Question 1

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Accounts Receivable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Accepted Answer

An increase in accounts receivable indicates that more sales were made on credit during the period, resulting in an increase in revenue recognized but not received in cash. Therefore, an increase in accounts receivable is subtracted from net income to arrive at net cash flows from operating activities using the indirect method.

Question 2

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $45,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Free cash flow equals

Accepted Answer

The answer of During 2009, Heckart Corporation had sales of...

Question 3

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $36,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Cash flows to assets equals (Round amounts to one decimal place)

Accepted Answer

The answer of During 2009, Heckart Corporation had sales of...

Question 4

Royer Corporation engaged in this transaction: Sold buildings and equipment for cash.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

The transaction relates to the sale of buildings and equipment, which is classified as an investment activity and would therefore appear in the investing activities section of the statement of cash flows.

Question 5

If the indirect method is used to prepare a statement of cash flows, which of the following would be added to net income to arrive at net cash flows from operating activities?

Accepted Answer

A decrease in prepaid expenses indicates that cash was not used for these expenses during the period, so it is added back to net income in the operating activities section of the cash flow statement.

Question 6

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $26,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Cash flow yield equals (Round amounts to one decimal place)

Accepted Answer

The answer of During 2009, Heckart Corporation had sales of...

Question 7

Royer Corporation engaged in this transaction: Purchased treasury stock with cash.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

The purchase of treasury stock with cash is a financing activity, as it involves using cash to buy back shares from investors, which reduces the amount of outstanding shares and increases the ownership percentage of the remaining shareholders. Therefore, it would appear in the financing activities section of a statement of cash flows.

Question 8

Royer Corporation engaged in this transaction: Purchased 60-day commercial paper.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

Purchasing commercial paper is considered a cash equivalent transaction and does not represent a cash flow on the statement of cash flows.

Question 9

If net cash flows from operating activities were $296,000, net income were $200,000, and sales were $2,000,000, cash flows to sales would equal (Round amounts to one decimal place)

Accepted Answer

Cash flows to sales is calculated by dividing net cash flows from operating activities by sales. Therefore, cash flows to sales would be $296,000/$2,000,000=0.148 or 14.8%.

Question 10

Royer Corporation engaged in this transaction: Amortization of a patent. Assume use of the indirect approach.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

Amortization of a patent is considered a non-cash expense and is included in the operating activities section of the statement of cash flows under the indirect approach.

Question 11

Royer Corporation engaged in this transaction: Depreciation on equipment. Assume use of the indirect approach.
Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Accepted Answer

Depreciation on equipment is a non-cash expense that is added back to net income in the operating activities section of the statement of cash flows using the indirect method.

Question 12

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $45,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Cash flows to sales equals (Round amounts to one decimal place)

Accepted Answer

The answer of During 2009, Heckart Corporation had sales of...

Question 13

If net cash flows from operating activities were $194,000, net income were $50,000, and net sales were $600,000, the cash flow yield would equal (Round amounts to one decimal place)

Accepted Answer

Cash flow yield is calculated by dividing net cash flows from operating activities by net sales.

Cash flow yield = Net cash flows from operating activities / Net sales

Cash flow yield = $194,000 / $600,000 = 0.3233

To convert cash flow yield to a multiple, we can divide 1 by the yield.

Cash flow yield as a multiple = 1 / 0.3233 ≈ 3.1

Therefore, the cash flow yield is 0.3233 or approximately 3.1 times. The correct answer is C.

Question 14

If the indirect method is used to prepare a statement of cash flows, which of the following would be deducted from net income to arrive at net cash flows from operating activities?

Accepted Answer

An increase in accounts receivable indicates that more revenue was recognized than cash received, so it is deducted from net income to calculate cash flows from operating activities.

Question 15

The calculation of free cash flow could include all of the following except

Accepted Answer

Net income is used as a starting point for calculating free cash flow, so it cannot be included as a part of the calculation. A, B, and D are all components that can be included in the calculation of free cash flow.

Question 16

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Dividend Income (assume that cash received is equal to amount reported)-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Accepted Answer

The answer of Assume the indirect method is used to...

Question 17

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Inventory-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Accepted Answer

An increase in inventory means that more cash was used to purchase inventory, which reduces net income. Therefore, it must be subtracted from net income to arrive at net cash flows from operating activities.

Question 18

Cash flows to assets is measured in terms of

Accepted Answer

The answer of Cash flows to assets is measured in...

Question 19

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Interest Income (assume that cash received is equal to amount reported)-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Accepted Answer

Interest income is considered a non-operating item and does not affect the calculation of net cash flows from operating activities when using the indirect method. It is typically dealt with in the investing section of the cash flow statement.

Question 20

The direct method of preparing a statement of cash flows

Accepted Answer

The answer of The direct method of preparing a statement...

Quiz 15: The Statement of Cash Flows

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Accounts Receivable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $45,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Free cash flow equals

Royer Corporation engaged in this transaction: Sold buildings and equipment for cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

If the indirect method is used to prepare a statement of cash flows, which of the following would be added to net income to arrive at net cash flows from operating activities?

Royer Corporation engaged in this transaction: Purchased treasury stock with cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Royer Corporation engaged in this transaction: Purchased 60-day commercial paper. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

If net cash flows from operating activities were $296,000, net income were $200,000, and sales were $2,000,000, cash flows to sales would equal (Round amounts to one decimal place)

Royer Corporation engaged in this transaction: Amortization of a patent. Assume use of the indirect approach. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Royer Corporation engaged in this transaction: Depreciation on equipment. Assume use of the indirect approach. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

If net cash flows from operating activities were $194,000, net income were $50,000, and net sales were $600,000, the cash flow yield would equal (Round amounts to one decimal place)

If the indirect method is used to prepare a statement of cash flows, which of the following would be deducted from net income to arrive at net cash flows from operating activities?

The calculation of free cash flow could include all of the following except

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Inventory-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Cash flows to assets is measured in terms of

The direct method of preparing a statement of cash flows