Full Test Bank Deines Company Performance Cash Flows Ch.19 - Test Bank | Introduction to Accounting 8e by Ainsworth Deines by Ainsworth Deines. DOCX document preview.
Chapter 19
Company Performance: Cash Flows
MATCHING
1. Identify each of the following transactions as an operating activity (O), an investing activity (I), a financing activity (F), a noncash investing or financing activity (NIF), or an activity that does not appear on the statement of cash flows (NA).
______ Purchased merchandise inventory on account
______ Paid employee salaries
______ Issued common stock in return for land
______ Purchased treasury stock
______ Sold equipment for cash
______ Paid a dividend
______ Paid for a three-year insurance policy
______ Sold a temporary investment in marketable securities
______ Purchased land and a building
______ Sold merchandise to a customer for cash
NA | Purchased merchandise inventory on account |
O | Paid employee salaries |
NIF | Issued common stock in return for land |
F | Purchased treasury stock |
I | Sold equipment for cash |
F | Paid a dividend |
O | Paid for a three-year insurance policy |
I | Sold a temporary investment in marketable securities |
I | Purchased land and a building |
O | Sold merchandise to a customer for cash |
2. Match the following descriptions with the terms below:
A. Accounts that reduce net income but do not reduce cash flows
B. Includes net income in the operating section of the cash flow statement
C. Does not include net income in the operating section of the cash flow statement
D. Accounts representing current obligations
E. Indicates the cash flow earned for each share of common stock
_____ 1. Cash flow per share
_____ 2. Current operating liabilities
_____ 3. Direct format
_____ 4. Indirect format
_____ 5. Noncash operating expenses
6. All the following are primary purposes of the statement of cash flows except:
A) assessing the entity’s ability to generate positive future net cash flows.
B) assessing management’s success in limiting the income taxes paid to the federal government.
C) assessing the reasons for differences between income and associated cash receipts and payments.
D) assessing both the cash and noncash aspects of the entity’s investing and financing transactions during the period.
7. All the following represent sections of the statement of cash flows except:
A) investing activities.
B) financing activities.
C) operating activities.
D) controlling activities.
8. Cash flows resulting from a company’s normal earnings process are reported on the statement of cash flows in the
A) financing activities section.
B) investing activities section.
C) operating activities section.
D) noncash investing and financing activities section.
9. Which of the following activities is not correctly associated with its cash flow classification?
A) Operating—Sale of merchandise for cash
B) Financing—Sale of company’s preferred stock
C) Investing—Purchase of Treasury stock
D) Operating—Purchase of advertising for the year
10. Which of the following activities is correctly associated with its cash flow classification?
A) Operating—Sale of company’s own common stock
B) Financing—Purchase of Treasury stock
C) Investing—Payment of rent for next two months
D) Financing—Payment of interest on bonds payable
11. To assess a company’s ability to generate positive future cash flows, the _________ activities section would be analyzed.
A) financing
B) investing
C) operating
D) noncash investing and financing
12. Cash inflow from the sale of trading securities would be reported in which of the
following in the statement of cash flows?
A) Operating
B) Investing
C) Financing
D) Both A and C
13. To assess a company’s ability to meet its obligations and pay dividends, the _________
activities section would be analyzed.
A) investing
B) financing
C) operating
D) both a and b are correct
14. Cash paid for interest on a note payable would be found in the ______ section of the cash
flow statement.
A) investing
B) financing
C) operating
D) Both a and b
15. Collections from customers would be reported in which of the following section of the statement of cash flows?
A) Investing activities
B) Financing activities
C) Operating activities
D) Noncash investing and financing activities
16. Payments to employees would be reported in which of the following section of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
17. Receipt of dividends from an investment in another company would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
18. Payment of cash for interest is considered which of the following in the statement of cash flows?
A) Operating
B) Financing
C) Investing
D) B and C
19. Collections of cash from the sale of land would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
20. The issuance of common stock in exchange for a patent would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
21. The proceeds from the issuance of common stock would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
22. Cash payments made to acquire equipment would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
23. The purchase of machinery by signing a long-term note payable would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
24. Cash payments for dividends would be reported in which of the following sections of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
25. The reporting format for the statement of cash flows, which shows the difference between accrual-based net income and cash flows from operations, is the:
A) direct format.
B) indirect format.
C) noncash format.
D) allowance format.
26. Which of the following is true about the direct method of determining cash from operations?
- Losses are added back to net income.
- Gains are added back to operating expenses.
- Gains are not reported in the operating section.
- Losses are subtracted from sales.
27. Which of the following is true about a cash-flow statement using the indirect method of determining cash from operations?
- Losses are added back to net income.
- Gains are subtracted from cash from investing events.
- Gains are added back to net income.
- Losses are subtracted from cash from financing events.
28. The reporting format for the statement of cash flows, which shows the actual cash inflows and outflows of operating activities, is the:
A) direct format.
B) indirect format
C) noncash format.
D) allowance format.
29. Sales totaled $385,000, net accounts receivable had a beginning and ending balance of $39,000 and $45,500, respectively. Cash collections from customers were:
A) $367,000.
B) $385,000.
C) $378,500.
D) $391,500.
30. Interest revenue for the current year was $4,500 more than cash collected for interest. This difference is most likely due to a(n):
A) increase in the interest payable account.
B) decrease in the interest payable account.
C) increase in the interest receivable account.
D) decrease in the interest receivable account.
31. Cash collections from customers during 2010 were $468,500, whereas net accounts receivable decreased $14,250. Sales reported on the income statement were:
A) $440,000.
B) $454,250.
C) $482,750.
D) $497,000.
32. Cost of Goods Sold for the period totaled $598,000, accounts payable had a beginning and ending balance of $97,000 and $86,500, respectively, and inventory had a beginning and ending balance of $156,000 and $142,500, respectively. Cash payments for inventory were:
A) $574,000.
B) $595,000.
C) $601,000.
D) $622,000.
34. Cash collections from customers during 2010 were $300,500, whereas net accounts receivable increased $5,000. Sales reported on the income statement were:
A) $300,500.
B) $295,500.
C) $305,000.
D) $310,500.
35. Interest expense for the period was $7,250 less than cash payments for interest. This difference is most likely due to a(n):
A) increase in the interest payable account.
B) decrease in the interest payable account.
C) increase in the interest receivable account.
D) decrease in the interest receivable account.
36. During 2010, cash payments for wages totaled $954,500, whereas wages payable decreased by $67,800. Wages expense reported on the income statement equaled:
A) $ 818,900.
B) $ 886,700.
C) $1,022,300.
D) $1,090,100.
37. On a statement of cash flows using the indirect format, depreciation expense is:
A) deducted from net income in the operating activities section.
B) included as an outflow in the investing activities section.
C) added to net income in the operating activities section.
D) ignored, since it is a noncash expenditure.
38. On a statement of cash flows using the indirect format, amortization of the discount on a note payable is:
A) ignored, since it is a noncash expenditure.
B) added to net income in the operating activities section.
C) included as an outflow in the financing activities section.
D) deducted from net income in the operating activities section.
39. On a statement of cash flows using the indirect format, amortization of the discount on notes receivable is:
A) deducted from net income in the operating activities section.
B) included as an inflow in the financing activities section.
C) added to net income in the operating activities section.
D) ignored, since it is a noncash expenditure.
40. On a statement of cash flows using the indirect format, cash paid for interest is:
A) deducted from net income in the operating activities section.
B) included as an outflow in the investing activities section.
C) added to net income in the operating activities section.
D) reported as an additional disclosure at the end of the statement.
41. On a statement of cash flows using the indirect format, amortization of the premium on investments in bonds is:
A) deducted from net income in the operating activities section.
B) included as an inflow in the financing activities section.
C) added to net income in the operating activities section.
D) ignored, since it is a noncash expenditure.
42. On a statement of cash flows using the indirect format, the loss on the sale of a building is:
A) ignored, since it is a noncash expenditure.
B) added to net income in the operating activities section.
C) included as an outflow in the investing activities section.
D) deducted from net income in the operating activities section.
43. On a statement of cash flows using the indirect format, an increase in taxes payable is:
A) ignored, since it is a noncash expenditure.
B) added to net income in the operating activities section.
C) included as an outflow in the financing activities section.
D) deducted from net income in the operating activities section.
44. On a statement of cash flows using the indirect format, an increase in prepaid insurance is:
A) ignored, since it is a noncash expenditure.
B) added to net income in the operating activities section.
C) included as an inflow in the financing activities section.
D) deducted from net income in the operating activities section.
45. On a statement of cash flows using the indirect format, a decrease in unearned revenue is:
A) deducted from net income in the operating activities section.
B) included as an outflow in the financing activities section.
C) added to net income in the operating activities section.
D) ignored, since it is a noncash expenditure.
46. A building with a cost of $683,000, and accumulated depreciation of $397,500, was sold at a gain of $82,000. This transaction would be reported on a statement of cash flows using the indirect format as a(n):
A) $367,500 inflow from investing activities and an $82,000 deduction from net income.
B) $285,500 inflow from investing activities and an $82,000 deduction from net income.
C) $397,500 inflow from investing activities and an $82,000 deduction from net income.
D) $203,500 inflow from investing activities and an $82,000 inflow from operating activities.
47. A machine with a cost of $196,500, and a carrying value of $84,900, was sold at a loss of $13,700. This transaction would be reported on a statement of cash flows using the indirect format as a(n):
A) $111,600 inflow from investing activities and a $13,700 outflow from operating activities.
B) $97,900 inflow from investing activities and a $13,700 addition to net income.
C) $84,900 inflow from investing activities and a $13,700 addition to net income.
D) $71,200 inflow from investing activities and a $13,700 addition to net income.
48. The retained earnings account began the year with a balance of $639,600, was reduced for dividends declared, and increased for net income of $312,000. If the cash paid for dividends was $129,500, and the dividends payable account decreased $45,000, the ending balance in the retained earnings account should be:
A) $502,100.
B) $777,100.
C) $822,100.
D) $867,100.
49. The retained earnings account began the year with a balance of $700,000, which was increased with net income of $250,000. If the ending balance of retained earnings was $800,000 and all dividends declared were paid, how much cash was paid for dividends during the year?
A) $150,000
B) $250,000
C) $100,000
D) $350,000
50. The purchase of treasury stock is reported on the statement of cash flows in the:
A) investing section.
B) financing section.
C) operating section.
D) noncash investing and financing section.
51. The sale of short-term marketable securities would be reported in which of the following section of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
52. The conversion of preferred stock into common stock would be reported in which of the following section of the statement of cash flows?
A) Investing activities
B) Operating activities
C) Financing activities
D) Noncash investing and financing activities
53. Which method shows the net cash flows from operating activities without presenting the individual cash inflows and outflows from those activities?
A) Indirect method
B) Direct method
C) Both methods
D) Neither method
54. Under the indirect method, depreciation expense is added to net income to arrive at cash flow from operating activities. Depreciation is handled this way because:
A) it is an inflow of cash.
B) it should be subtracted in arriving at net income.
C) it is deducted in arriving at net income but does not reduce cash.
D) it should be subtracted in arriving at cash from investing activities.
55. On a statement of cash flows using the direct format, depreciation expense is:
A) deducted from net income in the operating activities section.
B) included as an outflow in the investing activities section.
C) added to net income in the operating activities section.
D) ignored, since it is a noncash expense.
56. Cash received on interest earned on an investment bond is reported included in the:
A) financing section.
B) operating section.
C) investing section.
D) investing and operating section.
57. How should the changes in current accounts be treated in computing cash flows from operating activities using the indirect method?
A) Increases in all current accounts must be added to net income.
B) Increases in all current accounts must be subtracted from net income.
C) Increases in all current assets must be added to net income and increases in current liabilities subtracted.
D) Increases in all current assets must be subtracted from net income and increases in current liabilities added.
58. Which of the following would not be an investing activity?
A) Collection of interest on held-to-maturity securities
B) Purchase of available for-sale-securities
C) Making and collecting loans
D) Disposal of plant assets
59. If accounts receivable increased during the period, cash received from customers would be equal to:
A) the change in accounts receivable.
B) sales plus the increase in accounts receivable.
C) sales minus the increase in accounts receivable.
D) unable to determine from the information given.
60. Which of the following would not appear on the statement of cash flows?
A) Cash dividend
B) Stock dividend
C) Purchase of treasury stock
D) Issuance of stock for equipment
61. If accounts payable increased, cash paid for inventory would be equal to:
A) ending inventory minus the accounts payable increase.
B) ending inventory plus the accounts payable increase.
C) purchases minus the accounts payable increase.
D) purchases plus the accounts payable increase.
62. An increase in interest payable during the period indicates that:
A) interest paid exceeded interest expense for the period.
B) interest expense for the period exceeded interest paid.
C) all the interest incurred during the period was paid.
D) unable to determine from the information given.
63. Cash flows from operating activities include:
A) cash receipts and collections from sales of products.
B) cash receipts from the sale of operating assets.
C) cash receipts from issuing common stock
D) all the above.
64. Cash flows for investing activities include payments:
A) to purchase operating assets.
B) for dividends.
C) to employees.
D) for interest.
65. Cash flows for financing activities do not include:
A) proceeds from issuing common stock.
B) proceeds from issuing bonds.
C) payment of dividends.
D) receipt of dividends.
66. Which of the following is subtracted from net income in computing cash flows from operating activities using the indirect method?
A) Increases in accounts receivable
B) Decreases in accounts receivable
C) Decrease in taxes payable
D) Depreciation expense
67. If a firm sells for $8,000 equipment that cost $25,000 and has $20,000 of accumulated depreciation, how is this reported in the statement of cash flows?
A) $8,000 investing activity
B) $8,000 financing activity
C) $8,000 financing activity and $3,000 addition to net income
D) $8,000 investing activity and $3,000 subtraction from net income
68. Which of the following statements about the statement of cash flows is false?
A) The direct method provides more information than the indirect method.
B) Firms can use either the direct method or the indirect method of reporting operating activities.
C) Cash flows from operating activities is larger if the indirect method is used instead of the direct method.
D) If firms use the direct method, they must also provide a reconciliation of net income and operating cash flows.
69. Using the indirect method (statement of cash flows), an increase in current assets would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
70. Using the indirect method (statement of cash flows), a decrease in current assets would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
71. Using the indirect method (statement of cash flows), an increase in current liabilities would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
72. Using the indirect method (statement of cash flows), a decrease in current liabilities would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
73. Using the indirect method (statement of cash flows), a gain would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
74. Using the indirect method (statement of cash flows), a loss would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
76. Using the indirect method (statement of cash flows), a decrease in interest receivable would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
77. Using the indirect method (statement of cash flows), a decrease in inventory would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
78. Using the indirect method (statement of cash flows), a gain from the sale of equipment would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
79. Using the direct method (statement of cash flows), depreciation expense would:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
80. The beginning balance in accounts receivable is $ 8,000. Sales during the period equaled $ 15,000. What was the cash received from customers?
A) $ 7,000
B) $ 8,000
C) $ 15,000
D) No answer can be developed
81. The beginning balance in accounts receivable is $ 8,000. Sales during the period equaled $ 15,000. The ending balance in accounts receivable equals $ 2,000. What was the cash received from customers?
A) $7,000
B) $8,000
C) $15,000
D) $21,000
82. Salaries payable increased from 2009 to 2010. Using the indirect method (statement of cash flows), the increase should be:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
83. Salaries payable decreased from 2009 to 2010. Using the indirect method (statement of cash flows), the decrease should:
A) be subtracted from net income.
B) be added to net income.
C) have no adjustment made to net income.
D) be added to the investing section of the statement of cash flows.
84. RLV Inc. issued $ 10,000 worth of stock. What section of statement of cash flows will include the cash inflow?
A) Operating
B) Investing
C) Financing
D) Not included in the statement of cash flows
85. What are the four primary purposes of the statement of cash flows?
86. Since firms must publish an income statement, why is a statement of cash flows also necessary?
87. Since the statement of cash flows is so useful, why doesn’t FASB substitute it for the income statement?
88. Explain why many analysts consider operating activities the most important of the three activities reported on the statement of cash flow.
89. Explain how depreciation is handled under the direct and indirect methods of reporting cash flow from operating activities. Why is it treated this way?
90. Do you consider the direct or indirect method more useful? Why?
91. Given the following selected information, prepare a schedule showing net cash flows from operating activities for the year ended July 31, 2010 using the direct format.
July 31, 2010 | July 31, 2009 | |
Accounts Receivable | $ 32,000 | $ 39,000 |
Inventory | 145,000 | 127,000 |
Prepaid Insurance | 9,000 | 5,000 |
Accounts Payable | 21,000 | 26,000 |
Wages Payable | 13,000 | 11,000 |
Sales | 382,000 | |
Cost of Goods Sold | 237,000 | |
Insurance Expense | 16,000 | |
Wages Expense | 74,000 | |
Interest Expense | 8,000 | |
Dividend Revenue | 25,000 | |
Answers:
Cash received from customers $ 389,000
($382,000 + $39,000 – $32,000)
Cash received from dividends 25,000
Cash paid for inventory
($237,000 – $127,000 + $145,000 + $26,000 – $21,000) (260,000)
Cash paid for insurance
($16,000 - $5,000 + $9,000) (20,000)
Cash paid for wages
($74,000 + $11,000 – $13,000) (72,000)
Cash paid for interest (8,000)
Net cash flows from operating activities $ 54,000
92. Given the following selected information, prepare a schedule showing net cash flows from operating activities for the year ending May 31, 2010 using the indirect format.
May 31, 2010 | May 31, 2009 | |
Accounts Receivable | $ 53,000 | $ 69,000 |
Inventory | 171,000 | 186,000 |
Prepaid Insurance | 12,000 | 8,000 |
Accounts Payable | 47,000 | 55,000 |
Wages Payable | 28,000 | 37,000 |
Unearned Revenue | 33,000 | 26,000 |
Sales | 568,000 | |
Cost of Goods Sold | 385,000 | |
Insurance Expense | 27,000 | |
Wages Expense | 94,000 | |
Depreciation Expense | 31,000 | |
Amortization Expense | 18,000 | |
Interest Expense | 29,000 | |
Loss on Sale of Equipment | 6,000 | |
Dividend Revenue | 17,000 | |
Gain on Sale of Investment | 42,000 | |
Net income* | $37,000 | |
Adjustments to reconcile net income | ||
to net cash flows from operations: | ||
Depreciation expense | 31,000 | |
Amortization expense | 18,000 | |
Loss on sale of equipment | 6,000 | |
Gain on sale of investment | (42,000 | ) |
Decrease in accounts receivable | 16,000 | |
Decrease in inventory | 15,000 | |
Increase in prepaid insurance | (4,000 | ) |
Decrease in accounts payable | (8,000 | ) |
Decrease in wages payable | (9,000 | ) |
Increase in unearned revenue | 7,000 | |
Net cash flows from operating activities | $67,000 | |
93. Given the following selected information, determine the net cash flows from investing activities and the net cash flows from financing activities.
(a.) Net income was $189,500 for the period.
(b.) Purchased 10,000 shares of common stock at $15 per share for the treasury.
(c.) Sold equipment with a carrying value of $32,500 at a gain of $6,000.
(d.) Purchased land and a building worth $450,000 by signing a 10-year note payable.
(e.) Issued $1,000,000 in bonds at par.
(f.) The beginning and ending retained earnings account balances were $418,000 and $534,000, respectively. There were no prior period adjustments during the period.
(g.) Wrote a check for $648,000 for the purchase of machinery.
(h.) Sold temporary investments in marketable securities with a $50,000 carrying value, at a loss of $17,500.
(i.) Cash dividends were declared and paid during the period.
Answers:
Net cash flows from investing activities: | ||
Cash received from sale of equipment | $38,500 | |
($32,500 + $6,000) | ||
Cash received from sale of temporary investments | 32,500 | |
($50,000 – $17,500) | ||
Cash paid for machinery | (648,000 | ) |
Net cash flows from investing activities | $ (577,000 | ) |
Net cash flows from financing activities: | ||
Cash paid to purchase treasury stock | $ (150,000 | ) |
(10,000 × $15) | ||
Cash received from sale of bonds at par | 1,000,000 | |
Cash paid for dividends | (73,500 | ) |
($418,000 + $189,500 – $534,000) | ||
Net cash flows from financing activities | $ 776,500 | |
94. Create the operating section of the statement of cash flows (indirect method).
RLV Inc. Income Statement For the Year Ending December 31, 2010 | ||
Sales | 250,000 | |
Cost of Goods Sold | 50,000 | |
Gross Margin | 200,000 | |
All Other Items: | ||
Salaries Expense | (100,000 | ) |
Depreciation Expense | ( 25,000 | ) |
Gain on Sale of Equipment | 10,000 | |
Net Income | 85,000 | |
RLV Inc. Balance Sheet—Partial Statement December 31, 2010 | ||
2010 | 2009 | |
Cash | 10,000 | 3,000 |
Accounts Receivable | 20,000 | 15,000 |
Inventory | 9,000 | 13,000 |
Accounts Payable | 13,000 | 2,000 |
RLV Inc. Statement of Cash Flows For the Year Ending December 31, 2010 | ||
Net Cash Flows from Operating Activities: | ||
Net Income | $ 85,000 | |
Adjustments to reconcile to operating cash flows | ||
Depreciation Expense | $ 25,000 | |
Increase in Accounts Receivable | ($ 5,000 | ) |
Decrease in Inventory | $4,000 | |
Increase in Accounts Payable | $ 11,000 | |
Gain on Equipment Sale | ($ 10,000 | ) |
Net Cash Flows from Operating Activities | $ 110,000 | |
95. Create the operating section of the statement of cash flows (indirect method).
Book Inc. Income Statement For the Year Ending December 31, 2010 | ||
Sales | 300,000 | |
Cost of Goods Sold | 150,000 | |
Gross Margin | 150,000 | |
All Other Items: | ||
Salaries Expense | ( 70,000 | ) |
Depreciation Expense | ( 15,000 | ) |
Gain on Sale of Equipment | 7,000 | |
Net Income | 72,000 | |
Book Inc. Balance Sheet—Partial Statement December 31, 2010 | ||
| 2010 | 2009 |
Cash | 10,000 | 3,000 |
Accounts Receivable | 15,000 | 35,000 |
Inventory | 20,000 | 13,000 |
Accounts Payable | 2,000 | 9,000 |
Answers:
Book Inc. Statement of Cash Flows For the Year Ending December 31, 2010 | ||
Net Cash Flows from Operating Activities: | ||
Net Income | $ 72,000 | |
Adjustments to reconcile to operating cash flows | ||
Depreciation Expense | $15,000 | |
Decrease in Accounts Receivable | $20,000 | |
Increase in Inventory | ($7,000 | ) |
Decrease in Accounts Payable | ($7,000 | ) |
Gain on Equipment Sale | ($7,000 | ) |
Net Cash Flows from Operating Activities | $ 86,000 | |
96. Create the operating section of the statement of cash flows (indirect method).
Moving Inc. Income Statement For the Year Ending December 31, 2010 | |||
Sales | 900,000 | ||
Cost of Goods Sold | 400,000 | ||
Gross Margin | 500,000 | ||
All Other Items: | |||
Salaries Expense | (100,000 | ) | |
Depreciation Expense | ( 200,000 | ) | |
Loss on Sale of Equipment | (100,000 | ) | |
Net Income | 100,000 | ||
Moving Inc. Balance Sheet—Incomplete Statement December 31, 2010 | ||
| 2010 | 2009 |
Cash | 10,000 | 3,000 |
Accounts Receivable | 5,000 | 35,000 |
Inventory | 10,000 | 20,000 |
Accounts Payable | 10,000 | 30,000 |
***** Other Information: Dividends Paid = $ 50,000
Answers:
Moving Inc. Statement of Cash Flows For the Year Ending December 31, 2010 | ||
Net Cash Flows from Operating Activities: | ||
Net Income | $100,000 | |
Adjustments to reconcile to operating cash flows | ||
Depreciation Expense | $200,000 | |
Decrease in Accounts Receivable | $ 30,000 | |
Decrease in Inventory | $ 10,000 | |
Decrease in Accounts Payable | ($ 20,000 | ) |
Loss on Equipment Sale | $100,000 | |
Net Cash Flows from Operating Activities | $420,000 | |
97. In 2010 Penoke Corporation retired $1,000,000 of its long-term bonds early and as a result of the transaction generated a gain of $100,000. How much cash did Penoke pay to retire the bonds early, and in what section would the cash payment be reported on the statement of cash flows?
Answers:
Carrying value of the bond $1,000,000
Less: Gain on early retirement 100,000
Cash paid $ 900,000
Reported in the Financing Section
98. Chair Inc. has the following financial information. Using the direct method (statement of cash flows), solve for cash received from customers (show your work).
2010
2009
Accounts Receivable
120,000
500,000
Other Information:
Customer Sales ==> $ 900,000
Answers:
Accounts Receivable
Beg. Bal. + Sales = Cash Received + End Bal.
500,000 + 900,000 = 1,280,000 + 120,000
99. Computer Inc. has the below financial information. Using the direct method (statement of cash flows), solve for cash paid for insurance (show your work).
2010
2009
Prepaid Insurance
300,000
250,000
Other Information:
Insurance Expense ==> $ 150,000
Answers:
Prepaid Insurance
Beg. Bal. + Cash Paid = Insurance Expense + End Bal.
250,000 + 200,000 = 150,000 + 300,000
100. Seldon Corporation sold a piece of equipment for cash. The sale generated a gain of $10,000; the equipment originally cost $50,000 and at the time of the sale had accumulated depreciation of $45,000. How much cash was generated by sale and in what section would the cash be reported on the statement of cash flows?
101. The following information was taken from the comparative balance sheet and income
statement of the Graves Company. From this information, determine how much cash was
raised by the sale of equipment and how much equipment was purchased in 2010.
2010 2009
Equipment 125,000 100,000
Accumulated Depreciation 55,000 40,000
Depreciation Expense on Equipment in 2010 $20,000
Gain on Sale of Equipment in 2010 $10,000
Book value of the Equipment Sold in 2010 $15,000
Document Information
Connected Book
Test Bank | Introduction to Accounting 8e by Ainsworth Deines
By Ainsworth Deines