Accounting Chapter 12
long term debt was $20 mil at the beginning of the year and 30 mil at the end. During the year an additional 15 mil was borrowed. Repayments on the statement of cash flow during the year were
(5) million under financing activities
Which of the following cash flows are classified as operating activities
- cash from revenue earned in daily transactions -cash flow causing decrease in current liabilities
free cash flow is the amount of cash available to use to
-repay existing financing -build up the company's cash balance -expand the business through additional investing activities
which allows dividends and interest paid to be classified as operating or financing activities
IFRS
which of the following is the best mature of a companys profitability
accrual based net income
an decrease in inventory will be __ net income when determing net cash flow provided by operating activites
added back to
when preparing the statements of cash flow using the indirect method, depreciation expense is
added back to net income under the operating activities section
short term, highly liquid investments that are purchased within three months of maturity can be considerd __- equivalents
cash
the payment of dividends and changes in the dividends payable account are classfied as
financing
when preparing the operating activities section of the statement of cash flows using the indirect method, adding a decrease in accounts receivable to net income allows the inclusion of transaction that
increased cash, but did not affect net income
Credits to the common stock account recorded during the period will be reported as cash __ activities on the statement of cash flows
inflows under financing
Accrual basis accounting is superior to cash basis accounting in that
it provides a better measure of profitability
repayments of loans will be reported as a
negative cash flow under financing activities
when using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is
net income
depreciation expense originally reduced net income, but the expense does not involve paying cash
noncash
the cash flow statement should be evaluated by examining the cash flow pattern
of the subtotals for the three sections of the statement
U.S. GAAp classifies the payment of interest as an ___ activity on the statment of cash flows
operating
the classifications used to categorize cash inflows and outflows on the statement of cash flows includes
operating, financing, investing activities
braden and sons inc paid cash to purchase equipment costing 342 this year. also this year the company sold 70k cash equipment that orginally cost 230k 5
the purchases and the sales of equipment must be shown separately as a decrease to cash 342 and increase 70k
braden and sons inc borrowed 700k cash from trenton savings and loan last year. In addition, the company repaid a 450k note payable to first national bank. how should these transactions be listed in the statement of cash flows
transactions must be shown separately as a decrease to cash for 450 k and an increase of 700k in the financing activities sections
list the steps in preparing a statement of cash flow
1. determine the change in each balance sheet account 2. identify the cash flow category to which each account relates 3. create schedules that summarize the operating, investing, and financing cash flows
when using the indirect method, adding a decrease in prepaid insurance to net income eliminates the effect of recording insurance expense that
decreased net income, but did not impact cash
an increase in prepaid insurance ___net income
is subtracted from
what is the purpose of the statement of cash flow?
it is intended to provide a cash based view of a company
which of the following items would not be classified as a financing activity
repayments of accounts payble
as increase in inventory will be ___ net income when determining net cash flow flow provided by operating activities
subtracted from
how is the change is retained earnings accounted for in the statement of cash flows
the change is accounted for by the addition of net income in operating activities and the subtractions of dividends in financing activities
dovers co's comparative balance sheet indicated that the equipment account increase by
(62,000)
after its first year of business, best measures inc sales revenue were 100k of which 90k was collected and total expenses of 60k of which 20k was paid. which of the following statements is correct?
-cash basis net income= 70k -accural basis ni=40k0uiop
which of the following describes the acceptable methods that may be used to prepare the statements of cash flow?
-direct or indirect method
short term, highly liquid investments that are purchased within three months of maturity can be considered equivalent to cash because they are
-so near maturity that their value is unlikely to change -readily convertible to known amounts of cash
arlingtons inc income statment showed net income income of 57,600 and depreciation expense of 9200 accounts receiable increase 3750 inventory increased 3200, supplies decreased 500 accounts payale increased 2700 and
61,150
a decrease in prepaid insurance is added to net income because
a decrease in prepaid insurance causes an increases in insurance expense and a decrease in net income, but it does not involve cash
when calculating net cash flow provided by operating activities, an increase in accounts payable
added; less
increase in current liabilities are a source of cash; more expense was incurred than was paid decreases in current liabilities are a use of cash, more cash was paid than was expanded increases in current assets are a use of cash, more revenue was earned than collected
adding increases in current liabilities such as income tax payable allows the inclusion of transactions that decreased net income but not cash subtracting decreases in current liabilities such as salaries payable allow that inclusion of transaction that decreased cash but not net subtracting increases in current assets such as accounts receivable allows the inclusion of transactions that increased net income but not cash