Question 1

The income statement for CBA reported a net loss of $14,000. Also, the statement reported depreciation expense of $12,000 and amortization of patents of $6,000. Assuming no additional "adjustments to reconcile net income to cash from operating activities," the cash flow from operations would be a:

Accepted Answer

The net loss of $14,000 is adjusted by adding back non-cash expenses: $12,000 depreciation and $6,000 amortization, resulting in a $4,000 inflow ($12,000 + $6,000 - $14,000 = $4,000).

Question 2

A firm's dividends payable account increased $10,000 during the year. The firm also declared $35,000 of dividends. What is the complete disclosure in the direct method Statement of Cash Flows for these events?

Accepted Answer

The correct disclosure in the direct method Statement of Cash Flows for these events is a $25,000 financing cash outflow. This is because the firm declared $35,000 of dividends but the dividends payable account increased by $10,000, indicating that only $25,000 ($35,000 - $10,000) was actually paid out in cash.

Question 3

MDB reported sales of $800,000, bad debt expense (allowance method) of $30,000, and an increase in net accounts receivable of $120,000 during 2013. What is MDB's cash collected from customers for 2013 if MDB did not record any write-offs during the period?

Accepted Answer

Cash collected from customers can be calculated as:
Sales - Increase in net accounts receivable = Cash collected from customers
$800,000 - $120,000 = $680,000 (cash collected if there were no bad debt expenses)

However, since there was a bad debt expense of $30,000, we need to subtract this from the cash collected amount:
$680,000 - $30,000 = $650,000

Therefore, the answer is (A) $650,000.

Question 4

The sale of $3,000 worth of cash equivalents at cost has what effect on the direct method Statement of Cash Flows.

Accepted Answer

The sale of cash equivalents at cost does not impact the direct method Statement of Cash Flows because cash equivalents are considered part of cash and cash equivalents balance, and transactions within this category do not affect the cash flows from operating, investing, or financing activities.

Question 5

DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000 during the year, and accounts payable increased by $30,000 during the year. What would be DBB's cash paid to suppliers for 2013?

Accepted Answer

The formula to calculate cash paid to suppliers= cost of goods sold + increase in inventory - increase in accounts payable
Cash paid to suppliers = $600,000 + $20,000 - $30,000 = $590,000

Question 6

DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000 during the year, and accounts payable decreased by $30,000 during the year. What would be DBB's cash paid to suppliers for 2013?

Accepted Answer

To calculate DBB's cash paid to suppliers, we need to adjust cost of goods sold for the change in inventory and accounts payable.

Cash paid to suppliers = Cost of goods sold - decrease in inventory + decrease in accounts payable
Cash paid to suppliers = $600,000 - (-$20,000) - (-$30,000)
Cash paid to suppliers = $610,000

Therefore, the correct answer is (D) $610,000.

Question 7

ARI Inc. began 2013 with the following: $$\begin{array} { | l | l | } 
\hline \text { Accounts receivable } & \$ 10,000 \
\hline \text { Allowance tor doubtful accounts } & ( 800 ) \
\hline \text { Net accounts receivable } & \$ 9,200 \
\hline
\end{array}$$ During 2013 the following events occurred: $$\begin{array} { | l | l | } 
\hline \text { Accounts written off } & \$ 1,200 \
\hline \text { Sales on accounts } & 30,000 \
\hline \text { Bad debt expense recognized } & 2,000 \
\hline
\end{array}$$ At the end of 2013, ARI showed a balance in gross accounts receivable (before the allowance for doubtful accounts) of $16,800. In the direct method Statement of Cash Flows, what amount would be shown as an operating cash inflow?

Accepted Answer

The operating cash inflow is calculated by taking the sales on accounts ($30,000) and subtracting the increase in accounts receivable. The beginning gross accounts receivable was $10,000, and the ending was $16,800, showing an increase of $6,800. Therefore, the operating cash inflow is $30,000 - $6,800 = $23,200. However, given the options provided seem to not directly match this calculation, it appears there might have been a misunderstanding in the calculation process or a mistake in the options or the interpretation of the question. The correct approach involves understanding that the direct method focuses on actual cash transactions. Since the question and options provided seem to have a discrepancy with the calculated answer, it's important to clarify that the calculation based on the given data leads to a different result than the options provided.

Question 8

RJB reported sales of $200,000 and an increase in accounts receivable of $30,000 during 2001. Under the direct method, what would be RJB's cash collected from customers during 2001?

Accepted Answer

Under the direct method, cash collected from customers is found by subtracting the increase in accounts receivable from sales. 
Cash collected from customers = Sales - Increase in accounts receivable
Cash collected from customers = $200,000 - $30,000
Cash collected from customers = $170,000

Question 9

DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000 during the year, and accounts payable increased by $30,000 during the year. What would be DBB's cash paid to suppliers for 2013?

Accepted Answer

DBB's cash paid to suppliers for 2013 can be calculated using the following formula:Cash paid to suppliers = Cost of goods sold + Increase in accounts payable - Decrease in merchandise inventoryCash paid to suppliers = $600,000 + $30,000 - $20,000 = $550,000

Question 10

Assume cash paid to suppliers for 2011 is $420,000; that merchandise inventory increased by $20,000 during the year, and that cost of goods sold was $415,000 for 2011. During 2011, accounts payable must have:

Accepted Answer

Accounts payable represent amounts owed to suppliers for purchases of goods or services that have not yet been paid. The formula to calculate change in accounts payable is: 
Accounts Payable (end of year) - Accounts Payable (beginning of year) = Cash Paid to Suppliers - Increase in Inventory - Cost of Goods Sold
Substituting the given values: 
Accounts Payable - 0 = $420,000 - $20,000 - $415,000 
Accounts Payable = $15,000 increase
Therefore, choice C, increased by $15,000 is the correct answer.

Question 11

The following four events affecting property, plant and equipment, and intangible assets, occurred during the current year for a firm: 
(i.) Purchased equipment for $50,000.
(ii)) Successfully defended a patent infringement suit costing the firm $60,000 in legal fees this year; as a result, the firm has sole rights to the patent.
(iii.) Capitalized and paid $30,000 of interest on a building under construction which is to house the firm's new offices.
(iv)) Received $100,000 in casualty insurance proceeds as a result of fire damage to one of the firm's factories.
What is the net effect on investing cash flow of the above transactions for the current year?

Accepted Answer

The answer of The following four events affecting property, plant...

Question 12

If cash collected from customers for 2013 is $780,000 and accounts receivable increased by $20,000 during the year, what were sales for 2013?

Accepted Answer

Sales for 2013 can be calculated as: 
Sales = Cash collected + Increase in Accounts Receivable 
Sales = $780,000 + $20,000 = $800,000. Therefore, the answer is option C.

Question 13

A firm's accumulated depreciation account increased $30,000 for the year, and total plant assets at cost increased $200,000. During the year, the firm purchased $350,000 of new equipment for cash, and sold equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale. What is the complete disclosure of these events in the indirect method Statement of Cash Flows?

Accepted Answer

The answer of A firm's accumulated depreciation account increased $30,000...

Question 14

DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000 during the year and accounts payable decreased by $30,000 during the year. What would be DBB's cash paid to suppliers for 2013?

Accepted Answer

The cash paid to suppliers is calculated by adjusting the cost of goods sold for changes in inventory and accounts payable. Starting with COGS of $600,000, add the increase in inventory ($20,000) and the decrease in accounts payable ($30,000): $600,000 + $20,000 + $30,000 = $650,000.

Question 15

A firm purchased $20,000 worth of investments classified as securities available for sale. At the end of the year, the investments were worth $23,000. What is the correct disclosure of these events in the direct method Statement of Cash Flows?

Accepted Answer

The correct disclosure in the direct method Statement of Cash Flows for purchasing investments classified as securities available for sale is to report the cash paid for the investments as an investing cash outflow. The purchase price of $20,000 is the amount of cash that flowed out of the company to acquire these investments. Changes in the fair value of securities available for sale are not recognized in the Statement of Cash Flows but in other comprehensive income.

Question 16

SDB reported sales of $300,000, write-offs of uncollectible accounts of $10,000 against the allowance, and a decrease in net accounts receivable of $40,000 during 2013. What would be SDB's cash collected from customers during 2013?

Accepted Answer

Cash collected from customers is determined by adding the decrease in accounts receivable to sales and subtracting write-offs of uncollectible accounts. 
Cash collected from customers = Sales - Write-offs + Decrease in accounts receivable 
Cash collected from customers = $300,000 - $10,000 + $40,000 
Cash collected from customers = $330,000 
Therefore, the best choice is C.

Question 17

The sale of $3,000 worth of cash equivalents costing $2,500 has what effect on the indirect method Statement of Cash Flows.

Accepted Answer

The answer of The sale of $3,000 worth of cash...

Question 18

Assume cash paid to suppliers for 2011 is $350,000; merchandise inventory increased by $5,000 during the year, and accounts payable decreased by $10,000 during the year. What was cost of goods sold for 2011?

Accepted Answer

Cost of goods sold = Cash paid to suppliers + Beginning inventory - Ending inventory - Increase in accounts payable= $350,000 + $0 - $5,000 - (-$10,000)= $350,000 + $0 - $5,000 + $10,000= $355,000

Question 19

The following information was provided by the records of QRS for the current reporting year: $$\begin{array} { | l | l | } 
\hline \text { Cost of goods sold (as reported on the income statement } & \$ 80,000 \
\hline \text { Inventory increase } & 20,000 \
\hline \text { Accounts payable increase } & 3,000 \
\hline
\end{array}$$ The cash paid to suppliers was:

Accepted Answer

The cash paid to suppliers is calculated by adjusting the cost of goods sold for changes in inventory and accounts payable. The formula is: Cash Paid to Suppliers = Cost of Goods Sold + Increase in Inventory - Increase in Accounts Payable. Plugging in the numbers: $80,000 + $20,000 - $3,000 = $97,000.

Question 20

Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000 and trade accounts payable increased by $12,000. The cash paid to suppliers was:

Accepted Answer

The cash paid to suppliers can be calculated using the formula: Cash paid to suppliers = Cost of Goods Sold + Increase in Inventory - Increase in Accounts Payable. Plugging in the given values: $150,000 + $10,000 - $12,000 = $148,000.

Quiz 5: The Statement of Cash Flows