $45,000 and a gain on disposal of equipment of $15,000 was recorded.Net cash provided by operating activities in 2022 using the indirect method was

Accepted Answer

The answer of Minette Company reported net income of $200,000...

Question 11

Tito Company reports a $20,000 increase in inventory and a $5,000 decrease in accounts payable during the year.Cost of Goods Sold for the year was $282,000.Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were

Accepted Answer

To calculate cash payments to suppliers using the direct method, adjust the Cost of Goods Sold (COGS) by changes in inventory and accounts payable. Start with COGS of $282,000, add the $20,000 increase in inventory (indicating more cash spent on inventory), and add the $5,000 decrease in accounts payable (indicating more cash paid to suppliers). Thus, cash payments to suppliers = $282,000 + $20,000 + $5,000 = $307,000.

Question 12

If Reed Company realizes a loss of $9,000 on a cash sale of office equipment having a book value of $90,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash received from the sale is the book value minus the loss, which is $90,000 - $9,000 = $81,000. This is the amount reported in the cash flows from investing activities.

Question 13

If Martinelli Corporation realizes a gain of $81,000 on a cash sale of equipment having a book value of $600,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash flows from investing activities should report the total cash received from the sale, which is the book value plus the gain: $600,000 + $81,000 = $681,000.

Question 14

Each of the following is an adjustment to convert net income to net cash provided by operating activities except

Accepted Answer

Adding gains and deducting losses is not an adjustment to convert net income to net cash provided by operating activities; instead, gains are deducted and losses are added back.

Question 15

A transaction involving a gain on the sale of equipment affects cash provided (used) by

Accepted Answer

The gain on the sale of equipment affects operating activities because it is included in net income, which is adjusted for non-cash gains in the operating section of the cash flow statement. It also affects investing activities because the cash received from the sale is recorded there.

Question 16

During 2022, Ecuyer Industries reported cash provided by operations of $794,000, cash used in investing of $686,000, and cash used in financing of $190,000.In addition, cash spent on fixed assets during the period was $276,000.Average current liabilities were $650,000 and average total liabilities were $1,716,000.No dividends were paid.Based on this information, what was Ecuyer's free cash flow?

Accepted Answer

The answer of During 2022, Ecuyer Industries reported cash provided...

Question 17

Land costing $125,000 was sold for $355,000 cash.The gain on the sale was reported on the income statement as other income.On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Accepted Answer

The statement of cash flows reports the total cash received from the sale of land as an investing activity, which is $355,000.

Question 18

If a loss of $108,000 is realized when selling (for cash) a building having a book value of $800,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash received from the sale is the book value minus the loss, which is $800,000 - $108,000 = $692,000. This amount is reported in the cash flows from investing activities.

Question 19

All of the following adjustments would be deducted in determining net cash provided by operating activities except a(n)

Accepted Answer

Depreciation expense is added back to net income in the operating activities section of the cash flow statement, not deducted.

Question 20

Free cash flow provides an indication of a company's ability to

Accepted Answer

Free cash flow indicates a company's ability to generate cash after accounting for capital expenditures, which can be used to pay dividends or reinvest in the business.

Quiz 12: Statement of Cash Flows