Question 1

Financing activities include receiving dividends from investments in other companies.

Accepted Answer

Financing activities involve transactions related to raising capital and repaying investors, such as issuing equity, paying dividends, and repaying debt, not receiving dividends, which is considered an investing activity.

Question 2

Investing activities include: a) the purchase and sale of non-current assets, b) lending and collecting on notes receivable, c) the purchase and sale of investments other than cash equivalents.

Accepted Answer

Investing activities refer to the purchase and sale of non-current assets such as property, plant, and equipment, as well as investments other than cash equivalents such as stocks, bonds, and mutual funds. Lending and collecting on notes receivable also falls under investing activities.

Question 3

Financing activities include receiving cash from issuing debt and receiving dividends from investments in other corporations.

Accepted Answer

Financing activities include receiving cash from issuing debt, but receiving dividends from investments in other corporations is considered an investing activity, not a financing activity.

Question 4

Under the indirect method, noncash operating expenses are added back to net income when preparing the investing section of the statement of cash flows.

Accepted Answer

Under the indirect method, noncash operating expenses are added back to net income in the operating section, not the investing section, of the statement of cash flows.

Question 5

A machine with a cost of $190,000 and accumulated depreciation of $95,000 was sold for $50,000 cash. The amount that should be reported as a source of cash under cashflows from investing activities is:

Accepted Answer

The cash inflow from the sale of the machine is $50,000, which is reported under cash flows from investing activities.

Question 6

Genesis reported that bonds with a face value of $100,000 and a carrying value of$67,000 are retired for $60,000 cash, resulting in a loss of $7,000. The amount to be reported in the financing section is:

Accepted Answer

The cash paid to retire the bonds, $60,000, is reported in the financing section of the cash flow statement.

Question 7

Deena Inc. reported $32,000 of cash provided by operating activities and the following data:

Accepted Answer

The answer of Deena Inc. reported $32,000 of cash provided...

Question 8

Received a settlement on a lawsuit.A - Operating activities. B - Investing activities. C - Financing activities.D - Schedule of noncash financing and investing activities. E - Not reported on the statement of cash flows.

Accepted Answer

Received a settlement on a lawsuit is a financing activity.

Question 9

A transfer from retained earnings to common shares in a share dividend transaction should be reported in the statement of cash flows as:

Accepted Answer

The answer of A transfer from retained earnings to common...

Question 10

The statement of cash flows is:

Accepted Answer

The statement of cash flows reports the cash inflows and outflows for an accounting period, detailing how cash is generated and used in operating, investing, and financing activities.

Question 11

Use the indirect method to calculate the net cash provided or used) by operating activities based on the following information:

Accepted Answer

The answer of Use the indirect method to calculate the...

Question 12

The Merchandise Inventory for Year 1 was $100,000 and for Year 2 was $94,000. The Accounts Payable account for Year 1 was $40,000 and for Year 2 was $42,000. Cost of goods sold for Year 2 was $460,000. What was the total amount for cash payments for merchandise for Year 2?

Accepted Answer

The cash payments for merchandise can be calculated using the formula: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Rearranging gives Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory. Purchases = $460,000 + $94,000 - $100,000 = $454,000. Cash Payments = Purchases + Beginning Accounts Payable - Ending Accounts Payable = $454,000 + $40,000 - $42,000 = $452,000.

Question 13

Amy Corporation's income statement showed the following: net income, $72,000;depreciation expense, $8,000; and gain on sale of plant assets, $6,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $5,700; merchandiseinventory increased $8,000; prepaid expenses decreased $2,100; accounts payable increased $1,700. Calculate the net cash provided or used) by operating activities.

Accepted Answer

To calculate net cash provided by operating activities, start with net income ($72,000), add back non-cash expenses like depreciation ($8,000), and adjust for changes in working capital: decrease in accounts receivable ($5,700), increase in inventory (-$8,000), decrease in prepaid expenses ($2,100), and increase in accounts payable ($1,700). Also, subtract the gain on sale of plant assets ($6,000). The calculation is: $72,000 + $8,000 - $6,000 + $5,700 - $8,000 + $2,100 + $1,700 = $75,500.

Question 14

A change in retained earnings can be due to payment of cash dividends.

Accepted Answer

Payment of cash dividends decreases retained earnings, leading to a change in the balance.

Question 15

Reporting of financing activities is the same under both the direct and the indirect methods.

Accepted Answer

The reporting of financing activities is the same under both the direct and indirect methods. Both methods require disclosure of cash inflows and outflows from financing activities, including issuance or repayment of debt, issuance of equity, and payment of dividends. The only difference between the two methods is in the presentation format of the cash flow statement.

Question 16

The sale of equipment increases investing cash flows.

Accepted Answer

The sale of equipment is considered a cash inflow under investing activities and therefore increases investing cash flows.

Question 17

Use the information provided about the current year operations of Upper Down Company to calculate cash paid for merchandise.

Accepted Answer

Cash paid for merchandise = Beginning inventory + Purchases - Ending inventory= $108,000 + $115,000 - $109,400= $111,600

Question 18

Reconstruction analysis is used to identify the types of purchases and disposals of property, plant and equipment by reproducing the entries that occurred in the year.

Accepted Answer

Reconstruction analysis is a method to identify the types of purchases and disposals of property, plant and equipment by reproducing the entries that occurred in the year. It involves examining records, receipts, invoices and other documents to reconstruct transactions and determine the nature and value of assets acquired or disposed of during a given period.

Question 19

The three-step process in determining net cash inflows outflows) from investing activities are: 1) identify changes in investing-related accounts; 2) explain these changes using reconstruction analysis; 3) report cash flow effects.

Accepted Answer

This is a correct statement outlining the steps involved in determining net cash inflows/outflows from investing activities.

Question 20

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. The cash received from the sale was $40,000.

Accepted Answer

The cash received from the sale was $50,000, calculated as the original cost of $100,000 minus the accumulated depreciation of $40,000, which gives a book value of $60,000. Selling it at a loss of $10,000 means it was sold for $50,000.

Quiz 16: Reporting and Analyzing Cash Flows