acct 1201 - ch. 12 learnsmart

Which of the following classifications is not used to categorize cash inflows and cash outflows on the statement of cash flows?

(X) Operating (X) Investing (X) Financing (O) Spending

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.

Match the transaction on the left with the appropriate statement of cash flows classification on the right. Payment of Accounts Payable

Operating activities

Match the transaction on the left with the appropriate statement of cash flows classification with "+" indicating a cash inflow and "-" indicating a cash outflow. Cash collected from customers

Operating activities +

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?

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).

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

Which of the following are cash outflows from investing activities?

(O) purchase of long-term investments (X) repayment of long-term debt (X) payment of income taxes (O) Purchase of building (O) purchase of land

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; $20,000 = $100,000 + 80,000 - 150,000 - 10,000

During the year, Cashews, Inc. borrowed $100,000 cash from a bank, received $700,000 of from issuing bonds, repaid $300,000 note payable from a bank, and sold $200,000 of short-term investments. The net cash inflow (outflow) from financing activities (assuming no other financing activities) equals ______.

$500,000

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?

(O) An increase in interest expense (X) A decrease in interest expense (X) An increase in dividends (O) A decrease in the number of shares outstanding

Which of the following cash flows are classified as operating activities?

(O) Cash from revenue earned in daily transactions (X) Cash for reacquiring common stock into treasury (O) Cash flow causing decrease in current liabilities (X) Cash from sale of investments (X) Payment of dividends (X) Cash for purchasing a warehouse to be used in the business

Which of the following transactions would be classified as investing activities?

(O) The purchase of equipment (O) The purchase of investments for cash (O) The sale of a building used in the business (X) The issuance of additional common stock (X) The increase in accounts receivable due to sales on account (X) The repayment of a long-term note payable

Identify which of the following are properly reported in a statement of cash flows.

(X) Repurchase of treasury stock: cash inflow under financing activities (X) Payment of accrued liabilities: cash outflow under financing activities (O) Cash paid for interest: cash outflow under operating activities (O) Net proceeds from stock issuance: cash inflow under financing activities (O) Repayment of loan principal: cash outflow under financing activities

Two common ways to assess a company's ability to internally finance its expansion needs are the ______.

- capital acquisition ratio - free cash flow

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

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

If the direction of change in Accounts Receivable is a(n) _____ (increase/decrease) from the prior period, the amount of that change is added to net income in the _____ activities section of the statement of cash flows.

- decrease - operating

The sale of property, plant, and equipment results in a cash _____ (inflow/outflow) to the _____ activities section of the statement of cash flows.

- inflow - investing

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.

- investing - financing

The classifications used to categorize cash inflows and outflows on the statement of cash flows includes _____ activities, _____ activities, and _____ activities.

- operating - financing - investing

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

False

Match the transaction on the left with the appropriate statement of cash flows classification on the right. Payment of dividends to stockholders

Financing activities

Match the transaction on the left with the appropriate statement of cash flows classification with "+" indicating a cash inflow and "-" indicating a cash outflow. Repayment of loan principal to lenders

Financing activities -

Match the transaction on the left with the appropriate statement of cash flows classification on the right. Purchase of a new delivery truck

Investing activities

Match the transaction on the left with the appropriate statement of cash flows classification with "+" indicating a cash inflow and "-" indicating a cash outflow. Sales of equipment no longer needed in the business

Investing activities +

A net cash outflow from financing activities means ______.

amounts received from issuing stocks and debt were less than repurchasing or repayments of stocks and debt

The _____ method prepares the operating activities section of the statement of cash flows by restating each revenue and expense from the accrual basis to the cash basis. It shows the cash collected from customers and the cash paid for operating expenses.

direct

The _____ method reports the components of cash flows from operating activities as gross receipts and gross payments.

direct

Issuing bonds payable is an example of a(n) _____ activity.

financing

Issuing stock to owners is classified as a(n) _____ activity.

financing

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

financing

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

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

investing

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

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.

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

Material noncash investing and financing transactions are ______.

reported in a supplementary schedule to the statement of cash flows

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