ACTG CH19

Jasper's income statement reports revenue from investments that lack significant influence of $10,000, and its balance sheet reports that dividends receivable decreased by $1,500. How much will Jasper report as cash received from investments?

$11,500

Fault Company's records indicate that, during the current year, land costing $150,000 was sold. A loss of $25,000 was recognized on the sale. Cash inflows associated with this sale were

$125,000. book value of $150,000 less loss of $25,000

Aggie Company reports investment revenue of $14,000 in its income statement relating to a 5% investment in another company's common stock. During the current year, dividends receivable increased by $1,000. Thus, cash collected from investments will be

$13,000.

Milky Company reports sales revenue of $200, an increase in deferred revenue of $2, and an increase in accounts receivable of $1. Cash collected from customers is:

$201 $(200+2-1) = $201

During the current period, Kunze Corp. disposed of old equipment and received $2,000 cash; purchased new equipment for $20,000 cash; collected an accounts receivable balance of $2,500; and purchased an investment for $3,000. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$21,000 net outflow. 2,000 - 20,000 - 3,000

During the current year Hainzel Corp. sold inventory costing $200,000 for $500,000. The balance of accounts payable decreased by $20,000, and the balance of the inventory account decreased by $10,000. Cash paid to suppliers is

$210,000 $200,000+20,000-10,000

Glueck Corp. reports sales revenue of $200,000. During the year, the company's accounts receivable balance decreased by $14,000. Cash collected from customers is

$214,000.

During the current period, Schmidt Corp. disposed of old equipment and received $1,000 cash; purchased new equipment for $10,000 cash; paid an accounts payable balance of $2,500; and sold an investment costing $2,000 for $2,800. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$6,200 net outflow 1,000 - 10,000 + 2,800

Sales revenue for the year was $100,000; accounts receivable had a beginning balance of $10,000 and an ending balance of $18,000. Cash collected from customers was

$92,000. revenue less increase in A/R

Marten Company's records indicate that, during the current year, land costing $50,000 was sold. A gain of $45,000 was recognized on the sale. Cash inflows associated with this sale were

$95,000. book value of $50,000 plus gain of $45,000

During the current year Mainzel Corp. sold inventory costing $100,000 for $220,000. The balance of accounts payable increased by $10,000, and the balance of the inventory account increased by $6,000. Cash paid to suppliers is

$96,000. $100,000 - 10,000 + 6,000

Which of the following concepts governs recognition of revenue and expense?

Accrual accounting

Which of the following statements is correct with respect to analyzing accounts for the preparation of a statement of cash flows? (Select all that apply.)

All income statement amounts must be accounted for. All changes in balance sheet accounts must be accounted for.

Under which method(s) will a reconciliation of net income to cash from operating activities be presented? (Select all that apply.)

Both the direct and the indirect method

Which of the following methods of preparing the statement of cash flows is (are) acceptable under U.S. GAAP?

Both the direct and the indirect method

Which of the following transactions/events commonly give rise to cash inflows for business entities? (Select all that apply.)

Cash is collected from customers. Common stock is sold to investors.

Which of the following transactions/events commonly give rise to cash outflows of business entities? (Select all that apply.)

Fire insurance is purchased. Employees are paid.

Which of the following statements regarding income statement and related cash amounts is correct?

Income statement amounts and cash amounts typically are not the same.

Which of the following statements best describes the importance of cash flow information?

Investors and creditors consider the risk associated with cash flow forecasts. Investors and creditors rely heavily on cash flow information.

Which of the following is correct regarding depreciation expense?

It is a noncash expense that does not require the use of cash.

Which of the following would result in a cash inflow from investing activities?

Sale of a machine for cash.

Which of the following is critically important with respect to the ultimate potential of a firm to provide cash flows to investors and creditors?

The firm's ability to generate cash flows for itself.

Gerta Company shows salaries expense of $30,000 in its income statement. During the current year, the balance of its salaries payable account increased by $4,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $4,000 should be

added to net income.

Kunzen Company shows salaries expense of $15,000 in its income statement. During the current year, the balance of its salaries payable account increased by $2,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $2,000 should be

added to net income.

Under the indirect method of deriving net cash flows from operating activities, increases in liabilities relating to operating activities must be

added to net income.

When preparing the statement of cash flows using the indirect method, depreciation expense and losses are

added to net income.

Depreciation represents a noncash expense because it is merely an ____ of a ____ cash expenditure.

allocation; previous

Short-term, highly liquid investments that can be readily converted to cash, with little risk of loss, are referred to as _____ __________.

cash equivalents

Which of the following are not valid categories in the statement of cash flows? (Select all that apply.)

cash flows from discontinued operations cash flows from continuing operations

Which of the following are included in the statement of cash flows? (Select all that apply.)

cash flows from investing activities cash flows from operating activities noncash investing and financing activities cash flows from financing activities

Which of the following are valid categories in the statement of cash flows? (Select all that apply.)

cash flows from operating activities cash flows from financing activities cash flows from investing activities

Glueck Corp. reports sales revenue of $200,000. During the year, the company's accounts receivable balance decreased by $14,000. Additional information reveals that during the year accounts totaling $7,000 were written off and bad debt expense of $10,000 was recognized. A journal entry prepared to determine cash collected from customers would include debits to (Select all that apply.)

cash for $207,000. bad debt expense for $10,000.

Michal Corp.'s land account decreased by $250,000. No specific information regarding this decrease is available. In its statement of cash flows, Michael should report

cash inflows from investing activities of $250,000.

Kester Corp.'s land account increased by $140,000. No specific information regarding this increase is available. In its statement of cash flows, Kester should report

cash outflows from investing activities of $140,000.

Which of the following decision makers tend to be especially interested in cash flow information? (Select all that apply.)

creditors investors

Milky Company reports sales revenue of $200, an increase in deferred revenue of $2, and an increase in accounts receivable of $1. Using a journal entry to determine cash collected from customers, accounts receivable should be ____ and deferred revenue ___.

debited; credited

Amounts reported in the income statement usually are ______ the cash effects of the items reported.

different from

The _______ method of reporting cash flows from operating activities reports the cash effect of each operating activity.

direct

Financing activities are inflows and outflows of cash resulting from the

external financing of a business.

Which of the following represent objectives of preparing a statement of cash flows? (Select all that apply.)

identifying all operating, investing, and financing events and transactions classifying the transactions and events correctly adhering to a proper statement format

To identify all the operating, investing, and financing activities using a spreadsheet, we must account for the changes in each account on the: (Select all that apply.)

income statement balance sheet

Cash flows from operating activities are both inflows and outflows of cash that result from activities reported in the

income statement.

The method of presenting the statement of cash flows that begins with a presentation of net income or net loss is referred to as the ____ method.

indirect

A cash inflow from the sale of land is categorized as a(n)

investing activity

An important advantage of using a spreadsheet to analyze transactions that may need to be reported in the statement of cash flows is to

make sure that no reportable activity is overlooked.

In addition to the primary activities, what other required information must be presented in a statement of cash flows? (Select all that apply.)

noncash investing and financing activities a reconciliation of the net increase or decrease in cash with the change in the cash balance

In a statement of cash flows—direct method, depreciation expense should

not be reported.

The objective in preparing the statement of cash flows is to identify all transactions and events that represent

operating, investing, and financing activities and report them in the proper statement format.

Net income (or loss) is the result of netting together the ___________ recognized and the ___________ incurred during the current reporting period. (Enter only one word per blank.)

revenue, expense

If a journal entry is used to derive the amount of cash collected from customers,

sales revenue, bad debt accruals, and changes in A/R and the allowance account need to be recognized.

Which of the following are required characteristics of cash equivalents? (Select all that apply.)

short-term low risk high liquidity

An important tool that can be used to ensure that no reportable activities are inadvertently overlooked is a:

spreadsheet

Carmen Company shows salaries expense of $25,000 in its income statement. During the current year, the balance of its salaries payable account decreased by $3,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $3,000 should be

subtracted from net income.

Under the indirect method of deriving net cash flows from operating activities, decreases in liabilities relating to operating activities must be

subtracted from net income.

Which accounts or balances must be considered in order to calculate the amount of cash paid to suppliers for inventory? (Select all that apply.)

the change in the inventory account balance cost of goods sold the change in the accounts payable balance

Under the indirect method of preparing the statement of cash flows, depreciation expense and losses are added back to net income because they (Select all that apply.)

were subtracted in deriving net income. do not require an outflow of cash.