Chapter 13 Practice Quiz 2

If Sales are $130,000, beginning Accounts Receivable $12,000, and ending Accounts Receivable $15,000, what is the amount of the cash receipts from customers?

$127,000

Assume a company sold a piece of equipment for $3,000. The original cost was $15,000 and the accumulated depreciation prior to the sale was $10,000. What amount, if any, would appear in the operating activities section of the statement of cash flows using the indirect method?

$2,000

In the current year, Wall Company issued common stock for $200,000 cash. The company also paid cash dividends $30,000 and issued a two-year note payable to purchase equipment for $45,000. Bonds Payable increased from an issuance of bonds for cash for $50,000. Wall Company also purchased treasury stock that had a cost of $8,000 cash. The financing activities section of the statement of cash flows will report net cash provided by financing activities of:

$212,000.

Meter Company reported net income for the year of $30,000. During the year, Accounts Receivable increased by $7,000, Accounts Payable decreased by $3,000, and depreciation expense of $5,000 was recorded. Also, Equipment was purchased for $40,000 cash. Using the indirect method, net cash provided by operating activities for the year is

$25,000.

Blackhenge Company has the following information available: Net income, $15,000; Cash provided by operations, $21,000; Cash sales, $75,000; Capital expenditures, $11,000; and Cash dividends, $3,000. What is Blackhenge's free cash flow?

$7,000

In Angle Company, the Land account decreased $90,000 as a result of a cash sale for $100,000 and recognized a gain on the sale of $10,000. The Equipment account increased $20,000 as a result of a cash purchase. Angle Company also purchased a truck for $25,000 by issuing a five-year note. Bonds Payable increased from an issuance of bonds for cash for $50,000. The net cash provided by investing activities is:

$80,000.

Cash receipts from customers, under the direct method, are equal to sales plus the increase in accounts receivable.

False

Declaration of cash dividends is a cash outflow that companies report as a financing activity.

False

Free cash flow describes the cash remaining from operating activities after deducting capital expenditures.

False

Investing activities usually involve long-term liability and stockholders' equity accounts.

False

The statement of cash flows classifies cash receipts and payments into four activity categories.

False

Which of the following is not a reason that companies favor the indirect method of preparing the statement of cash flows?

It requires less information.

Noncash activities are not reported in the body of the statement of cash flows.

True

The information in a statement of cash flows should help investors and creditors assess the entity's ability to pay dividends and meet obligations.

True

The statement of cash flows is not prepared from an adjusted trial balance like the other financial statements are.

True

Under the indirect method, depreciation expense is added to net income.

True

When companies dispose of fixed assets, they must eliminate from net income all gains and losses to arrive at cash provided by operating activities.

True

Under the indirect method of preparing the statement of cash flows, an increase in accounts receivable is:

deducted from net income.

Under the indirect method of preparing the statement the cash flows, which of the following is added to net income in the operating activities section?

depreciation expense

Cash flow activities that include obtaining cash from issuing debt and repaying the amounts borrowed are classified as:

financing activities.

Under the indirect method of preparing the statement of cash flows, which of the following is deducted from net income in the operating activities section?

gain on sale of land

Cash flow activities that include acquiring and disposing of investments and property, plant, and equipment are classified as:

investing activities.

Free cash flow is equal to cash provided by operating activities:

less capital expenditures less cash dividends.

The indirect method of preparing the statement of cash flows begins with:

net income.

Which of the following is not an operating activity?

payment of a cash dividend

Which of the following would be classified as an operating activity?

payment of interest

The information to prepare the statement of cash flows usually comes from all of the following except:

retained earnings statement.

Operating activities include cash outflows to:

suppliers for inventory.

Companies do not report significant noncash activities in:

the body of the statement of cash flows.