Exam 5: Fraud, Internal Control, and Cash

One of the primary purposes of the cash flow statement is to

Mason Corporation reported a net loss of $12,000 for the year ended December 31, 20X3. During the year, accounts receivable decreased $5,000, merchandise inventory increased $4,000, accounts payable increased by $13,000, and depreciation expense of $7,000 was recorded. During 20X3, operating activities using the indirect method was

The following information is provided from the cash flow statement for Toys 4 U for the years 20X3 through 20X7 in millions of dollars: 20X7 20X6 20X5 20X4 20X3 Cash provided by operating activities \ 964 \ 509 \ 743 \ 250 \ 592 Capital expenditures, net \ 373 \ 494 \ 415 \ 468 \ 586 (A) Calculate the capital acquisitions ratio for Toys 4 U for the five-year period from 20X3 to 20X7. (B) Comment on the capital acquisitions ratio for Toys 4 U for the five years.

Cash flow from investing activities is considered the most important category on the cash flow statement because it is considered the best measure of expected earnings.

The quality of earnings ratio (Cash Flow from Operating Activities ÷ Net earnings) measures the portion of profit that was generated in cash.

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

The statement of cash flows (indirect method) reports depreciation expense as an addition to profit because depreciation does which of the following?

A new, fast-growing company may typically have which of the following patterns of cash flows?

Reba Company reported profit of $10,000 for 20X1. Additional 20X1 information is as follows: Expenditures for operational assets \ 6,000 Depreciation expense on operational assets 2,000 Dividends paid on common shares 900 Net increase in trade payables 400 Net decrease in inventory 200 Amortization of patent 100 Net decrease in trade receivables 300 Based on the information given above, the statement of cash flows would show "cashflows from operating activities" of $______________

Which of the following statements about the quality of earnings ratio is false?

If a loss of $20,000 is incurred in selling (for cash) office equipment that cost $90,000 and had accumulated depreciation of $22,500, the total amount reported in the investing activities section of the statement of cash flows is

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

Both the statement of cash flows and the statement of financial position report on the causes of the changes in the cash of the business.

Short-term investments in marketable equity securities are considered the equivalent of cash (i.e., they are combined with cash) in preparing the statement of cash flows.

Billton Company purchased a machine in the current year for $18,000. Payment included cash, $5,000; a one-year note payable, $5,000; and a 2-year, $8,000 note payable. This transaction decreases cash by $5,000 in the current year.

ABC Company reported total sales revenue of $80,000 and total expenses of $72,000 (i.e., profit of $8,000) 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?

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

Using the indirect method, calculate the amount of cash flows from operating activities from the following data: Net Earnings \ 275,000 Beginning trade receivables 43,000 Ending trade receivables 37,000 Beginning prepaid expenses 10,000 Ending prepaid expenses 3,000 Beginning trade payables 19,000 Ending trade payables 14,000 Depreciation expense 48,000 Dividends declared and paid 12,000

The sales revenue reported on the income statement for 20X1 totaled $96,000, of which one third was on credit. The 20X1 beginning balance of trade receivables was zero and the 20X1 ending balance reported on the statement of financial position was $10,000; therefore, the 20X1 cash inflow from customer sales was $86,000.

Toga Corporation reported profit of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is