Deck 11: Statement of Cash Flows

Question 1

Cash paid for interest on a loan is classified as a cash flow from financing activities in a statement of cash flows.

Answer 1

False

Question 2

Information about noncash investing and financing activities must be disclosed in a schedule that is separate from the statement of cash flows.

Answer 2

True

Question 3

If accounts receivable increase during an accounting period, then the cash received from customers is more than the sales revenue for the period.

Answer 3

False

Question 4

Bradley Company has an accrual basis net income of $90,000 and the following related items:
How much is Bradley's net cash flow from operating activities?

A) $ 87,000
B) $101,000
C) $ 62,000
D) $106,000

Question 5

Laborto Inc. has an accrual basis net loss of $20,000 and the following related items:

How much is Laborto's net cash flow from operating activities?

A) $35,000
B) ($ 4,000)
C) $ 1,000
D) ($13,000)

Question 6

Marriott Modeling School has an accrual basis net income of $52,000 and the following related items:

What is Marriott Modeling's net cash flow from operating activities?

A) $83,000
B) $31,000
C) $37,000
D) $50,000

Question 7

A company reported annual sales revenue of $550,000. During the year, accounts receivable decreased from a $14,000 beginning balance to a $12,000 ending balance. Accounts payable decreased from a $11,000 beginning balance to a $8,000 ending balance.
How much is cash received from customers for the year?

A) $449,000
B) $462,000
C) $552,000
D) $448,000

Question 8

A company reported annual sales revenue of $845,000. During the year accounts receivable increased from a $14,000 beginning balance to a $19,000 ending balance. Accounts payable decreased from a $13,000 beginning balance to a $6,000 ending balance.
How much is cash received from customers for the year?

A) $840,000
B) $833,000
C) $864,000
D) $850,000

Question 9

A company reported cost of goods sold of $400,000 for the year. During the year, inventory increased from a $23,000 beginning balance to a $35,000 ending balance, and accounts payable increased from a $12,000 beginning balance to a $14,000 ending balance.
How much is the cash paid for merchandise purchased during the year?

A) $430,000
B) $426,000
C) $452,000
D) $410,000

Question 10

A company reported annual income tax expense of $85,000. During the year, income tax payable increased from a $6,200 beginning balance to a $8,800 ending balance. How much is cash paid for income taxes during the year?

A) $82,400
B) $84,600
C) $90,800
D) $73,200

Question 11

With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?

A) Indirect method because it provides better information for decision making
B) Direct method because it is based on the accrual basis of accounting
C) Direct method because it requires a supplemental indirect method section
D) Indirect method because it is less expensive to prepare

Question 12

The following amounts have been taken from the recent financial statements for Ranger Industries:

To the closest hundredth, which of the following amounts is Ranger's operating-cash-flow-to-current-liabilities ratio?

A) 2.15
B) 2.41
C) 2.05
D) 1.05

Question 13

Which of the following is a required separate disclosure for firms using the direct method in the statement of cash flows?

A) A reconciliation of net income to net cash flows from operating activities
B) A list of all noncash investing and financing transactions
C) The policy for determining which highly liquid, short-term investments are treated as cash equivalents
D) All of the above

Question 14

For the current year, Mendez Company's net cash flow from operating activities is $60,000; its beginning total liabilities were $100,000, and its ending total liabilities were $200,000. The company's operating-cash-flow-to-total-liabilities ratio for the year is:

A) 0.40
B) 0.30
C) 0.20
D) 0.10
E) None of the above

Question 15

Gates Corporation had the following data for the year:

Gates' operating-cash-flow-to-current-liabilities ratio for the year is:

A) 0.74
B) 0.525
C) 0.3
D) 0.6
E) None of the above

Question 16

Coda Corporation had the following data for the year:

Coda's operating-cash-flow-to-current-liabilities ratio for the year is:

A) 0.56
B) 0.66
C) 0.48
D) 0.42
E) None of the above

Question 17

Use the following information for the questions below:
Peter Corporation reported the following transactions for 2019:
1. Sold equipment for $7,000. The original cost was $15,000; the book value is $6,000
2. Issued 2,000 shares of $5 par value common stock for $12 per share
3. Paid $3,000 for an Insurance policy which goes into effect in January 2020
4. Recognized $2,000 in Interest expense on Dec 31, 2019 - to be paid on April 30, 2020
5. Received $8,000 as collections from customers for 2018 sales, and $18,000 for 2019 sales
6. Reacquired 300 shares of its own common stock at $20 per share
7. Received $2,000 in dividends on stock held as available for sale
8. Recorded depreciation expense for $5,000
9. Paid $1,000 of dividends to common stockholders
10. Purchased equipment costing $65,000, by making a cash down payment of $20,000 and signing a note for the remaining $45,000.
11. Acquired a building with a market value of $250,000 by issuing 20,000 shares of common stock.
12. Paid salaries of $18,000
13. Cash received from sale of available for sale securities $6,000
14. Repaid a loan, which included $5,000 of the principal and $1,000 in interest
Peter Corporation uses the direct method for preparing the 2019 Statement of Cash Flows.

-The net cash flow from operating activities is:

A) ($8,000)
B) $1,000
C) $6,000
D) $4,000

Question 18

Use the following information for the questions below:
Peter Corporation reported the following transactions for 2019:
1. Sold equipment for $7,000. The original cost was $15,000; the book value is $6,000
2. Issued 2,000 shares of $5 par value common stock for $12 per share
3. Paid $3,000 for an Insurance policy which goes into effect in January 2020
4. Recognized $2,000 in Interest expense on Dec 31, 2019 - to be paid on April 30, 2020
5. Received $8,000 as collections from customers for 2018 sales, and $18,000 for 2019 sales
6. Reacquired 300 shares of its own common stock at $20 per share
7. Received $2,000 in dividends on stock held as available for sale
8. Recorded depreciation expense for $5,000
9. Paid $1,000 of dividends to common stockholders
10. Purchased equipment costing $65,000, by making a cash down payment of $20,000 and signing a note for the remaining $45,000.
11. Acquired a building with a market value of $250,000 by issuing 20,000 shares of common stock.
12. Paid salaries of $18,000
13. Cash received from sale of available for sale securities $6,000
14. Repaid a loan, which included $5,000 of the principal and $1,000 in interest
Peter Corporation uses the direct method for preparing the 2019 Statement of Cash Flows.

-The net cash flow from investing activities is:

A) ($ 7,000)
B) ($21,000)
C) ($ 1,000)
D) ($12,000)

Question 19

Use the following information for the questions below:
Peter Corporation reported the following transactions for 2019:
1. Sold equipment for $7,000. The original cost was $15,000; the book value is $6,000
2. Issued 2,000 shares of $5 par value common stock for $12 per share
3. Paid $3,000 for an Insurance policy which goes into effect in January 2020
4. Recognized $2,000 in Interest expense on Dec 31, 2019 - to be paid on April 30, 2020
5. Received $8,000 as collections from customers for 2018 sales, and $18,000 for 2019 sales
6. Reacquired 300 shares of its own common stock at $20 per share
7. Received $2,000 in dividends on stock held as available for sale
8. Recorded depreciation expense for $5,000
9. Paid $1,000 of dividends to common stockholders
10. Purchased equipment costing $65,000, by making a cash down payment of $20,000 and signing a note for the remaining $45,000.
11. Acquired a building with a market value of $250,000 by issuing 20,000 shares of common stock.
12. Paid salaries of $18,000
13. Cash received from sale of available for sale securities $6,000
14. Repaid a loan, which included $5,000 of the principal and $1,000 in interest
Peter Corporation uses the direct method for preparing the 2019 Statement of Cash Flows.

-The net cash flow from financing activities is:

A) $17,000
B) $12,000
C) $ 3,000
D) $18,000

Question 20

Consider the following events:
$\bullet$ Cash of $56,000 was used to purchase a used truck.
$\bullet$ Cash of $40,000 was used to retire bonds.
$\bullet$ Cash of $25,000 was received from the sale of an investment at a loss.
$\bullet$ Cash dividends of $14,000 were received from an investment.
$\bullet$ Plant assets were depreciated $6,000, under the straight-line method
Compute the net cash flow from investing activities (parentheses indicate an outflow):

A) $25,000
B) ($47,000)
C) ($ 7,000)
D) ($31,000)

Question 21

Consider the following events:
$\bullet$ 25,000 shares of preferred stock, cumulative, 5%, $10 par was issued for $15 a share.
$\bullet$ The annual cash dividend was declared and paid to the above preferred stock.
$\bullet$ The company purchased 12,000 shares of common stock at $17 per share to be held as Treasury stock.
$\bullet$ Interest of $8,000 was paid to bondholders.
$\bullet$ Bonds Payable with a par value of $100,000 were retired at $108,000.
Compute the net cash flow from financing activities (parentheses indicate an outflow):

A) $ 58,500
B) $(71,500)
C) $ 50,500
D) $ 45,500

Question 22

Consider the following:
$\bullet$ Net income, $95,000
$\bullet$ Depreciation Expense $11,000
$\bullet$ Increase in accounts receivable, $4,000
$\bullet$ Decrease in merchandise inventory, $20,000
$\bullet$ Decrease in accounts payable, $8,000
$\bullet$ Increase in income taxes payable, $3,000
Using the Indirect Method, the Net Cash provided by Operating Activities was:

A) $ 90,000
B) $106,000
C) $101,000
D) $117,000

Question 23

A company had net income of $465,000. Depreciation expense is $52,000. During the year, Accounts Receivable and Inventory increased $30,000 and $80,000, respectively. Prepaid Expenses and Accounts Payable decreased $4,000 and $8,000, respectively. There was also a loss on the sale of equipment of $6,000.
How much cash was provided by operating activities?

A) $392,000
B) $409,000
C) $552,000
D) $576,000

Question 24

Chen Company's financial statements show a net income of $189,000. The following items also appear on Chen's balance sheet:

Using the indirect method, what is Chen's net cash flow from operating activities?

A) $221,000
B) $136,000
C) $232,000
D) $272,000

Question 25

Rodriguez Company reported sales revenue of $100,000 and total expenses of $90,000 (including depreciation) for the year ended December 31. During the year, accounts receivable decreased by $4,000, merchandise inventory increased by $3,000, accounts payable increased by $2,000, and depreciation expense of $7,000 was recorded.
Assuming no other data are needed, the net cash inflow from operating activities for the year was:

A) $18,000
B) $13,000
C) $20,000
D) $ 7,000

Question 26

Consider the following:

Calculate the net cash provided (or used) by operating activities using the indirect method:

A) $25,900
B) $18,900
C) $35,900
D) $12,700

Question 27

Consider the following:

The cost of goods sold was $490,000. What was the amount of cash paid for merchandise?

A) $490,000
B) $493,000
C) $477,000
D) $487,000

Question 28

Miller Company reports a $30,000 increase in inventory and a $10,000 increase in accounts payable during the year. Cost of Goods Sold for the year was $300,000.
The cash payments made to suppliers were:

A) $300,000
B) $260,000
C) $320,000
D) $290,000

Question 29

Dodd Inc. had cash sales of $250,000 and credit sales of $500,000. The accounts receivable balance increased $10,000 during the year.
How much cash did Dodd receive from its customers during the year?

A) $740,000
B) $760,000
C) $540,000
D) $560,000

Question 30

The beginning balance of Prepaid Interest was $1,800 and the ending balance was $2,600. The Interest Expense account for the year was $8,600.
How much cash was paid for interest?

A) $8,300
B) $9,400
C) $8,100
D) $8,600

Question 31

The beginning balance of Unearned Rent was $8,100 and the ending balance was $11,200. The Rent Earned for the year was $58,700.
How much cash was received for rent?

A) $78,000
B) $39,400
C) $55,600
D) $61,800

Question 32

Williams Corporation shows income tax expense of $60,000. There has been a $5,000 decrease in federal income taxes payable and a $7,000 increase in state income taxes payable during the year.
What was Williams' cash payment for income taxes?

A) $60,000
B) $58,000
C) $55,000
D) $62,000

Question 33

The financial statements of Athens Townhomes show the following:

Cash collected from tenants during the year is:

A) $759,000
B) $763,000
C) $755,000
D) $751,000

Question 34

If wages expense is $90,000 and the beginning and ending Wages Payable balances are $10,000 and $15,000, respectively, cash paid to employees for wages is:

A) $75,000
B) $80,000
C) $85,000
D) Not determinable from the information given

Question 35

If insurance expense is $9,000 and the beginning and ending Prepaid Insurance balances are $1,000 and $1,500, respectively, cash paid for insurance is:

A) $8,500
B) $9,000
C) $9,500
D) Not determinable from the information given

Question 36

The financial statements for Ruthman Company show the following:

Cash paid for merchandise is:

A) $124,000
B) $122,000
C) $120,000
D) $118,000

Question 37

Write an X in the appropriate column to show whether each of the following cash flows should be classified as an operating, investing, or financing.

Question 38

Put an X in the appropriate column to show whether each of the following cash flows should be classified as an operating, investing, or financing cash flow.

Question 39

Dynatech had the following income statement for the year ended December 31:

Additional information about the company follows:

Calculate Dynatech's cash flows provided by operating activities for the year using the indirect method.

Question 40

The following information relates to Menendez Company for the year, in which the company reported a $66,000 net income.

Calculate the net cash flow from operating activities for the year using the indirect method.

Question 41

Consider the following data for two manufacturing firms ($ in millions):

a. Compute the operating-cash-flow-to-current-liabilities ratio for each firm.
b. Compute the operating-cash-flow-to-capital-expenditures ratio for each firm.
c. Comment on the results of your computations.

Question 42

Consider the following data for three manufacturing firms ($ in millions):

a. Compute the operating-cash-flow-to-capital-expenditures ratio for each firm.
b. Compute the free cash flow for each firm.
c. Comment on the results of your computations.

Question 43

Major Sports had the following income statement for the current year:

Additional information about the company follows:

Calculate Major Sports' net cash flow provided by operating activities for the current year using the direct method. Show a separate cash flow for each revenue and expense.

Question 44

Soft Skin Company had the following income statement for the current year:

Additional information about the company follows:
Calculate Soft Skin's net cash flow provided by operating activities for the current year using the direct method. Show a separate cash flow for each revenue and expense.

Question 45

The following account changes were presented in a recent balance sheet for Sweet Tea Company ($ in millions).

Determine whether the amount of change would be added to (+) or subtracted from (-) Sweet Tea's net income for the period when calculating cash flow from operations using the indirect method.

Question 46

During the current year, Ward Company's long-term investments account (at cost) increased $7,000, which was the net result of purchasing stock costing $51,000 and selling stocks costing $60,000 at a $6,000 loss. Ward's notes payable account decreased $11,000, the net result of issuing $24,000 of notes and paying $35,000 during year on notes. .
What items and amounts appear in the (a) cash flows from investing activities and (b) cash flows from financing activities sections of Ward Company's statement of cash flows for the current year?

Question 47

Naslund Company uses the indirect method. Selected information appears below.

How much is Naslund's net cash flow from operating activities?

Question 48

Beldon Industries uses the indirect method. Selected information appears below.

How much is its net cash flow from operating activities?

Question 49

Mall Star, Inc., had a $10,000 net loss from operations in the current year. Depreciation expense was $31,600 and a cash dividend of $36,000 was declared and paid. Balances of the current asset and current liability accounts at the beginning and end of the year follow.

Did Mall Star's operating activities provide or use cash and by what amount? Use the indirect method to determine your answer and show your work.

Question 50

Wilson, Inc. reported the following amounts during 2018 and 2019:

a. How much is the net increase or decrease in cash during 2019?
b. How much will the company report on its balance sheet at December 31, 2019 as 'cash'?

Question 51

The information below was provided by Longo Company for the current year:

During the year, Longo sold equipment with a cost of $25,000 and accumulated depreciation of $19,000. A loss of $1,000 was recognized on the sale of the equipment.
Prepare the investing activities section of the statement of cash flows for the year.

Question 52

MotorBoats, Inc. provided the following information for the current year:

No new loans were taken out during the year. Prepare the financing activities section of the statement of cash flows for the current year.

Question 53

During the year, Dawkins issued common stock for cash and borrowed $60,000 from the bank on a long- term loan. Dawkins, Inc. provided the following:

How much cash was received from issuing common stock?

Question 54

Harmon Helmets purchased equipment for $62,000 cash, sold equipment costing $36,000 with a book value of $22,000 at a loss, and declared dividends during 2019. No new notes payable were issued during the year. Financial data follows:

Calculate cash flows from operations using the indirect method for 2019.

Question 55

The following schedule of cash receipts and payments relates to Harrison Elements for the year 2019:

Harrison had $36,000 cash to start 2019 and ended the year with $82,000 cash. In good form, prepare a 2019 statement of cash flows for Harrison Elements using the direct method.

Question 56

The following schedule of information relates to Page Products for the year, 2019:

The cash balance was $22,000 at the beginning of 2019. In good form, prepare a 2019 statement of cash flows for Page Products using the indirect method.

Question 57

The following schedule of information relates to Allentown Bolts for the year 2019:

The cash balance was $21,000 at the beginning of 2019.
In good form, prepare a 2019 statement of cash flows for Allentown Bolts using the indirect method.