Exam 5: Fraud, Internal Control, and Cash

Allen Company reported total sales revenue of $150,000 and total expenses of $152,000 (i.e., a net loss of $2,000) for the year ended December 31, 20X4. During 20X4, trade receivables decreased by $1,000, trade payables increased by $5,000, wages payable increased by $3,000, and $18,000 in depreciation expense was recorded. Assuming no other adjustments are needed, what was the "net cash flow from operating activities" for 20X4 (parentheses indicate net cash outflow)?

The following information pertains to Brockville Inc. for 20X4: Inventory January 1, \ 300,000 Inventory December 31, \ 335,000 Accounts payable January 1 \ 45,000 Accounts payable December 31 \ 48,000 Cost of goods sold during 20X4 \ 2,400,000 If Brockville prepares their cash flow statement using the indirect method, what adjustment to the net income will be made for the year for Cornwall when calculating their cash flow from operations?

Jackson Company gathered the following data to prepare its 20X7 statement of cash flows: Profit \ 40,000 Depreciation expense 5,000 Trade receivables decrease 3,000 Wages payable increase 4,000 Amortization of patent 1,000 Income tax payable decrease 2,000 Based only on the above data, the net cash inflow from operating activities during 20X7 was which of the following?

Proceeds from borrowing and issuing the firm's own equity securities are examples of financing cash inflows

Operating activities include the cash effects of transactions that Evaluation revenues and expenses.

In 20X3, Cee Co. disclosed cash paid for property, plant and equipment of $1.069 million and cash flow from operations of $3.883 million. Their average property, plant and equipment from the comparative statement of financial position was $3.968 million. Compute Cee Co.'s capital expenditures ratio for 20X3.

Selected transactions of Horner Inc. are listed below. 1. Common shares are sold for cash. 2. Bonds payable are issued for cash at a discount. 3. Interest on a short-term note receivable is collected. 4. Merchandise is sold to customers for cash. 5. Cash is paid to purchase inventory. 6. Equipment is purchased by signing a 3-year , 5% note payable. 7. Cash dividends on common shares are declared and paid. 8. One hundred XYZ common shares are purchased for cash. 9. Land is sold for cash at book value. 10. Recorded an increase in the market value of available-for-sale securities Classify each transaction as either A - an operating activity, B - an investing activity, C - a financing activity, orD - a noncash investing and financing activity .

A higher quality of earnings ratio indicates that it is less likely that the company is using aggressive revenue recognition policies to increase profit.

Cash equivalents are defined as short-term, highly liquid investments that are readily convertible into known amounts of cash and are so near their maturity that there is insignificant risk of changes in their value due to interest rate changes.

The 20X2 income statement for Ryan Corporation showed the following: Profit \ 81,000 Depreciation expense 8,000 The statement of financial position showed: Trade receivables increase \ 5,000 Prepaid expenses decrease 2,000 -What was the cash flow from operating activities?

Which item may be of concern when analyzing cash flow from operating activities?

Kinross Corp had the following activities during the year: Proceeds from the sale of land \ 300,000 Gain on sale of land \ 50,000 Proceeds from the issue of common shares \ 1,000,000 Purchase of equipment \ 450,000 Repayment of mortgage outstanding on the sold land \ 200,000 Interest paid \ 22,500 Dividends paid \ 10,000 What was Kinross' cash flow from financing activities for the year?

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

The cash flow statement will not report the

Investing activities reported on the statement of cash flows include cash payments to acquire property, plant, and equipment, and short-term and long-term investments.

Connor Limited reported net earnings of $265,000 for the current year. Depreciation expense recorded on buildings and equipment amounted to $82,000 for the year. Balances of the current assets and current liabilities accounts at the beginning and end of the year are as follows: Beginning of year End of year Cash \ 15,000 \ 20,000 Trade receivables 22,500 16,500 Inventories 57,000 52,000 Prepaid expenses 4,000 8,500 Trade payables 18,000 14,000 Income taxes payable 900 1,200 Prepare the operating activities section of the cash flow statement using the indirect method.

A company wants to maintain its current debt/equity ratio. Which of the following relationships would most likely occur on the cash flow statement?

WT Company reported sales revenue of $100,000 and total expenses of $90,000 (including depreciation) for the year ended December 31, 20X1. During 20X1, 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 20X1?

The statement of cash flows is dated exactly like the income statement but unlike the statement of financial position.

The financial statements of Juliet Company show the following: Beginning balance Ending balance Trade receivables \ 28,000 \ 22,000 Inventories \ 38,400 32,000 Trade payables \ 11,000 \ 15,000 COGS \ 74,000 How much cash was paid out to suppliers?