Question 1

Dividends received by a company appear in the operating activities section of a direct method cash flow statement.

Accepted Answer

Dividends received by a company are considered as operating cash inflows and therefore appear in the operating activities section of a direct method cash flow statement.

Question 2

Under the direct method, depreciation on a building would be reported as a(n):

Accepted Answer

Under the direct method, depreciation is not reported on the cash flow statement because it is a non-cash expense.

Question 3

Operating expenses (other than depreciation)for the year were $360,000. Accrued expenses increased by $37,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

The answer of Operating expenses (other than depreciation)for the year...

Question 4

Exchanging stock for a building under the direct method would be reported:

Accepted Answer

Exchanging stock for a building is a non-cash transaction and would not appear in the cash flow statement itself. Instead, it should be reported in a separate disclosure to provide information about investing and financing activities that do not involve cash flows.

Question 5

When a corporation receives dividends, they are shown as a(n)______ when using the direct method.

Accepted Answer

Dividends received are considered as part of the operating activities under the direct method because it represents cash inflows from the primary business operations of the corporation.

Question 6

A purchase of new equipment on a note payable under the direct method would be reported:

Accepted Answer

Purchases of new equipment on a note payable are considered non-cash investing and financing activities. Therefore, they are not reported in the cash flow statement's main sections (operating, investing, or financing) but are disclosed separately.

Question 7

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

Accepted Answer

To find the amount of cash paid for salaries and wages during 2016, we need to look at the Income Statement under the "Operating Expenses" section. The line item for "Salaries and Wages Expense" shows a total of $160,300. This means that the company paid $160,300 in cash for salaries and wages during 2016. Therefore, the correct answer is C.

Question 8

Which of the following statements is correct concerning the computation required to determine cash collected from customers under the direct method?

Accepted Answer

A decrease in Accounts Receivable indicates that more cash has been collected from customers than sales made on credit. Under the direct method, this decrease is added to Sales Revenue to determine the cash collected from customers.

Question 9

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

Accepted Answer

The answer of From the Income Statement and Balance Sheet...

Question 10

Cost of goods sold for the year was $660,000. Inventory was $83,000 at the beginning of the year and $37,000 at the end of the year. There were no changes in the amount in account payable for the year. Cash payment for merchandise to be reported under the direct method is:

Accepted Answer

Beginning inventory + Purchases - Ending inventory = Cost of goods sold
$83,000 + Purchases - $37,000 = $660,000
Purchases = $614,000
Cash payment for merchandise equals the cost of purchases plus any change in Accounts Payable. Since there were no changes in Accounts Payable, the cash payment would be $614,000. Therefore, the correct answer is B.

Question 11

Cash payments for inventory are computed as- Total inventory purchased plus a decrease in Accounts Payable OR minus an increase in Accounts Payable.

Accepted Answer

This statement is true. Cash payments for inventory are calculated by adding the total inventory purchased and subtracting any decrease in Accounts Payable or adding any increase in Accounts Payable.

Question 12

Operating expenses (other than depreciation)for the year were $533,000. Accrued expenses decreased by $50,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

When accrued expenses decrease, it means the company has paid more in cash than the expenses recognized. Therefore, to find the cash payments for operating expenses, add the decrease in accrued expenses ($50,000) to the operating expenses ($533,000), resulting in $583,000.

Question 13

Cost of goods sold for the year was $840,000. Inventory was $64,000 at the beginning of the year and $89,000 at the end of the year. There were no changes in the amount in account payable for the year. Cash payment for merchandise to be reported under the direct method is:

Accepted Answer

The direct method reports cash payments for merchandise purchases during the year. To calculate this, we need to adjust the cost of goods sold by changes in inventory.

Cost of goods sold = $840,000

Change in inventory = $89,000 - $64,000 = $25,000 increase

Cash payments for merchandise = Cost of goods sold + increase in inventory = $840,000 + $25,000 = $865,000

Therefore, the correct choice is D ($865,000).

Question 14

Payments to suppliers include payments for which of the following?

Accepted Answer

Payments to suppliers typically include payments for inventory, as suppliers are those who provide the goods or materials that businesses need to operate. Employee compensation and income taxes are not payments made to suppliers; instead, they are payroll expenses and tax obligations, respectively.

Question 15

The gains and losses on the sale of equipment under the direct method would be reported:

Accepted Answer

The direct method only reports cash inflows and outflows from operating activities. Gains and losses on the sale of equipment are considered investing activities and would be reported in the investing section if using the indirect method. However, they are not reported at all when using the direct method.

Question 16

Operating expenses (other than depreciation)for the year were $230,000. Prepaid expenses increased by $13,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

When using the direct method for the cash flow statement, an increase in prepaid expenses means that more cash was paid than the expenses recognized. Therefore, you add the increase in prepaid expenses ($13,000) to the operating expenses ($230,000) to get $243,000.

Question 17

Operating expenses (other than depreciation)for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Accepted Answer

The cash payments for operating expenses using the direct method are calculated as follows:
Operating expenses (other than depreciation) = $335,000
Prepaid expenses decreased by = $7,000
Cash payments for operating expenses = Operating expenses – decrease in prepaid expenses
Cash payments for operating expenses = $335,000 – $7,000 = $328,000. Therefore, the correct answer is C.

Question 18

The following information is available for Allsport Company. What amount was paid for merchandise during the current year (2016)?

Accepted Answer

The answer of The following information is available for Allsport...

Question 19

Payments to suppliers include items such as employee compensation, interest and income taxes.

Accepted Answer

Payments to suppliers typically refer to the amounts paid for goods and services used in the production process or for direct resale, and do not include employee compensation, interest, or income taxes, which are categorized separately in financial accounting.

Question 20

Under the direct method, paying and collecting interest on loans are:

Accepted Answer

Under the direct method of preparing the cash flow statement, paying and collecting interest on loans are considered operating activities. This is because they relate to the core operations of the business, such as receiving interest on loans given (which is part of operating income) and paying interest on loans taken (which is part of operating expenses).

Quiz 11: The Statement of Cash Flows

Dividends received by a company appear in the operating activities section of a direct method cash flow statement.

Under the direct method, depreciation on a building would be reported as a(n) :

Operating expenses (other than depreciation) for the year were $360,000. Accrued expenses increased by $37,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Exchanging stock for a building under the direct method would be reported:

When a corporation receives dividends, they are shown as a(n) ______ when using the direct method.

A purchase of new equipment on a note payable under the direct method would be reported:

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

Which of the following statements is correct concerning the computation required to determine cash collected from customers under the direct method?

From the Income Statement and Balance Sheet information listed below, what amount of cash was paid for salaries and wages during 2016?

Cost of goods sold for the year was $660,000. Inventory was $83,000 at the beginning of the year and $37,000 at the end of the year. There were no changes in the amount in account payable for the year. Cash payment for merchandise to be reported under the direct method is:

Cash payments for inventory are computed as- Total inventory purchased plus a decrease in Accounts Payable OR minus an increase in Accounts Payable.

Operating expenses (other than depreciation) for the year were $533,000. Accrued expenses decreased by $50,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Cost of goods sold for the year was $840,000. Inventory was $64,000 at the beginning of the year and $89,000 at the end of the year. There were no changes in the amount in account payable for the year. Cash payment for merchandise to be reported under the direct method is:

Payments to suppliers include payments for which of the following?

The gains and losses on the sale of equipment under the direct method would be reported:

Operating expenses (other than depreciation) for the year were $230,000. Prepaid expenses increased by $13,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

Operating expenses (other than depreciation) for the year were $335,000. Prepaid expenses decreased by $7,000. Cash payments for operating expenses to be reported on the cash flow statement using the direct method would be:

The following information is available for Allsport Company. What amount was paid for merchandise during the current year (2016) ?

Payments to suppliers include items such as employee compensation, interest and income taxes.

Under the direct method, paying and collecting interest on loans are: