Accounting chapter 11

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own shares for $12 million and pays cash dividends of $5 million. Cash inflows from financing activities will be: $112 mill $17 mill $15 mill $110 mill

$112 mill

Summary of Adjustments to Net Income

+ Depreciation expense + Amortization expense + Loss on sale of assets − Gain on sale of assets − Increase in a current asset + Decrease in a current asset + Increase in a current liability − Decrease in a current liability

Changes in Current Assets and Current Liabilities

- Increase in a current asset + Decrease in a current asset + Increase in a current liability - Decrease in a current liability

Which of the following are significant noncash activities? Acquiring equipment by issuing a long-term note. Acquiring land by issuing common stock. Selling land. Issuing common stock for cash.

Acquiring equipment by issuing a long-term note. Acquiring land by issuing common stock.

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? Collection of interest Borrowing from bank Payment of utilities Sale of a building Collection from customers

Collection of interest Collection from customers

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? Collection of interest Payment of utilities Sale of a building Borrowing from bank Collection from customers

Collection of interest Collection from customers

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? Interest paid on bonds payment on account purchase of a building retirement of common stock purchase of supplies

Interest paid on bonds payment on account purchase of supplies

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? Interest received on notes receivable Borrowing from bank Sale of building Issuance of common stock Collection on account

Interest received on notes receivable Collection on account

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year? Inventory Accounts payable Bonds payable Notes receivable Accounts receivable

Inventory Accounts payable Accounts receivable

Which of the following are nonoperating items that require adjustments under the indirect method? Depreciation expense Rationale: noncash operating expense Losses on the sale of long-term assets Gains on the sale of long-term assets Amortization expense

Losses on the sale of long-term assets Gains on the sale of long-term assets

Which of the following are cash outflows from financing activities? Pay dividends Issue common stock Receive interest Purchase of supplies Repay borrowing from bank

Pay dividends Repay borrowing from bank

Which of the following are common financing activities? Payment of cash dividends Issuing common stock Receiving dividends from an investment in another company Borrowing money

Payment of cash dividends Issuing common stock Borrowing money

Which of the following are common financing activities? Payment of cash dividends Purchasing treasury stock Issuing common stock Receiving dividends from an investment in another company

Payment of cash dividends Purchasing treasury stock Issuing common stock

Which of the following are cash outflows from investing activities? Purchase of building purchase of land repayment of long-term debt purchase of long-term investments payment of income taxes

Purchase of building purchase of land purchase of long-term investments

Which of the following are cash outflows from investing activities? Purchase of investment Purchase of land Repurchase of common stock Payment on account payable Purchase of inventory

Purchase of investment Purchase of land

Which of the following are cash outflows from financing activities? Payment of income taxes Repayment of note payable Payment of dividends Purchase of equipment Issuance of common stock

Repayment of note payable Payment of dividends

Which of the following cash transactions are classified as cash inflows from investing activities? Borrowing from bank Sale of equipment Sale of building Sale of investments Sale of merchandise inventory

Sale of equipment Sale of building Sale of investments

Which of the following are classified as cash inflows from investing activities? Issuance of common stock Purchase of an investment Sale of land Sale of equipment

Sale of land Sale of equipment

Which is a significant noncash activity? Repurchasing common stock. Receiving proceeds from sale of stock. Signing a note payable in exchange for land. Collecting on customer accounts.

Signing a note payable in exchange for land.

Which of the following would be included as an adjustment to net income in the operating activities section of a statement of cash flows using the indirect method? a. Depreciation expense b. Purchaseofatruck c. Issuance of common stock d. Payment of cash dividends

a. Depreciation expense

When preparing a statement of cash flows using the indirect format, amortization expense must be:

added back to net income

Which of the following would be included in the operating activities section of a statement of cash flows? a. Sale of a piece of equipment b. Paymentofdividends c. Increase in the balance of accounts payable d. Issuance of common stock

c. Increase in the balance of accounts payable

Which of the following represents the first step in preparing a statement of cash flows in the correct order?

calculate the net cash flows from operating activities

List the four steps in preparing a statement of cash flows in the correct order.

calculate the net cash flows from operating activities determine the net cash flows from investing activities determine the net cash flows from financing activities combine operating, investing, financing activities

Which of the following are common noncash items requiring adjustment to net income under the indirect method? prepaid expense insurance expense depreciation expense amortization expense salaries expense

depreciation expense amortization expense

Select the items that would be added to net income in order to prepare the operating activities section of a statement of cash flows - indirect method.

depreciation expense decrease in current asset loss on sale of land

In preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for depreciation expense. loss from sale of asset. gain from sale of asset. payment of a noncurrent liability. issuance of bonds for cash.

depreciation expense. loss from sale of asset. gain from sale of asset.

In preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for issuance of bonds for cash. depreciation expense. payment of a noncurrent liability. loss from sale of asset. gain from sale of asset.

depreciation expense. loss from sale of asset. gain from sale of asset.

Cash flows from ________ activities include both inflows and outflows of cash from the external funding of a business.

financing

Select the items that would be subtracted from net income in order to prepare the operating activities section of a statement of cash flows - indirect method. loss on sale of land gain on sale of land decrease in current liability increase in current liability depreciation expense

gain on sale of land decrease in current liability

The statement of cash flows provides information about the cash inflows and cash outflows of an entity. For financing activities, a cash _______ occurs when cash is borrowed from a creditor, and a cash _______ occurs when a loan is repaid.

inflow, outflow

Cash flows from ________ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets.

investing

Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as ________ activities.

investing

The purchase and sale of long-term assets and current investments are classified as

investing

Which of the following nonoperating items require adjustments to net income under the indirect method? prepaid expenses stock dividends distributed during the year losses from sale of long-term assets gains from sale of long-term assets accrued expenses

losses from sale of long-term assets gains from sale of long-term assets

Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to ________ ________ to prepare the operating section for the indirect format of the statement of cash flows.

net income

The starting point for preparing the operating activities section using the indirect method is:

net income

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ________ ________

net income

Transactions reported on the statement of cash flows that do not increase or decrease cash, but that result in significant investing and financing activities are referred to as ______ activities.

non cash

Transactions reported on the statement of cash flows that do not increase or decrease cash, but that result in significant investing and financing activities are referred to as ________ activities.

non cash

Gains and losses on the sale of long-term assets represent common _______ items needing adjustment under the indirect method.

non operating

Depreciation expense and amortization expense represent _______ items requiring adjustments to net income under the indirect method.

noncash

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

operating activities

The statement of cash flows classifies items as

operating, investing, and financing.

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? payment on account purchase of building issuance of bonds Payment of salaries purchase of supplies on account

payment on account Payment of salaries

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows? purchase of a building purchase of supplies retirement of common stock Interest paid on bonds payment on account

purchase of supplies Interest paid on bonds payment on account

Noncash investing and financing activities are either: reported directly after the statement of cash flows reported in the notes to the financial statements reported as investing and financing activities on the statement of cash flows

reported directly after the statement of cash flows reported in the notes to the financial statements

In a statement of cash flows, the sum of cash inflows and outflows is equal to

the change in the cash balance.

Which of the following are common financing activities? Payment of cash dividends Purchasing treasury stock Receiving dividends from an investment in another company Issuing common stock

Payment of cash dividends Purchasing treasury stock Issuing common stock

Using the indirect method to report cash flows from operating activities, a(n) _______ in the accounts receivable from the prior period is added to net income in the _________ activities section of the statement of cash flows.

decrease, operating

Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as _______ activities.

financing

Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as ________ activities.

financing

An increase in accounts receivable indicates that the company collected _____ cash than the amount of ______.

less; sales revenue

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income.

noncash

The three classifications on the statement of cash flows are cash flows from: business activities. operating activities. investing activities. financing activities. discontinued activities.

operating activities. investing activities. financing activities.

Using the indirect method to report cash flows from operating activities, an increase in the inventory account will be ______ net income to arrive at net cash flow provided by operating activities.

subtracted from

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows? Sale of building Collection on account Borrowing from bank Issuance of common stock Interest received on notes receivable

Collection on account Interest received on notes receivable

Which of the following are cash inflows from financing activities? Issuing stock to investors for cash Issuance of bonds Receiving dividends Collecting from customers Purchasing treasury stock

Issuing stock to investors for cash Issuance of bonds

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

related cash may be higher or lower than the accrued amount included in net income

Cash flows from _________ activities include both inflows and outflows of cash from the external funding of a business.

financing

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows.

Which of the following are significant noncash activities? Acquiring equipment by issuing a long-term note. Selling land. Acquiring land by issuing common stock. Issuing common stock for cash.

Acquiring equipment by issuing a long-term note. Acquiring land by issuing common stock.

The statement of cash flows provides summary information about cash _______ and cash _______ during the year.

inflows, outflows

Which of the following are cash inflows from financing activities? Issuance of bonds Receiving dividends Purchasing treasury stock Issuing stock to investors for cash Collecting from customers

Issuance of bonds Issuing stock to investors for cash

Which of the following are cash inflows from financing activities? Collection from customers Issuance of common stock to investors Sale of land Borrowing from bank Interest received

Issuance of common stock to investors Borrowing from bank

When preparing the statement of cash flows using the indirect method, depreciation expense is ______ ______ net income.

added to

When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to

amounts presented in the income statement.

_______ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

operating

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own common shares for $12 million and pays cash dividends of $5 million. Which of the following are cash outflows from financing activities? payment of cash dividends sale of Kleister Company common shares repayment of notes payable issuance of bonds

payment of cash dividends repayment of notes payable

Noncash investing and financing activities are either: reported as investing and financing activities on the statement of cash flows reported directly after the statement of cash flows reported in the notes to the financial statements

reported directly after the statement of cash flows reported in the notes to the financial statements

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

Depreciation expense originally reduced net income, but it is a noncash expense.

Which of the following are cash inflows from financing activities? Interest received Issuance of common stock to investors Borrowing from bank Sale of land Collection from customers

Issuance of common stock to investors Borrowing from bank

Which of the following are cash inflows from financing activities? Receiving dividends Purchasing treasury stock Collecting from customers Issuing stock to investors for cash Issuance of bonds

Issuing stock to investors for cash Issuance of bonds

A decrease in prepaid insurance is added to net income because

insurance expense decreased net income; however, cash was not paid. The prepaid insurance account was decreased rather than cash.

The two types of adjustments to net income for the indirect method are adjustments for components of net income that do not affect cash. changes in liabilities and owners' equity accounts during the period that affected cash. changes in owners' equity accounts during the period that affected cash. changes in operating assets and liabilities during the period that affected cash and were not in net income.

components of net income that do not affect cash. changes in operating assets and liabilities during the period that affected cash and were not in net income.

Select the items that would be added to net income in order to prepare the operating activities section of a statement of cash flows - indirect method. gain on sale of land decrease in current asset loss on sale of land increase in current asset depreciation expense

decrease in current asset loss on sale of land depreciation expense

Adjustments to net income in calculating operating cash flows include: Noncash items Changes in current assets and current liabilities Changes in noncurrent assets and noncurrent liabilities Nonoperating items

Noncash items Changes in current assets and current liabilities Nonoperating items

Under the indirect method of preparing the statement of cash flows, depreciation expense is added back to net income because it provides an inflow of cash. did not require an outflow of cash. was subtracted in deriving net income. increases the cash balance.

did not require an outflow of cash. was subtracted in deriving net income.