Question 1

When equipment is sold for cash, the amount received is reflected as a cash
A) inflow in the operating section.
B) inflow in the financing section.
C) inflow in the investing section.
D) outflow in the operating section.

Accepted Answer

When equipment is sold for cash, it results in a cash inflow which is reflected in the investing section of the cash flow statement. This is because the sale of equipment is an investing activity, as it relates to the acquisition or disposal of long-term assets. The operating section deals with cash inflows and outflows related to the company's day-to-day operations, while the financing section deals with cash inflows and outflows related to borrowing and returning funds to investors.

Question 2

Barney Day Inc. had credit sales of $ 800,000. The beginning accounts receivable balance was $ 40,000 and the ending accounts receivable balance was $ 140,000. What were the cash collections from customers during the period?
A) $ 900,000
B) $ 800,000
C) $ 700,000
D) $ 840,000

Accepted Answer

Cash collections can be calculated as: Beginning Accounts Receivable + Credit Sales - Ending Accounts Receivable = Cash Collections. Thus, $40,000 + $800,000 - $140,000 = $700,000.

Question 3

Issuing bonds for land is
A) reported in the operating section.
B) reported in the financing section.
C) not reported in the cash flow statement.
D) reported in the investing section.

Accepted Answer

The answer of Issuing bonds for land is
A) reported in...

Question 4

Tabador Corporation shows income tax expense of $ 80,000. There has been a $ 2,000 increase in income taxes payable during the year. What was Tabador's cash payment for income taxes?
A) $ 80,000
B) $ 78,000
C) $ 75,000
D) $ 82,000

Accepted Answer

The cash payment for income taxes would be calculated as follows:

Income tax expense for the year = $80,000
Increase in income taxes payable = $2,000

Therefore, the total income taxes owed for the year would be:

Income taxes payable at beginning of year + Income tax expense for the year - Income taxes payable at end of year

Let's assume that income taxes payable at the beginning of the year were $60,000. Then:

Income taxes payable at end of year = Income taxes payable at beginning of year + Income tax expense for the year - Increase in income taxes payable
Income taxes payable at end of year = $60,000 + $80,000 - $2,000 = $138,000

Finally, to calculate the cash payment for income taxes, we need to figure out how much of that $138,000 was actually paid in cash during the year. We can do this by looking at the change in income taxes payable:

Cash payment for income taxes = Income taxes payable at end of year - Income taxes payable at beginning of year
Cash payment for income taxes = $138,000 - $60,000 = $78,000

Therefore, the answer is B) $78,000.

Question 5

If $ 200,000 of bonds are issued during the year but $ 120,000 of old bonds are retired during the year, the cash flow statement will show a(n)
A) net increase in cash of $ 80,000.
B) net decrease in cash of $ 80,000.
C) increase in cash of $ 200,000 and a decrease in cash of $ 120,000.
D) net gain on retirement of bonds of $ 80,000.

Accepted Answer

The answer of If $ 200,000 of bonds are issued...

Question 6

Barker Inc. had cash sales of $ 300,000 and credit sales of $ 500,000. The accounts receivable balance increased $ 10,000 during the year. How much cash did Barker receive from its customers during the year?
A) $ 790,000
B) $ 810,000
C) $ 490,000
D) $ 510,000

Accepted Answer

Cash received from customers = Cash sales + (Increase in accounts receivable)= $300,000 + $10,000= $310,000Total cash received from customers = Cash received from cash sales + Cash received from credit sales= $310,000 + $500,000= $810,000

Question 7

Cash receipts from customers are greater than sales revenue when there is
A) an increase in accounts receivable.
B) a decrease in accounts receivable.
C) an increase in cost of goods sold.
D) a decrease in cost of goods sold.

Accepted Answer

Cash receipts from customers exceed sales revenue when there is a decrease in accounts receivable. This indicates that customers are paying off their previous balances, leading to more cash being received than the current period's sales revenue.

Question 8

Which of the following items does NOT appear in the cash flow statement under the direct method?
A) cash payments to suppliers
B) cash collections from customers
C) depreciation expense
D) cash from the sale of equipment

Accepted Answer

The direct method of cash flow statement includes cash payments and cash collections from operating activities. Depreciation expense appears in the indirect method of cash flow statement, while cash from the sale of equipment is a cash flow from investing activities.

Question 9

Rice Export Corp. had an increase in inventory of $ 40,000. The cost of goods sold was $ 90,000. There was a $ 5,000 decrease in accounts payable from the prior period. What were Rice Export's cash payments to suppliers?
A) $ 135,000
B) $ 85,000
C) $ 125,000
D) $ 95,000

Accepted Answer

Cost of goods sold = Beginning inventory + Purchases - Ending inventory$90,000 = Beginning inventory + Purchases - $40,000Purchases = $90,000 + $40,000 = $130,000Cash payments to suppliers = Purchases + Decrease in accounts payableCash payments to suppliers = $130,000 + $5,000 = $135,000

Question 10

Claudia Clay Limited had a cost of goods purchased of $ 250,000. The comparative balance sheet analysis revealed a $ 10,000 decrease in inventory and a $ 20,000 increase in accounts payable. What were Claudia Clay's cash payments to suppliers?
A) $ 230,000
B) $ 220,000
C) $ 260,000
D) $ 280,000

Accepted Answer

The cash payments to suppliers can be calculated by adjusting the cost of goods purchased for changes in inventory and accounts payable. The formula is: Cash Payments = Cost of Goods Purchased + Decrease in Inventory - Increase in Accounts Payable. Therefore, $250,000 + $10,000 - $20,000 = $240,000. However, the correct choice is $230,000, indicating a possible error in the problem statement or options.

Question 11

When preparing the financial statements for 2021, Bart Butler, CFO for Bartender Inc., noticed that during the year the company sold equipment with an original cost of $ 50,000 for cash proceeds of $ 18,000. At the time of the sale, the equipment had a carrying amount of $ 20,000. Bartender uses the direct method to prepare its cash flow statement. The loss on the sale of equipment will
A) be added to profit in the operating section of the cash flow statement.
B) be deducted from profit in the operating section of the cash flow statement.
C) be shown as a cash outflow from investing activities.
D) not be included in the cash flow statement as it is a noncash charge.

Accepted Answer

The answer of When preparing the financial statements for 2021,...

Question 12

Which of the following would NOT appear in the operating activities section of a cash flow statement prepared under the direct method?
A) cash receipts from customers
B) cash paid for income taxes
C) gain on sale of equipment
D) cash paid to employees

Accepted Answer

The gain on sale of equipment is a non-operating activity and would not appear in the operating activities section of a cash flow statement prepared under the direct method. The other options listed are all operating activities and would appear in the operating activities section.

Question 13

Schneider Corporation reports a $ 15,000 increase in inventory and a $ 5,000 increase in accounts payable during the year. Cost of goods sold for the year was $ 150,000. The cash payments made to suppliers were
A) $ 150,000.
B) $ 160,000.
C) $ 130,000.
D) $ 145,000.

Accepted Answer

The cash payments to suppliers can be calculated as: Cost of Goods Sold ($150,000) + Increase in Inventory ($15,000) - Increase in Accounts Payable ($5,000) = $160,000.

Question 14

When preparing the financial statements for 2021, Marc Martin, CFO for Maverick Mania Inc., noticed that during the year the company sold equipment with an original cost of $ 50,000 for cash proceeds of $ 18,000. At the time of the sale, the equipment had a carrying amount of $ 20,000. Maverick Mania uses the direct method to prepare its cash flow statement. On the 2021 cash flow statement, the company should report
A) cash proceeds from investing activities, $ 20,000.
B) cash proceeds from operating activities, $ 18,000.
C) cash proceeds from investing activities, $ 18,000.
D) cash proceeds from operating activities, $ 20,000.

Accepted Answer

The cash proceeds from the sale of equipment are reported under investing activities, and the amount is the actual cash received, which is $18,000.

Question 15

CAT Corp. has other operating expenses of $ 60,000. There has been a decrease in prepaid expenses of $ 4,000 during the year, and accrued liabilities are $ 6,000 larger than in the prior period. What were CAT's cash payments for operating expenses?
A) $ 62,000
B) $ 58,000
C) $ 50,000
D) $ 70,000

Accepted Answer

The answer of CAT Corp. has other operating expenses of...

Question 16

If there is a net decrease in cash we say that cash was
A) "provided" by that activity.
B) "used" by that activity.
C) "generated" by that activity.
D) "absorbed" by that activity.

Accepted Answer

A net decrease in cash means that the overall effect of that activity was to use up cash, therefore option B "used" is the best choice. Option A ("provided") is incorrect since a decrease in cash means that cash was not provided, but rather depleted. Option C ("generated") is incorrect because generating cash implies an increase in cash, not a decrease. Option D ("absorbed") is also incorrect as it doesn't accurately describe the nature of the decrease in cash, which is the result of the activity using up cash.

Question 17

Which of the following changes in retained earnings during a period will be reported in the financing activities section of the cash flow statement? 1. Declaration of a cash dividend paid during the period.
2) Profit for the period.
A) 1
B) 2
C) neither 1 nor 2
D) both 1 and 2

Accepted Answer

The declaration of a cash dividend paid during the period is a financing activity because it involves the distribution of cash to shareholders, which is classified as a financing outflow. Profit for the period is reported in the operating activities section of the cash flow statement, as it reflects the company's primary business activities of generating revenue and incurring expenses.

Question 18

On the cash flow statement using the indirect method, a loss on the sale of equipment will
A) be added to profit in the operating section.
B) be deducted from profit in the operating section.
C) appear as an inflow of cash in the investing section.
D) appear as an outflow of cash in the investing section.

Accepted Answer

A loss on the sale of equipment is added back to profit in the operating section of the cash flow statement when using the indirect method because it is a non-cash expense that reduced net income.

Question 19

The indirect and direct methods of preparing the cash flow statement are identical EXCEPT for the
A) significant noncash activity section.
B) operating activities section.
C) investing activities section.
D) financing activities section.

Accepted Answer

The indirect and direct methods differ only in the operating activities section, where the indirect method adjusts net income for changes in balance sheet accounts, while the direct method lists cash receipts and payments.

Question 20

When using the indirect method, which of the following would NOT be needed to determine net cash provided by operating activities?
A) depreciation expense
B) change in accounts receivable
C) payment of cash dividends
D) change in prepaid expenses

Accepted Answer

Payment of cash dividends is a financing activity and would not be included in the determination of net cash provided by operating activities when using the indirect method. Depreciation expense and changes in accounts receivable and prepaid expenses are all relevant to the determination of net cash provided by operating activities.

Quiz 9: The Cash Flow Statement

When equipment is sold for cash, the amount received is reflected as a cash

Barney Day Inc. had credit sales of $ 800,000. The beginning accounts receivable balance was $ 40,000 and the ending accounts receivable balance was $ 140,000. What were the cash collections from customers during the period?

Issuing bonds for land is

Tabador Corporation shows income tax expense of $ 80,000. There has been a $ 2,000 increase in income taxes payable during the year. What was Tabador's cash payment for income taxes?

If $ 200,000 of bonds are issued during the year but $ 120,000 of old bonds are retired during the year, the cash flow statement will show a(n)

Barker Inc. had cash sales of $ 300,000 and credit sales of $ 500,000. The accounts receivable balance increased $ 10,000 during the year. How much cash did Barker receive from its customers during the year?

Cash receipts from customers are greater than sales revenue when there is

Which of the following items does NOT appear in the cash flow statement under the direct method?

Rice Export Corp. had an increase in inventory of $ 40,000. The cost of goods sold was $ 90,000. There was a $ 5,000 decrease in accounts payable from the prior period. What were Rice Export's cash payments to suppliers?

Claudia Clay Limited had a cost of goods purchased of $ 250,000. The comparative balance sheet analysis revealed a $ 10,000 decrease in inventory and a $ 20,000 increase in accounts payable. What were Claudia Clay's cash payments to suppliers?

Which of the following would NOT appear in the operating activities section of a cash flow statement prepared under the direct method?

Schneider Corporation reports a $ 15,000 increase in inventory and a $ 5,000 increase in accounts payable during the year. Cost of goods sold for the year was $ 150,000. The cash payments made to suppliers were

CAT Corp. has other operating expenses of $ 60,000. There has been a decrease in prepaid expenses of $ 4,000 during the year, and accrued liabilities are $ 6,000 larger than in the prior period. What were CAT's cash payments for operating expenses?

If there is a net decrease in cash we say that cash was

Which of the following changes in retained earnings during a period will be reported in the financing activities section of the cash flow statement? 1. Declaration of a cash dividend paid during the period. 2) Profit for the period.

On the cash flow statement using the indirect method, a loss on the sale of equipment will

The indirect and direct methods of preparing the cash flow statement are identical EXCEPT for the

When using the indirect method, which of the following would NOT be needed to determine net cash provided by operating activities?