Question 1

Selected data taken from the accounting records of Laser Inc. for the current year ended December 31, are as follows:
  During the current year, the cost of merchandise sold was $448,500, and the operating expenses other than depreciation were $78,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows.
Required:
Determine the amount reported on the statement of cash flows for:
(1) Cash payments for merchandise; and
(2) Cash payments for operating expenses.

Accepted Answer

The answer of Selected data taken from the accounting records...

Question 2

The cost of merchandise sold during the year was $45,000. Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
A) $46,000
B) $44,000
C) $50,000
D) $40,000

Accepted Answer

To calculate cash payments for merchandise, we need to use the following formula:
Cash payments for merchandise = Cost of merchandise sold + Increase in inventory - Decrease in inventory + Increase in accounts payable - Decrease in accounts payable
Using the information given in the question, we can calculate cash payments for merchandise as follows:
Cash payments for merchandise = $45,000 + ($10,500 - $13,500) + ($5,000 - $7,000) 
= $45,000 - $3,000 - $2,000
= $40,000
Therefore, the correct choice is B.

Question 3

Identify which section the statement of cash flows (using the indirect method) would present information regarding the following activities: (Use O for operating, I for investing, or F for financing):
a. Issued common stock
b. Redeemed bonds
c. Issued preferred stock
d. Purchased patents
e. Net income
f. Paid cash dividends
g. Purchased treasury stock
h. Sold long-term investment.
i. Sold equipment.
j. Purchased buildings
k. Issued bonds

Accepted Answer

The answer of Identify which section the statement of cash...

Question 4

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:
  Adjust net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

Accepted Answer

The answer of Fortune Corporation's comparative balance sheet for current...

Question 5

Durrand Corporation's accumulated depreciation increased by $12,000, while patents decreased by $2,200 between consecutive balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $2,500 from sale of land. Reconcile a net income of $45,000 to net cash flow from operating activities.

Accepted Answer

The answer of Durrand Corporation's accumulated depreciation increased by $12,000,...

Question 6

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method.

Accepted Answer

The answer of For each of the following, identify whether...

Question 7

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method.

Accepted Answer

The answer of For each of the following, identify whether...

Question 8

Free cash flow is cash from operations, less cash for
A) dividends and cash for fixed assets needed to maintain productivity
B) dividends and cash to redeem bonds payable
C) fixed assets needed to maintain productivity
D) dividends, cash for fixed assets needed to maintain productivity, and cash to redeem bonds payable

Accepted Answer

Free cash flow is a measure of a company's ability to generate cash from its operations after accounting for capital expenditures needed to maintain productivity and dividends paid to shareholders. Therefore, it is calculated by subtracting cash used for both fixed asset maintenance and dividends from cash generated from operations. Option A correctly identifies these two components of free cash flow, while options B and D include additional cash outflows beyond those that reduce free cash flow. Option C fails to account for dividends, which are a key determinant of free cash flow.

Question 9

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method.

Accepted Answer

The answer of For each of the following, identify whether...

Question 10

Kennedy, Inc. reported the following data:
  Prepare the cash flows for operating activities under the indirect method as it would appear on the statement of cash flows.

Accepted Answer

The answer of Kennedy, Inc. reported the following data:
 ...

Question 11

The following two scenarios are independent of one another.

Accepted Answer

The answer of The following two scenarios are independent of...

Question 12

Master Designs Company has cash flows for operating activities of $300,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace existing capacity.
What is the free cash flow for Master Designs?

Accepted Answer

The answer of Master Designs Company has cash flows for...

Question 13

Lamar Corporation purchased land for $150,000. Later in the year the company sold land with a book value of $190,000 for $200,000. Show how the effects of these transactions are reported on the statement of cash flows using the indirect method.

Accepted Answer

The answer of Lamar Corporation purchased land for $150,000. Later...

Question 14

Free cash flow is
A) all cash in the bank
B) cash from operations
C) cash from financing, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
D) cash flow from operations, less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends

Accepted Answer

Free cash flow is the cash flow from operations minus the cash used to purchase fixed assets to maintain productive capacity and cash used for dividends. Option A is incorrect because having cash in the bank does not necessarily mean it is free cash flow. Option B is incorrect because it only represents one component of the formula. Option C is incorrect because it adds cash from financing which is not a part of the formula.

Question 15

Sinclair Company's accumulated depreciation-equipment increased by $6,000, while patents decreased by $2,200 between balance sheet dates. There were no purchased or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $3,200 from the sale of investments.
Required:
Reconcile a net income of $92,000 to net cash flow from operating activities.

Accepted Answer

The answer of Sinclair Company's accumulated depreciation-equipment increased by $6,000,...

Question 16

The board of directors declared cash dividends total $152,000 during 2011. The comparative balance sheet indicated dividends payable of $42,000 at the beginning of the year and $38,000 at the end of the year. What was the amount of cash payment to stockholders during the year?

Accepted Answer

The answer of The board of directors declared cash dividends...

Question 17

Sales reported on the income statement were $340,000. The accounts receivable balance declined $17,000 over the year. Determine the amount of cash received from customers.

Accepted Answer

The answer of Sales reported on the income statement were...

Question 18

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise?

Accepted Answer

The answer of Cost of merchandise sold reported on the...

Question 19

Each of the events below may have an effect on the statement of cash flows. Designate how the event should be reported within the statement of cash flows using the codes provided below. Codes may be used more than once, or not at all.
Codes
  Events

Accepted Answer

The answer of Each of the events below may have...

Question 20

The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following:

Accepted Answer

The answer of The cash flows from operating activities are...

Quiz 14: Statement of Cash Flows

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows: Adjust net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method.

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method.

Free cash flow is cash from operations, less cash for

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method.

Kennedy, Inc. reported the following data: Prepare the cash flows for operating activities under the indirect method as it would appear on the statement of cash flows.

The following two scenarios are independent of one another.

Master Designs Company has cash flows for operating activities of $300,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace existing capacity. What is the free cash flow for Master Designs?

Lamar Corporation purchased land for $150,000. Later in the year the company sold land with a book value of $190,000 for $200,000. Show how the effects of these transactions are reported on the statement of cash flows using the indirect method.

Free cash flow is

The board of directors declared cash dividends total $152,000 during 2011. The comparative balance sheet indicated dividends payable of $42,000 at the beginning of the year and $38,000 at the end of the year. What was the amount of cash payment to stockholders during the year?

Sales reported on the income statement were $340,000. The accounts receivable balance declined $17,000 over the year. Determine the amount of cash received from customers.

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise?

Each of the events below may have an effect on the statement of cash flows. Designate how the event should be reported within the statement of cash flows using the codes provided below. Codes may be used more than once, or not at all. Codes Events

The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following: