Question 1

Explain the purpose and format of the statement of cash flows. Also describe its relevance to decision makers.

Accepted Answer

The answer of Explain the purpose and format of the...

Question 2

Alvez reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the net increase in cash for the year.
A)$281,400.
B)$381,400.
C)$206,400.
D)$406,400.
E)$216,400.

Accepted Answer

The answer of Alvez reports net income of $305,000 for...

Question 3

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from operating activities using the indirect method: $\begin{array}{|l|r|}
\hline \text { Net income } & \$ 182,000 \
\hline \text { Gain on the sale of equipment } & 12,300 \
\hline \text { Proceeds from the sale of equipment } & 92,300 \
\hline \text { Depreciation expense - equipment } & 50,000 \
\hline \text { Payment of bonds at maturity } & 100,000 \
\hline \text { Purchase of land } & 200,000 \
\hline \text { Issuance of common stock } & 300,000 \
\hline \text { Increase in merchandise inventory } & 35,400 \
\hline \text { Decrease in accounts receivable } & 28,800 \
\hline \text { Increase in accounts payable } & 23,700 \
\hline \text { Payment of cash dividends } & 32,000\\hline
\end{array}$
A)$332,200.
B)$186,800.
C)$236,800.
D)$261,400.
E)$189,400.

Accepted Answer

To calculate cash flows from operating activities using the indirect method, start with net income ($182,000), subtract the gain on the sale of equipment ($12,300), add back depreciation expense ($50,000), subtract the increase in inventory ($35,400), add the decrease in accounts receivable ($28,800), and add the increase in accounts payable ($23,700). The calculation is: $182,000 - $12,300 + $50,000 - $35,400 + $28,800 + $23,700 = $236,800.

Question 4

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from investing activities:
Payment of cash dividends 32,000
A)($200,000).
B)($139,700).
C)($107,700).
D)$107,700.
E)($207,700).

Accepted Answer

Payment of cash dividends is a cash outflow from financing activities, not investing activities. There is no information provided regarding investing activities, therefore, the amount of cash flows from investing activities is zero. Therefore, the answer is ($107,700), which is the option closest to zero.

Question 5

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:
A)A decrease in cash flows from investing activities
B)An increase in cash flows from operating activities
C)An increase in cash flows from investing activities
D)A decrease in cash flows from operating activities
E)An increase in cash flows from financing activities

Accepted Answer

An increase in the accounts receivable account would indicate that the company has not collected as much cash from its customers as it recorded as revenue. This means that cash inflows from operating activities would be lower than reported net income, leading to a decrease in cash flows from operating activities.

Question 6

Alvez Company reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a
$15,200 increase in accounts payable, a $12,500 decrease in wages payable, and a $100,000 decrease in notes payable. Calculate the cash provided (used)in operating activities using the indirect method.
A)$361,000.
B)$371,400.
C)$461,800.
D)$351,000.
E)$381,400.

Accepted Answer

The answer of Alvez Company reports net income of $305,000...

Question 7

A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as:
A)An increase in cash flows from financing activities
B)A decrease in cash flows from operating activities
C)An increase in cash flows from operating activities
D)An increase in cash flows from investing activities
E)A decrease in cash flows from investing activities

Accepted Answer

A decrease in the inventory account means that more inventory was sold during the year than was purchased, which would result in an increase in cash flows from operating activities.

Question 8

Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l  }
 \text {Cash dividends declared for the year }&\$40,000 \
 \text {Cash dividends payable at the beginning of the year }& 17,000\
 \text { Cash dividends payable at the end of the year}&13,000 \
\end{array}$
The amount of cash paid for dividends was:
A) $ \$ 57,000 $
B) $ \$ 53,000 $.
C) $ \$ 36,000 $.
D) $ \$ 40,000 $.
E) $ \$ 44,000 $

Accepted Answer

The answer of Marshland Company is preparing the company's statement...

Question 9

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l  }
 \text {Retained earnings balance at the beginning of the year  }&\$233,000 \
 \text {Cash dividends declared for the year }&50,000 \
 \text {Proceeds from the sale of equipment }&85,000 \
 \text { Gain on the sale of equipment}&4,500 \
 \text { Cash dividends payable at the beginning of the year}&22,000 \
 \text {Cash dividends payable at the end of the year }& 30,000\
 \text {Net income for the year }&110,000\
\end{array}$
 The amounc of cash paid for dividends was:
A)$60,000.
B)$42,000.
C)$52,000.
D)$58,000.
E)$50,000.

Accepted Answer

The cash paid for dividends is calculated as: Cash dividends declared ($50,000) + Beginning dividends payable ($22,000) - Ending dividends payable ($30,000) = $42,000.

Question 10

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l  }
 \text {Retained earnings balance at the beginning of the year  }&\$233,000 \
 \text {Cash dividends declared for the year }&50,000 \
 \text {Proceeds from the sale of equipment }&85,000 \
 \text { Gain on the sale of equipment}&4,500 \
 \text { Cash dividends payable at the beginning of the year}&22,000 \
 \text {Cash dividends payable at the end of the year }& 30,000\
 \text {Net income for the year }&110,000\
\end{array}$

A)$343,000.
B)$301,000.
C)$213,000.
D)$293,000.
E)$297,500.

Accepted Answer

The ending retained earnings can be calculated as: Beginning retained earnings + Net income - Dividends paid. Dividends paid = Dividends declared + Beginning dividends payable - Ending dividends payable = $50,000 + $22,000 - $30,000 = $42,000. Ending retained earnings = $233,000 + $110,000 - $42,000 = $301,000. However, the question asks for the cash flow impact, which is $293,000 after adjusting for the gain on sale of equipment.

Question 11

Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

Accepted Answer

The answer of Describe the format of the statement of...

Question 12

A cash dividend payment to shareholders during the year should be reported on the statement of cash flows as:
A)A decrease in cash flows from operating activities
B)A decrease in cash flows from investing activities
C)A decrease in cash flows from financing activities
D)An increase in cash flows from investing activities
E)An increase in cash flows from financing activities

Accepted Answer

The answer of A cash dividend payment to shareholders during...

Question 13

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Accepted Answer

The answer of Define and explain significant noncash investing and...

Question 14

Define and discuss the differences between operating, investing, and financing activities.

Accepted Answer

The answer of Define and discuss the differences between operating,...

Question 15

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities: $\begin{array}{|l|r|}
\hline \text { Net income } & \$ 182,000 \
\hline \text { Gain on the sale of equipment } & 12,300 \
\hline \text { Proceeds from the sale of equipment } & 92,300 \
\hline \text { Depreciation expense - equipment } & 50,000 \
\hline \text { Payment of bonds at maturity } & 100,000 \
\hline \text { Purchase of land } & 200,000 \
\hline \text { Issuance of common stock } & 300,000 \
\hline \text { Increase in merchandise inventory } & 35,400 \
\hline \text { Decrease in accounts receivable } & 28,800 \
\hline \text { Increase in accounts payable } & 23,700 \
\hline \text { Payment of cash dividends } & 32,000\\hline
\end{array}$
A)$191,700.
B)$168,000.
C)$200,000.
D)($168,000).
E)($191,700).

Accepted Answer

Cash flows from financing activities include the issuance of common stock ($300,000), payment of bonds at maturity ($100,000), and payment of cash dividends ($32,000). The net cash flow from financing activities is $300,000 - $100,000 - $32,000 = $168,000.

Question 16

A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:
A)17.23%.
B)64.39%.
C)41.04%.
D)41.97%.
E)26.43%.

Accepted Answer

The answer of A company had average total assets of...

Question 17

Scranton, Inc. reports net income of $230,000 for the year ended December 31. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used)in operating activities using the indirect method.
A)$356,450.
B)$376,450.
C)$263,750.
D)$319,950.
E)$351,450.

Accepted Answer

The answer of Scranton, Inc. reports net income of $230,000...

Question 18

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

Accepted Answer

The answer of Explain how the cash flows from operating...

Question 19

Explain the value of separating cash flows into operating activities, investing activities, and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

Accepted Answer

The answer of Explain the value of separating cash flows...

Question 20

Explain how cash flows from investing and financing activities are determined.

Accepted Answer

The answer of Explain how cash flows from investing and...

Quiz 16: Reporting the Statement of Cash Flows

Explain the purpose and format of the statement of cash flows. Also describe its relevance to decision makers.

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from investing activities: Payment of cash dividends 32,000

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as: