Exam 5: Communicating and Interpreting Accounting Information

ABC Company reported total sales revenue of $80,000 and total expenses of $72,000 for the year ended December 31, 20X. During 20X, trade receivables increased by $3,000, merchandise inventory decreased by $2,000, trade payables increased by $1,000, and $5,000 in depreciation expense was recorded. Assuming no other adjustments to profit are needed, what was the net cash inflow from operating activities?

WT Company reported sales revenue of $100,000 and total expenses of $90,000 (including depreciation) for the year ended December 31, 20A. During 20A, trade receivables decreased by $4,000, merchandise inventory increased by $3,000, trade payables increased by $2,000, and depreciation expense of $6,000 was recorded. Assuming no other data are needed, what was the net cash inflow from operating activities for 20A?

The purchase of a piece of equipment in exchange for common shares must be reported on the statement of cash flows.

The primary objective of statement of cash flows is to provide information about a company's cash receipts and cash payments during an accounting period.

When using the indirect method, a loss on the sale of equipment should be added to profit to derive cash flows from operating activities.

A primary objective of the statement of cash flows is to show the earnings or loss on investing and financing transactions.

When the statement of cash flows is prepared in conformity with IFRS there is only one acceptable way to measure and report cash flows from operating activities.

Which of the following transactions is not a direct source of cash?

Selected transactions of Torts Corporation are listed below. 1. Collected an trade receivable. 2. Declared and paid dividends on common shares. 3. Sold long-term investments for cash. 4. Issued common shares for equipment. 5. Repaid a five-year note payable. 6. Paid employee wages. 7. Converted bonds payable to common shares. 8. Acquired long-term investment with cash. 9. Sold buildings and equipment for cash. 10. Sold merchandise to customers. Classify each transaction as either (a) an operating activity, (b) an investing activity, (c) a financing activity, or (d) a noncash investing and financing activity.

In the indirect method, a gain on sale of equipment is reported as:

The differences in the indirect method and the direct method of the statement of cash flows are evident in which section?

The statement of cash flows is the only financial statement prepared on the cash basis of accounting rather than on the accrual basis of accounting.

Very few companies use the direct method for disclosing their cash flows from operating activities.

In preparing statement of cash flows, an increase in the Common Shares account during a period would be an investing activity.

Winn Company's 20B income statement reported total revenues, $110,000, and total expenses (including $10,000 depreciation), $70,000 . The 20B balance sheet reported the following: trade receivables--beginning balance, $16,000 and ending balance, $14,000; wages payable--beginning balance, $2,000 and ending balance, $1,500. Therefore, based only on this information, the 20B net cash inflow from operating activities was which of the following?

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment is

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common shares (par $10 per share; no market price was quoted). How should this be reported on the statement of cash flows?

Which of the following is not true of the direct method of preparing a statement of cash flows?

The date in the heading of a statement of cash flows should say, "At December 31, 20A," rather than "For the Year Ended December 31, 20A."

The indirect method starts with net earnings and converts them to net cash provided by operating activities. This means that: