Question 1

A company reported that its bonds with a face value of $50,000 and a carrying value of $53,000 are retired for $56,000 cash.The amount to be reported under cash flows from financing activities is:

Accepted Answer

The retirement of bonds for cash is a financing activity. The company received cash of $56,000 for retiring the bonds. The difference between the cash received and the carrying value of the bonds ($3,000) represents a gain on retirement of debt, which would be reported as a separate item on the statement of cash flows. Therefore, the amount to be reported under cash flows from financing activities is the cash received, which is $56,000.

Question 2

Which of the following are used to determine cash flows from financing activities?

Accepted Answer

Long-term debt, Common Stock, and Retained Earnings are used to determine cash flows from financing activities. The other options include some incorrect items.

Question 3

When the indirect method is used,details from which of the following balance sheet accounts are used in calculating both operating and financing cash flows?

Accepted Answer

The indirect method involves adjusting net income for non-cash items and changes in working capital accounts. Retained earnings, which is the cumulative earnings of a company that have not been distributed to shareholders as dividends, is a balance sheet account that is used in calculating both operating and financing cash flows. Bonds payable, taxes payable, and common stock are not directly related to calculating operating or financing cash flows under the indirect method.

Question 4

-Use the information above to answer the following question.The company would report net cash provided by (used in)financing activities of:

Accepted Answer

The correct answer is $2,000, which represents the net cash provided by financing activities. This is calculated by considering cash inflows and outflows related to financing activities such as issuing stock, borrowing, and repaying debt.

Question 5

A corporation had a net increase in Retained Earnings of $65,000 for the year.The corporation also paid $20,000 of cash dividends that had been declared in the previous year.This year,the corporation declared $18,000 of dividends but has not paid them as of year-end.Given this information,the net income for the current year must have been:

Accepted Answer

The answer of A corporation had a net increase in...

Question 6

To determine net cash provided by or used in financing activities,one must analyze the:

Accepted Answer

Net cash provided by or used in financing activities is determined by analyzing the changes in the Common Stock and Retained Earnings accounts. This includes any proceeds from issuing stock, payments made for dividends, and repayment of loans or bonds. Notes receivable and bonds payable relate to the investing and financing activities and do not directly impact the determination of net cash provided by or used in financing activities. The cash account reflects the ending balance but does not provide information on the sources and uses of cash in financing activities. Interest expense and dividend income relate to the operating activities.

Question 7

In determining cash flows related to investing activities,which accounts are analyzed?

Accepted Answer

Cash flows related to investing activities primarily involve the purchase or sale of long-lived tangible and intangible assets, such as property, plant, and equipment, and investments in securities. Therefore, in determining cash flows related to investing activities, the relevant accounts to analyze are those related to long-lived assets, such as land, buildings, equipment, patents, and investments in stocks and bonds.

Question 8

A corporation prepared its statement of cash flows for the year.The following information is taken from that statement:

What is the amount of net cash provided by (used in)financing activities?

Accepted Answer

The net cash provided by (used in) financing activities is calculated as the sum of cash inflows from issuing stock and borrowing money, minus the cash outflows from paying dividends and repaying borrowings. In this case, the cash inflows from issuing stock and borrowing money is $0 ($10,000 + $4,400 = $14,400) and the cash outflows from paying dividends and repaying borrowings is ($15,800). Therefore, the net cash provided by (used in) financing activities is ($15,800) - $0 = ($15,800), which is closest to answer choice C.

Question 9

Cash flows from financing activities:

Accepted Answer

Cash flows from financing activities include all cash inflows and outflows between a company and its stockholders, such as proceeds from issuing stock, payments of dividends, and payments of debt.

Question 10

Dover Co.'s comparative balance sheet indicated that the Equipment account increased by $40,000.Upon further investigation of the account changes,it is determined that Dover purchased equipment totaling $70,000 for the year.It also sold equipment with an original cost of $30,000 for $8,000 cash.Assuming these are the only transactions affecting the investing activities,Dover will report net cash flows provided by (used in)investing activities of:

Accepted Answer

Dover purchased equipment for $70,000 (cash outflow) and sold equipment for $8,000 (cash inflow). The net cash flow from investing activities is $8,000 - $70,000 = -$62,000.

Question 11

Which of the following represents a cash inflow from financing activities?

Accepted Answer

The answer of Which of the following represents a cash...

Question 12

A company issues $1 million of new stock and pays $200,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $1.5 million in a new bond issue and paid off existing bonds with a face value of $2 million.The company bought 500 of another company's $1,000 bonds at a $100,000 premium.The net cash flow provided by financing activities is:

Accepted Answer

The net cash flow provided by financing activities can be calculated as follows:

Proceeds from stock issuance = $1 million (inflow)
Cash dividends paid = $200,000 (outflow)
Proceeds from new bond issue = $1.5 million (inflow)
Repayment of existing bonds = $2 million (outflow)
Purchase of bonds at a premium = $100,000 (outflow)

Net cash flow provided by financing activities = (1,000,000 - 200,000 + 1,500,000 - 2,000,000 - 100,000) = $300,000 (inflow)

Therefore, the best choice is D.

Question 13

-Use the information above to answer the following question.The company would report net cash provided by (used in)investing activities of:

Accepted Answer

The answer of 
-Use the information above to answer the...

Question 14

Braden and Sons,Inc.paid cash to purchase equipment costing $342,000 this year.Also this year,the company sold for $70,000 cash,equipment that originally cost $230,000 five years ago.How should these transactions be listed in the statement of cash flows?

Accepted Answer

The purchases and sales of equipment should be shown separately in the statement of cash flows. The purchase of equipment for $342,000 is a cash outflow and should be shown as a decrease to cash. The sale of equipment for $70,000 is a cash inflow and should be shown as an increase to cash. So, the correct option is to show a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale) in the statement of cash flows. Therefore, the answer is D.

Question 15

Two years ago,your company bought $40,000 in bonds from another company.This month,it sold half of those bonds for $20,640 and purchased the common stock of another company for $1,000.On the statement of cash flows for this accounting period,your company would report a net cash:

Accepted Answer

The company received $20,640 from the sale of half of the bonds, which represents an inflow of cash from investing activities. The purchase of the common stock for $1,000 represents an outflow of cash from investing activities. Therefore, the net cash flow from investing activities is an inflow of $19,640 (20,640 - 1,000).

Question 16

Company X paid Company Y $1.35 million for a new plant.During the same accounting period,Company X experienced the following changes in its balance sheet: Cash decreased by $350,000,Accounts Receivable increased by $321,300,Inventory increased by $275,800,Property,Plant,and Equipment increased by $752,900,and Bonds Payable increased by $1 million.The net cash flow provided by financing activities is:

Accepted Answer

The answer of Company X paid Company Y $1.35 million...

Question 17

Braden and Sons,Inc.borrowed $700,000 cash from Trenton Savings and Loan last year.In addition,the company repaid a $450,000 note payable to First National Bank.How should these transactions be listed in the Statement of Cash Flows?

Accepted Answer

The borrowing and repayment of loans are both financing activities and should be shown separately in the financing activities section of the cash flow statement.

Question 18

A company took out $665,000 of new debt this year and repaid $1,000,000 of older debt in the same year.The company also issued stock for $442,000 cash and paid dividends of $99,000 for the year.The company's financing cash flows appearing the statement of cash flows will show:

Accepted Answer

The answer of A company took out $665,000 of new...

Question 19

The Retained Earnings account has a beginning balance of $321,975 and an ending balance of $356,413.Net income is $40,251.Which of the following statements is correct?

Accepted Answer

The answer of The Retained Earnings account has a beginning...

Question 20

Which of the following represent cash outflows from financing activities?

Accepted Answer

The answer of Which of the following represent cash outflows...

Quiz 12: Reporting and Interpreting the Statement of Cash Flows