Question 1

Which of the following items would be classified as a cash flow from investing activities?1)Issue common stock for cash2)Payment on principal of note payable3)Payment of dividends4)Sale of equipment for cash

Accepted Answer

Only the sale of equipment for cash is classified as a cash flow from investing activities. Issuing common stock is a cash flow from financing activities, payment on principal of note payable is a cash flow from financing or operating activities depending on the nature of the note and payment of dividends is a cash flow from financing activities.

Question 2

What is the name given to the sum of the subtotals of the three sections (operating activities, investing activities, and financing activities)of the statement of cash flows?

Accepted Answer

The sum of the subtotals of the three sections of the statement of cash flows is known as the net change in cash. This represents the total amount of cash that has either been generated or used up by the company during the period. It is important to note that this figure does not take into account any non-cash transactions.

Question 3

Shamoo Incorporated presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from the company's year-end balance sheets:  The Year 2 income statement showed net income of $50,000. Based on this information, the amount of the cash flow from operating activities shown on the Year 2 statement of cash flows is

Accepted Answer

The answer of Shamoo Incorporated presents its statement of cash...

Question 4

PhillipsCompany reported total credit sales of $460,000 for Year 2. Its accounts receivable totaled $70,000 and $100,000 at the beginning and end of the year, respectively. What was the cash collected from customers during Year 2?

Accepted Answer

To find the cash collected from customers, use the formula: Beginning Accounts Receivable + Credit Sales - Ending Accounts Receivable = Cash Collected. So, $70,000 + $460,000 - $100,000 = $430,000.

Question 5

The financial statements of Gregg Company reported wages expense of $388,000 during Year 2, wages payable of $59,200 at the beginning of Year 2, and wages payable of $81,400 at the end of Year 2. What amount of cash was paid for wages during Year 2?

Accepted Answer

The amount paid for wages during Year 2 can be calculated as follows:
Cash paid for wages = Wages expense - wages payable at the end of the year + wages payable at the beginning of the year
Cash paid for wages = $388,000 - $81,400 + $59,200
Cash paid for wages = $365,800. Therefore, the correct answer is D, $365,800.

Question 6

During Year 1, Mallard Company earned $165,000 of sales revenue on account and accrued $122,500 of operating expenses. The company also earned $26,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $2,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?

Accepted Answer

Because none of the events described affect cash,none of them affect cash flows.

Question 7

On January 1, Year 1, Chisolm Company purchased equipment for $36,000 cash. On December 31, Year 1, depreciation of $9,000 was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows? Chisolm uses the direct method.

Accepted Answer

The answer of On January 1, Year 1, Chisolm Company...

Question 8

Which of the following transactions affects cash flows?

Accepted Answer

The payment of dividends declared in a previous year affects cash flows as it results in an outflow of cash. The accrual of interest receivable, issuance of a stock dividend, and recognition of depreciation expense do not have a direct impact on cash flows. Payment of dividends declared in a previous year will result in an outflow of cash, thus affecting cash flows. Accrual of interest receivable, issuance of a stock dividend, and recognition of depreciation expense do not directly impact cash flows.

Question 9

Which of the following transactions is a use of cash?

Accepted Answer

The purchase of treasury stock involves using cash to buy back shares of the company's own stock. This results in a use of cash for the company. The other options do not involve a direct use of cash. Short-term borrowing of cash would result in a liability, acquisition of land by issuing a short-term note payable would result in an increase in the company's liabilities, and issuance of a stock dividend would result in no change in cash. Purchase of treasury stock involves a use of cash, whereas the other options either involve borrowing or issuing of notes/stock dividends, which do not directly result in use or receipt of cash.

Question 10

What effect does depreciation expense have on net income and cash flows?

Accepted Answer

The answer of What effect does depreciation expense have on...

Question 11

On September 1, Year 1, Laredo Company purchased equipment making a down payment of $15,500 cash and signing a one-year note payable on the $22,500 balance. The note carried an interest rate of 6%, and all interest was to be paid on the maturity date. Which of the following correctly shows the combined effect of the purchase as well as the accrual of interest on December 31, Year 1?

Accepted Answer

The answer of On September 1, Year 1, Laredo Company...

Question 12

Ervin Company began the accounting period with $64,000 in accounts receivable. The ending balance in accounts receivable was $40,000. If the credit sales during the period were $588,000, what is the amount of cash received from customers?

Accepted Answer

Ending balance of accounts receivable of $40,000 = Beginning balance of accounts receivable of $64,000 + Increase due to credit sales of $588,000 - Decrease due to cash collected from customers (the unknown)
Cash collected from customers = $64,000 + $588,000 - $40,000 = $612,000

Question 13

When using the indirect method, which of the following items should be added to the amount of net income when determining the amount of net cash flow from operating activities?

Accepted Answer

A decrease in the balance of a Prepaid Rent account indicates that cash was not used for prepaid expenses, thus it should be added back to net income to determine net cash flow from operating activities.

Question 14

Which of the following is not a section of the statement of cash flows?

Accepted Answer

The sections of the statement of cash flows are operating activities, investing activities, and financing activities. Purchasing activities is not a section of the statement of cash flows.

Question 15

The financial statements of Gregg Company reported wages expense of $160,000 during Year 2, wages payable of $16,000 at the beginning of Year 2, and wages payable of $22,000 at the end of Year 2. What amount of cash was paid for wages during Year 2?

Accepted Answer

To determine the cash paid for wages during Year 2, we need to find the difference between the wages expense reported on the income statement ($160,000) and the change in wages payable from the beginning to the end of the year ($22,000 - $16,000 = $6,000 decrease in payable).

Cash paid for wages = Wages expense - Decrease in wages payable
Cash paid for wages = $160,000 - $6,000
Cash paid for wages = $154,000

Therefore, the correct answer is choice C.

Question 16

The Club, Incorporated (TCI)presents its statement of cash flows using the indirect method. For the current year the Company reported net income of $120,000. All sales are on account and the balance in the Accounts Receivable account increased by $7,000. The balance in the unearned revenue account decreased by $6,000. Also, the company reported depreciation expense of $15,000 and a gain on the sale of equipment of $8,000. Based on this information alone, the amount of the cash flow from operating activities shown on statement of cash flows is

Accepted Answer

The cash flow from operating activities can be calculated using the indirect method as follows:

Net Income $120,000
Add:
Depreciation Expense $15,000
Loss on Sale of Equipment $8,000
Subtract:
Increase in Accounts Receivable ($7,000)
Decrease in Unearned Revenue $6,000
Cash Flow from Operating Activities $142,000 - $13,000 = $129,000

Therefore, the correct answer is A) $114,000.

Question 17

On January 1, Year 1, Mayer Corporation signed a contract to perform $25,000 worth of services for Phips Company over the next three years. Which of the following indicates the effects of this event on the Year 1 income statement and statement of cash flows of Mayer Corporation?

Accepted Answer

The answer of On January 1, Year 1, Mayer Corporation...

Question 18

Phillips Company reported total credit sales of $244,200 for Year 2. Its accounts receivable totaled $39,500 and $57,700 at the beginning and end of the year, respectively. What was the cash collected from customers during Year 2?

Accepted Answer

Cash collected from customers = Total credit sales + Decrease in accounts receivable
= $244,200 + ($39,500 - $57,700)
= $244,200 - $18,200
= $226,000

Therefore, the answer is D) $226,000.

Question 19

Which of the following is the correct sequence of the three sections that are presented on the statement of cash flows?

Accepted Answer

The correct order of sections in the statement of cash flows is operating, investing, and financing. This order helps to show the sources and uses of cash in the normal operations of the business (operating), the purchase and sale of assets (investing), and the financing activities of the business (including loans and equity transactions). The correct sequence of the three sections presented on the statement of cash flows is Operating, Investing, and Financing. This order is important because it represents the flow of cash in a company: cash is generated from operations, which is then used to invest in assets, and any additional financing needed is obtained from external sources. Therefore, Option A is the correct answer.

Question 20

Ervin Company began the accounting period with $61,500 in accounts receivable. The ending balance in accounts receivable was $23,000. If the credit sales during the period were $148,000, what is the amount of cash received from customers?

Accepted Answer

The cash received from customers is calculated as: Beginning Accounts Receivable + Credit Sales - Ending Accounts Receivable = $61,500 + $148,000 - $23,000 = $186,500.

Quiz 12: Statement of Cash Flows

Which of the following items would be classified as a cash flow from investing activities?1) Issue common stock for cash2) Payment on principal of note payable3) Payment of dividends4) Sale of equipment for cash

What is the name given to the sum of the subtotals of the three sections (operating activities, investing activities, and financing activities) of the statement of cash flows?