Question 1

A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in

Accepted Answer

The answer of A business issues 20-year bonds payable in...

Question 2

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

Accepted Answer

The purchase of noncurrent assets (such as property, plant, and equipment) is a cash outflow related to investing activities, as it represents an investment in the long-term assets of the company. Issuance of bonds payable (A) and capital stock (B) are financing activities, while the purchase of treasury stock (C) is a combination of financing and investing activities, depending on whether the stock is resold or retired.

Question 3

A building with a book value of $ 46,000 is sold for $51,000 cash Using the indirect method, this transaction should be shown on the statement of cash flows as follows:

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The answer of A building with a book value of...

Question 4

The following information is available from the current period financial statements:  The net cash flow from operating activities using the indirect method is

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The answer of The following information is available from the...

Question 5

Cash dividends paid on capital stock would be reported in the statement of cash flows in

Accepted Answer

Cash dividends paid on capital stock represent a financing activity, as they involve distributing a portion of the company's earnings to shareholders. Therefore, they would be reported in the cash flows from financing activities section of the statement of cash flows.

Question 6

The current period statement of cash flows includes the flowing:  The cash balance at the end of the period is

Accepted Answer

The current period statement of cash flows shows that the cash balance at the beginning of the period was $190,000, and that there were net cash inflows of $165,000 from operating activities and $45,000 from financing activities. Therefore, the ending cash balance is $190,000 + $165,000 + $45,000 = $400,000. The option for $355,000 is the closest to the ending cash balance of $400,000. Therefore, the correct answer is C.

Question 7

Accounts receivable from sales transactions were $44,000 at the beginning of the year and $53,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is

Accepted Answer

The increase in accounts receivable of $9,000 ($53,000 - $44,000) indicates that not all sales were collected in cash. Therefore, the net income of $105,000 should be adjusted by subtracting the increase in accounts receivable to arrive at the cash flows from operating activities: $105,000 - $9,000 = $96,000.

Question 8

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

Accepted Answer

Gains on the sale of investments are added back to net income on the income statement when using the indirect method to prepare the statement of cash flows. Since the gain increases net income but does not involve cash inflow from operating activities, it is deducted to arrive at the cash flows from operating activities.

Question 9

Equipment with an original cost of $60,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would

Accepted Answer

The book value of the equipment is $40,000 ($60,000 original cost - $20,000 accumulated depreciation). Since it was sold at a loss of $7,000, the cash received must have been $33,000 ($40,000 book value - $7,000 loss).

Question 10

Cash paid for equipment would be reported in the statement of cash flows in

Accepted Answer

Cash paid for equipment is a capital expenditure and is therefore reported in the investing activities section of the statement of cash flows.

Question 11

If a gain of $9,000 is incurred in selling (for cash) office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash flows from investing activities section reports the cash received from the sale of office equipment, which is the book value plus the gain. Therefore, $55,000 (book value) + $9,000 (gain) = $64,000.

Question 12

On the statement of cash flows, the cash flows from financing activities section would include

Accepted Answer

Cash flows from financing activities include transactions involving the issuance or repayment of debt, as well as transactions involving the issuance or payment of equity. Receipts from the issuance of capital stock would fall under the cash flows from financing activities section. Option A and B are cash flows from investing activities, while option C is a cash flow from operating activities.

Question 13

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:  What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Accepted Answer

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

Net income $275,000 
Add: Depreciation $40,000 
Amortization $9,000 
Decrease in current asset (Accounts receivable) $7,000 
Increase in current liability (Accounts payable) $12,000 
Cash flows from operating activities $296,000

Therefore, the correct answer is D) $296,000.

Question 14

On the statement of cash flows, a $20,000 gain on the sale of fixed assets would be

Accepted Answer

The gain on the sale of fixed assets is a non-operating activity and therefore should be deducted from net income in converting the net income reported on the income statement to cash flows from operating activities. This is because the operating section of the cash flow statement only includes cash inflows and outflows from operating activities, while gains and losses on non-operating activities are reported in the investing or financing sections.

Question 15

On the statement of cash flows, the cash flows from investing activities section would include

Accepted Answer

The cash flows from investing activities section of the statement of cash flows reports the cash inflows and outflows related to the purchase and sale of long-term assets and investments. Therefore, receipts from the sale of investments would be included in this section. Choices A, B, and C relate to financing activities and would be reported in the cash flows from financing activities section of the statement of cash flows.

Question 16

Land costing $46,000 was sold for $79,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Accepted Answer

The statement of cash flows reports the total cash received from the sale of land as an investing activity, which is $79,000.

Question 17

Land costing $88,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

Accepted Answer

The amount reported as an investing activity on the statement of cash flows is the cash received from the sale, which is $50,000. The original cost of the land is not reported on the statement of cash flows since it is a non-cash transaction. The loss on the sale is reported as an expense on the income statement, but does not impact the cash flow statement.

Question 18

On the statement of cash flows, the cash flows from financing activities section would include all of the following except

Accepted Answer

The cash flows from financing activities section would include receipt or payment of cash for transactions that involve borrowing money, issuing or repurchasing stock, and payment of dividends. Payment of interest on bonds payable falls under cash flows from operating activities as it is an expense incurred during the course of business operations.

Question 19

Cash dividends of $85,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is

Accepted Answer

The cash dividends paid during the year can be calculated as follows:

Cash dividends paid = Cash dividends declared - Dividends payable at beginning of year + Dividends payable at end of year
Cash dividends paid = $85,000 - $10,000 + $15,000
Cash dividends paid = $90,000 - $10,000
Cash dividends paid = $80,000

Therefore, the best choice is B, $80,000.

Question 20

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

Accepted Answer

The answer of Which of the following should be deducted...

Quiz 14: Statement of Cash Flows