Chapter 23 Multiple Choice

Fara Co. reported bonds payable of $47,000 on Decemeber 31, Year 1, and $50,000 on December 31, Year 2. Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premium or discount during the year. What amount should Fara report in its Year 2 statement of cash flows for redemption of bonds payable?

$17,000

A company is preparing its year end cash flow statement using the indirect method. During the year the following transactions occurred: Dividends Paid $300 Proceeds from the isssuance of common stock 250 Borrowings under a line of credit 200 Proceeds from the issuance of convertible bonds 100 Proceeds from the sale of a buildiing What is the company's increase in cash flows provided by financing activities for the year?

$250

In preparing its statement of cash flows if Harlingen Co. omits the payment of cash dividends provided by <List A> activities will be<List B>

<List A> Financing <List B> Overstated

On July 1, Year 1, Dewey Co. signed a 4-year building lease that it reported as a capital lease. Dewey paid the monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its Year 1 statement of cash flows?

An outflow equal to the Year 1 principal payment only.

Which of the following cash flows per share should be reported in a statement of cash flows?

Cash flows per share should not be reported

The statement of cash flows may be presented in either a direct or indirect (reconciliation) format. In which of these formats would cash collected from customers be presented as a gross amount DIRECT INDIRECT

DIRECT -YES INDIRECT -NO

In a statement of cash flows (indirect method) of a business, an increase in inventories should be presented as a:

Deduction from income from continuing operations

In a statement of cash flows of a business enterprise, which of the following will increase reported cash flows from operating activities using the direct method? (Ignore income tax considerations)

Dividends received from investments

Bay Manufacturing Co. purchased a 3-month U.S Treasury Bill. In preparing Bay's statement of cash flows this purchase would

Have no effect

If the indirect method is used to present the statement of cash flows of a business, depreciation expense is:

Presented as an addition to net income in the operating section of the statement.

Which of the following transactions should be classified as investing activities on an entity's statement of cash flows?

Sale of property plant & equipment

The primary purpose of a statement for cash flows is to provide relevant information about

The cash receipts and cash disbursements of an entity during a period.

In its statement of cash flow for the current year, Ness Co. reported cash paid for interest of $70,000. Ness did not capitalize any interest during the current year. Changes occurred in several balance sheet accounts as follows: Accrued interest payable $17,000 decrease Prepaid interest 23,000 decrease In its income statement for the current year, what amount should Ness report as interest expense?

$76,000

Which of the following would be reported as an investing activity in a company's statement of cash flows?

Collection of a note receivable from a related party.

Ionia Company reports operating activities in its statement of cash flows, using the indirect method. Which of the following items, if any, should Iona add back to net income to arrive at net operating cash flow? EXCESS OF TREASURY STOCK ACQUISITION COST OVER SALES PROCEEDS (COST METHOD) BOND AMORTIZATION

EXCESS OF TREASURY STOCK ACQUISITION COST OVER SALES PROCEEDS (COST METHOD) -NO BOND AMORTIZATION -YES

How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method?

In operating activities as a deduction of income

A corporation issues a balance sheet and income statement for the current year. It also issues comparative income statements for each of the 2 previous years and a comparative balance sheet for 1 previous year. A statement of cash flows:

Must be issued for all 3 years

A statement of cash flows is to be presented in general-purpose external financial statements by which of the following?

All businesses and nongovernmental not-for-profit entitites

The following information was taken from the accounting records of Gorkey Corporation for the year ended December 31, Year 1: Proceeds from issuance of preferred stock $8,000,000 Dividends paid on preferred stock 800,000 Bonds payable converted to common stock 4,000,000 Payment for purchase of machinery 1,000,000 Proceeds from sale of plant building 2,400,000 2% stock dividend on common stock 600,000 Gain on sale of plant building 400,000 The net cash flows from investing and financing activities that should be presented on Gorky's statement of cash flows for the year ended December 31, Year 1, are respectively:

$1,400,000 and $7,200,000

A company calculated the following data for the period: Cash received from customers $25,000 Cash received from sale of equipment 1,000 Interest paid to bank on note 3,000 Cash paid to employees 8,000 What amount should the company report as net cash provided by operating activities in its statement of cash flows?

$14,000

The Marburg Corporation owns extensive rental property. For some of this property, rent is paid in advance. For other property, rent is paid following the end of the year. In the income statement for the year ended December 31, Year 2, Marburg reported $140,000 in rental income. The following data are included in Marburg's December 31 balance sheets: YR 1 YR2 Rent Receivable $95,000 $120,000 Deferred rent income 40,000 50,000 In its statement of cash flows for the year ended December 31, Year 2, Marburg should report cash receipts from rental properties totaling

$155,000

In its statement of cash flows issued for the year ending June 30, Prince Company reported a net cash inflow from operating activities of $123,000. The following adjustments were included in the supplementary schedule reconciling cash flow from operating activities with net income: Depreciation $38,000 Increase in net accounts receiv. 31,000 Decrease in inventory 27,000 Increase in accounts payable 48,000 Increase in interest payable 12,000 Net income is:

$29,000

Duke Co. reported cost of goods sols of $270,000 for the current year. Additional information is as follows: DEC 31 JAN 1 Inventory $60,000 $45,000 Accounts Payable 26,000 39,000 If Duke uses the direct method, what should Duke report as cash paid to suppliers in its current year statement of cash flows?

$298,000

Abbot Co. is preparing its statement of cash flows for the year. Abbot's cash disbursements during the year included the following: Payment of interest on bonds payable $500,000 Payment of dividends to stockholders 300,000 Payment to acquire 1,000 shares of Marks Co. common stock 100,000 What should Abbot report as total cash outflows for financing activities in it statement of cash flows under U.S GAAP?

$300,000

Lane Company acquired copyrights from authors, in some cases paying advance royalties within 30 days of year end. Lane reported royalty expense of $375,000 for the year ended December 31, Year 2. The following data are included in Lane's balance sheet: YR1 YR2 Prepaid royalties $60,000 $50,000 Royalties payable 75,000 90,000 In its Year 2 statement of cash flows, lane should report cash disbursements for royalty payments of:

$350,000

Alp Inc., had the following activities during the current year: -Acquired 2,000 shares of stock in Maybel, Inc., for $26,000 -Sold an investment in Rate Motors classified as available for sale for $35,000, when the carrying amount was $33,000 -Acquire a $50,000, 4-year certificate of deposit from a bank that was classified as held to maturity. (During the year, interest of $3,750 was paid to Alp). -Collected dividends of $1200 on stock investments In Alp's current-year financial statement of cash flows, net cash used in investing activities should be:

$41,000

The following information was taken from the financial statements of Planet Corp. for the year just ended. Accounts Receivable, January 1 $21,000 Accounts Receivable, December 31 30,400 Sales on account and cash sales 438,000 Uncollectible accounts 1,000 No accounts receivable were written off or recovered during the year. If the direct method is used in the statement of cash flows, Planet should report cash collected from customers as

$429,200

The following balances were reported by Mall Co. at December 31, Year 2, and Year 1: 12/31/Year2 12/32/Year1 Inventory $260,000 $290,000 Accounts Payable 75,000 50,000 Mail paid suppliers $490,000 during the year ended December 31, Year 2. What amount should Mall report for cost of goods sold in Year 2?

$545,000

Kresley Co. has provided the following current account balances for preparation of the annual statement of cash flows: Kresley's current-year income is $75,000. Net cash provided by operating activities in the statement of cash flows hsould be

$75,000