ACCT3341 Exam 2

Packard Corporation reports the following information: Net cash provided by operating activities: $335,000 Average current liabilities: $150,000 Average long-term liabilities: $100,000 Dividends declared: $60,000 Capital expenditures: $110,000 Payments of debt: $35,000 Packard's cash debt coverage is __

1.34 Cash debt coverage= Net cash provided by oper. activities/Avg. total liabilities $335,000/($150,000+ $100,000)

The first step in the preparation of the statement of cash flows requires the use of information included in which comparative financial statements?

Balance sheets

The primary purpose of the statement of cash flows is to provide information

about the cash receipts and cash payments of an entity during a period.

Equipment which cost $426,000 and had accumulated depreciation of $228,000 was sold for $222,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n)

deduction from net income of $24,000 and a $222,000 cash inflow from investing activities. BV= $198,000 Gain= $24,000

An accountant wishes to find the present value of an annuity of $1 payable at the beginning of each period at 10% for eight periods. The accountant has only one present value table which shows the present value of an annuity of $1 payable at the end of each period. To compute the present value, the accountant would use the present value factor in the 10% column for

eight periods and multiply by (1 + .10).

Huge Cart Inc. gives you the following information pertaining to the year 2020. Net sales: $850,000 Cost of goods sold: $500,000 Current assets: $500,000 Current liabilities: $250,000 Average total assets: $1,000,000 Total liabilities: $550,000 Net income: $150,000 The asset turnover ratio of Huge Cart Inc. is __

0.85 Asset turnover ratio= net sales/Avg. total assets $850,000/$1,000,000

Napier Co. provided the following information on selected transactions during 2021: Purchase of land by issuing bonds $1,000,000 Proceeds from issuing bonds $3,000,000 Purchases of inventory $3,800,000 Purchases of treasury stock $600,000 Loans made to affiliated corporations $1,400,000 Dividends paid to preferred stockholders $400,000 Proceeds from issuing preferred stock $1,600,000 Proceeds from sale of equipment $300,000 The net cash provided (used) by investing activities during 2021 is __

$(1,100,000). loans made to affiliated corporations - proceeds from sale of equipment ($1,400,000 - $300,000)

Assume ABC Company deposits $90,000 with First National Bank in an account earning interest at 6% per annum, compounded semi-annually. How much will ABC have in the account after five years if interest is reinvested?

$120,953 PV=$90,000, i=6%/2=3%, n=5*2=10, FV=?

Packard Corporation reports the following information: Net cash provided by operating activities: $335,000 Average current liabilities: $150,000 Average long-term liabilities: $100,000 Dividends paid: $60,000 Capital expenditures: $110,000 Payments of debt: $35,000 Packard's free cash flow is __

$165,000 Free cash flow rate= CF from operating activities-Dividend payment- Capital expenditures $335,000 - $60,000 - $110,000

Al Darby wants to withdraw $20,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually?

$20,000 times the present value of a 5-year, 10% ordinary annuity of 1.

Net cash flow from operating activities for 2021 for Spencer Corporation was $450,000. The following items are reported on the financial statements for 2021: Cash dividends paid on common stock $20,000 Depreciation and amortization $12,000 Increase in accounts receivable $24,000 Based on the information above, Spencer's net income for 2021 was __

$462,000 Net Income ?? +Depreciation and Amortization $12,000 -Increase in A/R $24,000 _______________________________________________________ Net cash flow from operating activities $450,000

During 2021, equipment was sold for $468,000. The equipment cost $786,000 and had a book value of $432,000. Accumulated Depreciation—Equipment was $2,061,000 at 12/31/20 and $2,205,000 at 12/31/21. Depreciation expense for 2021 was

$498,000. End Depreciation - Beg Depreciation + (Cost of equipment - Book value of equipment) = Depreciation expense $2205000 - $2061000 + ($786000 - $432000) = $498000

The balance in retained earnings at December 31, 2020 was $1,440,000 and at December 31, 2021 was $1,164,000. Net income for 2021 was $1,000,000. A stock dividend was declared and distributed which increased common stock $500,000 and paid-in capital $220,000. A cash dividend was declared and paid. The amount of the cash dividend was __

$556,000. Beg RE. + NI - (Increase in common stock + paid in capital) - Cash dividends = End RE $1,440,000 + $1,000,000 - ($500,000 + $220,000.) - X= $1,164,000

In preparing Titan Inc.'s statement of cash flows for the year ended December 31, 2021, the following amounts were available: Collect note receivable $615,000 Issue bonds payable $639,000 Purchase treasury stock $300,000 What amount should be reported on Titan, Inc.'s statement of cash flows for investing activities?

$615,000

Renfro Corporation will invest $90,000 every December 31st for the next six years (2020 - 2025). If Renfro will earn 12% on the investment, what amount will be in the investment fund on December 31, 2025?

$730,367 i=12%, n=6, PMT=$90,000, FV=?

During 2020 the DLD Company had a net income of $85,000. In addition, selected accounts showed the following changes: Accounts Receivable: $3,000 increase Accounts Payable: 1,000 increase Buildings: 4,000 decrease Depreciation Expense: 1,500 increase Bonds Payable: 8,000 increase What was the amount of cash provided by operating activities?

$84,500 NI $85,000. - Increase in A/R $3,000 +Increase in A/P 1,000 +Depreciation 1,500

Dunston Company will receive $500,000 in a future year. If the future receipt is discounted at an interest rate of 10%, its present value is $256,580. In how many years is the $500,000 received?

7 years FV=$500,000, i=10%, PV=$256,580, n=?

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?

Amortization of patent.

Paula purchased a house for $300,000. After providing a 20% down payment, she borrowed the balance from the local savings and loan under a 30-year 6% mortgage loan requiring equal monthly installments at the end of each month. Which time value concept would be used to determine the monthly payment?

Present value of an ordinary annuity

Which of the following statements about the statement of cash flows is correct?

The direct method is more consistent with the primary purpose of the statement of cash flows

Jerry recently was offered a position with a major accounting firm. The firm offered Jerry either a signing bonus of $23,000 payable on the first day of work or a signing bonus of $26,000 payable after one year of employment. Assuming that the relevant interest rate is 10%, which option should Jerry choose?

The signing bonus of $26,000 payable after one year of employment PV=$23,000 OR FV= $26,000, n=1, i=10% PV= $23,636.3

Of the following questions, which one would not be answered by the statement of cash flows?

Were all the cash expenditures of benefit to the company during the period?