Question 1

When reconciling net income to net cash provided by operating activities, all of the following would be an appropriate procedure except:

Accepted Answer

Subtracting a decrease in prepaid expenses would not be an appropriate procedure because it would decrease net cash provided by operating activities, whereas the goal is to reconcile net income to net cash provided by operating activities.

Question 2

The cash paid for taxes is included in the section of the statement of cash flows.

Accepted Answer

Cash paid for taxes is considered an operating activity and is included in the operating section of the statement of cash flows.

Question 3

A _ _ is not considered a cash equivalent.

Accepted Answer

A bank account, treasury bill, and money market fund are all considered cash equivalents.

Question 4

Referring to Tables 16- 1 and 16- 2, the cash collected from the issuance of stock by Silver Company in 20X6 was:

Accepted Answer

The cash collected from the issuance of stock is $8,000, as indicated in the financial data provided for Silver Company in 20X6.

Question 5

The Beehive Company acquired merchandise inventory costing $10,000 on September 1. The company will not pay for the inventory until October 1. This transaction will affect the Beehive Company by:

Accepted Answer

The acquisition of inventory on credit increases the Merchandise Inventory account and also increases the Accounts Payable account, reflecting the obligation to pay for the inventory in the future.

Question 6

Which of the following would be considered an intangible asset? 1. leasehold improvements
2) goodwill
3) land
4) mineral deposits
5) patent

Accepted Answer

Goodwill and patents are intangible assets because they do not have physical substance but provide value to the company.

Question 7

Referring to Tables 16- 1 and 16- 2, the cash paid for supplies by Silver Company in 20X6 was:

Accepted Answer

The answer of Referring to Tables 16- 1 and 16-...

Question 8

Given below is a list of events: 1. payment of employee wages
2) cash collections from customers
3) sale of capital stock
4) sale of land, at cost
5) payment of a cash dividend
6) borrow cash from creditors
7) purchase of equipment
8) cash sale of inventory
9) purchase inventory on account
Which of the above events are inflows in the operating section of the statement of cash flows?

Accepted Answer

Cash collections from customers (2) and cash sale of inventory (8) are considered inflows in the operating section of the statement of cash flows.

Question 9

The balances in selected accounts of Rerun Company increased (decreased) as follows: $\begin{array}{ll}
\text { Accounts payable } & \$ 10,000 \
\text { Bonds payable } & (12,000) \
\text { Common stock } & 4,000
\end{array}$ Rerun Company declared and paid dividends of $8,800. The cash flow from financing for Rerun Company was:

Accepted Answer

The answer of The balances in selected accounts of Rerun...

Question 10

The statement of cash flows is used for all of the following except:

Accepted Answer

The answer of The statement of cash flows is used...

Question 11

Given below is a list of events: 1. payment of employee wages
2) cash collections from customers
3) sale of capital stock
4) sale of land, at cost
5) payment of a cash dividend
6) borrow cash from creditors
7) purchase of equipment
8) cash sale of inventory
9) purchase inventory on account
Which of the above events are inflows in the financing section of the statement of cash flows?

Accepted Answer

The financing section of the statement of cash flows includes cash flows related to borrowing and equity. Sale of capital stock (3) and borrowing cash from creditors (6) are inflows in this section.

Question 12

The liabilities of Clare Company are listed below: $\begin{array}{ll}
\text { Accounts payable } & \$ 20,000 \
\text { First Mortgage bonds payable } & \$ 100,000 \
\text { Debentures payable } & \$ 80,000
\end{array}$ Clare Company liquidated its assets, receiving $150,000 cash. The debenture holders will receive if the debentures are unsubordinated.

Accepted Answer

The answer of The liabilities of Clare Company are listed...

Question 13

With respect to the relationship between depreciation and cash, which one of the following statements is incorrect?

Accepted Answer

Charging depreciation expense does not set aside cash for asset replacement; it is a non-cash accounting entry that allocates the cost of an asset over its useful life.

Question 14

Referring to Tables 16- 1 and 16- 2, the cash paid out for dividends by Silver Company in 20X6 was:

Accepted Answer

The cash paid out for dividends by Silver Company in 20X6 was $17,600. This is found by subtracting the beginning cash balance of $54,400 from the ending cash balance of $36,800.

Question 15

Beginning retained earnings was $34,400. Ending retained earnings was $61,600 and net income was $36,000. Cash paid as dividends was:

Accepted Answer

The change in retained earnings is the net income minus dividends. The change is $61,600 - $34,400 = $27,200. Since net income is $36,000, dividends paid must be $36,000 - $27,200 = $8,800.

Question 16

Listed below are increases (decreases) in selected accounts of Leonardo Company. $\begin{array}{ll}
\text { Accounts receivable } & \$ 20,000 \
\text { Inventory } & (40,000) \
\text { Accounts p ay able } & 68,000 \
\text { Wages p ayable } & (21,000)
\end{array}$ Net income for Leonardo Company was $42,000. The net cash provided by operating activities was:

Accepted Answer

The answer of Listed below are increases (decreases) in selected...

Question 17

Stone Cold Company reported cost of goods sold of $870,000, an increase in inventory of $100,000, and a decrease in accounts payable of $40,000. was paid to Stone Cold Company's suppliers.

Accepted Answer

The cash paid to suppliers is calculated as: Cost of Goods Sold ($870,000) + Increase in Inventory ($100,000) - Decrease in Accounts Payable ($40,000) = $1,010,000.

Question 18

Given below is a list of events: 1. payment of employee wages
2) cash collections from customers
3) sale of capital stock
4) sale of land, at cost
5) payment of a cash dividend
6) borrow cash from creditors
7) purchase of equipment
8) cash sale of inventory
9) purchase inventory on account
Which of the above events are outflows in the investing section of the statement of cash flows?

Accepted Answer

The purchase of equipment is an outflow in the investing section of the statement of cash flows.

Question 19

Depreciation is used to:

Accepted Answer

Depreciation is primarily used to allocate the original cost of an asset over its useful life to match the expense with the revenue it generates.

Question 20

Referring to Tables 16- 1 and 16- 2, the cash paid for patents by Silver Company in 20X6 was:

Accepted Answer