A201 Smartbook Chapter 12

Purchases of stock in other corporations is a(n) ______ activity. Multiple choice question.

investing

Material noncash investing and financing transactions are ______. Multiple choice question.

reported in a supplementary schedule to the statement of cash flows

Which of the following items would be added to Net income in the operating activities section of the statement of cash flows prepared using the indirect method? (Check all that apply.) Multiple select question.

- Decreases in operating assets - Loss on sale of investing asset - Depreciation and amortization expense

How is the change in cash classified on the statement of cash flows?

It is the sum of the operating, investing, and financing activities sections.

The complete list of items needed to prepare a statement of cash flows includes ______.

comparative balance sheets, complete income statement, and additional data concerning accounts in investing and financing activities

Select the categories found on a statement of cash flows. (Check all that apply.)

- financing activities - operating activities - investing activities

True or false: Changes in cash are classified as either operating activities, direct activities or indirect activities.

False

When preparing the statement of cash flows using the indirect method, one of the purposes of adjusting net income for changes to certain balance sheet accounts is to ______.

convert items included in net income to cash

An increase in accounts receivable on a comparative balance sheet indicates that more ______ during the accounting period.

sales revenue was earned than cash was collected

Barclay, Inc. sold equipment that originally cost $30,000 four years ago for $8,000 cash. The equipment had accumulated depreciation totaling $24,000. How will this transaction be listed in the investing activities section of Barclay's statement of cash flows? Multiple choice question.

Cash inflow of $8,000

the ________ activities section of the statement of cash flows indicates how well a company is able to generate cash through its normal business activities and management of working capital. (Enter one word per blank.)

operating

The ______ activities section is very important, since ______ are the only continuing, internal source of cash for the business.

operating; operations

A company that reports a significant negative cash flows from investing activities due to the purchase of a building will most likely report a ______.

positive cash flow from financing activities

Depreciation Expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income.

noncash

Repayments of formal, long-term debt contracts are classified as ______ activities.

financing

The ______ reports three broad categories: operating, investing, and financing activities.

statement of cash flows

Which method of preparing the statement of cash flows is more widely used and why?

The indirect method is because it is less expensive to implement.

True or false: Two common ways to assess a company's ability to internally finance expansion needs are the capital acquisition ratio and free cash flow.

True

The indirect method of preparing the statement of cash flows affects how ______ activities section is(are) prepared.

the operating

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

Depreciation Expense originally reduced net income, but the expense does not involve paying cash.

Vango, Inc. sold its delivery van with an original cost of $40,000 and an accumulated depreciation balance at the time of sale of $30,000. Given it was sold at a $1,000 loss, proceeds from the disposal of the van will equal ______ on the statement of cash flows under ______ activities. Multiple choice question.

$9,000; investing

Rent-a-wreck, Inc.'s property, plant and equipment balance, net of depreciation, at the beginning of the year was $100,000 and at the end was $150,000. During the year, depreciation expense was $10,000 and new equipment was purchased for $80,000 cash. What is the amount of proceeds from the disposal of property, plant and equipment shown on the statement of cash flows for the year?

$20,000

XYZ Co. sold equipment that originally cost $14,000 with accumulated depreciation of $11,000 for $4,000 cash, resulting in a gain of $1,000. Which of the statements below are correct regarding the treatment of this transaction on the statement of cash flows for the current period? (Check all that apply.) Multiple select question.

- $4,000 is a cash inflow in investing activities. - $1,000 is deducted from operating activities.

Cashews, Inc.'s financing activities section of the statement of cash flows reported a significant cash inflow from the issuance of bonds and cash outflow from the repurchase of treasury stock; all other financing activities were insignificant. As a result, which of the following may be expected to occur in the near future? (Check all that apply.)

- A decrease in the number of shares outstanding - An increase in interest expense

Which of the following describes the acceptable methods that may be used to prepare the statement of cash flows? (Check all that apply.)

- Indirect method - Direct method

Identify which of the following are properly reported in a statement of cash flows. (Check all that apply.) Multiple select question.

- Net proceeds from stock issuance: cash inflow under financing activities - Repayment of loan principal: cash outflow under financing activities - Cash paid for interest: cash outflow under operating activities

Which of the following transactions would be classified as investing activities? (Check all that apply.)

- The purchase of equipment - The purchase of investments for cash - The sale of a building used in the business

The complete list of items needed to prepare a statement of cash flows includes ______. (Check all that apply.)

- additional data concerning accounts in investing and financing activities - complete income statement - comparative balance sheets

Two common ways to assess a company's ability to internally finance its expansion needs are the ______. (Check those that apply.)

- capital acquisition ratio - free cash flow

The two types of adjustments to net income for the indirect method are adjustments for ______. (Check the two that apply.)

- changes in operating assets and liabilities during the period that affected cash and were not in net income - components of net income that do not affect cash

The direct and indirect methods of preparing the statement of cash flows will result in ______. (Check all that apply.)

- different approaches to arriving at the same net cash flow from operating activities - the same net cash flows from operating, investing and financing activities

In preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for ______. (Check all that apply.)

- loss from sale of asset - gain from sale of asset - depreciation expense

True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

False

Braden and Sons, Inc., paid cash to purchase equipment costing $342,000 this year. Also this year, the company sold for $70,000 cash equipment that originally cost $230,000 5 years ago. How should these transactions be listed in the statement of cash flows? Multiple choice question.

The purchases and the sales of equipment must be shown separately as a decrease to cash for $342,000 (purchase) and an increase of $70,000 (sale).

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company ______ combine them into one transaction in the ______ activities section. Multiple choice question.

cannot; financing

Credits in the accounts receivable account during a period represent the ______.

cash collected

When preparing the operating activities section of the statement of cash flows using the indirect method, adding a decrease in Accounts Receivable to net income allows the inclusion of transactions that ______.

increased cash, but did not affect net income

The sale of its intangible asset, trademark, is considered a(n) ______.

investing activity because the purchase and sale of assets that benefit the company for more than one year are classified as such

Companies are required to report material noncash transactions from ________ and ________ activities in either a supplementary schedule to the statement of cash flows or as a disclosure in the notes to the financial statements. (Enter one word per blank.)

investing, financing