acct 10

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

Purchase of a machine for cash.

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

Sale of a machine for cash.

When using the direct method, why is cash received from customers greater than sales revenue on the income statement when accounts receivable decreases?

There were more collections of accounts receivable than sales on account during the year.

When using the direct method to prepare the Statement of Cash Flows, depreciation expense is

not reported on the statement of cash flows.

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

operating

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

operating activities

When the ______ account decreases, it means the company paid less cash for insurance than it recorded as insurance expense.

prepaid insurance

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

1. calculate the net cash flows from operating activities 2. determine the net cash flows from investing activities 3. determine the net cash flows from financing activities 4. combine operating, investing, and financing activities

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?

Accounts receivable Accounts payable inventory

Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?

Calculate the change in the beginning and ending balance of cash

Adjustments to net income in calculating operating cash flows include:

Changes in current assets and current liabilities Noncash items Nonoperating items

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 nonoperating items that require adjustments under the indirect method?

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

Which of the following are common noncash items requiring adjustment to net income under the indirect method?

depreciation expense amortization expense

Cash from operating activities differs between the direct and indirect method with respect to the

detail and presentation only

Cash from operating activities differs between the direct and indirect method with respect to the:

detail and presentation only

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

financing

Issuing stock to owners is classified as a(n) _______ activity.

financing

Repayments of formal, long-term debt contracts are classified as ______ activities.

financing

A decrease in accounts receivable will result in a(n) in cash from sales revenue when using the direct method to determine cash flows from operations.

increase

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

inflows & outflows

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 activities.

The three classifications on the statement of cash flows are cash flows from (Select all that apply.)

investing activities. operating activities. financing activities

When prepaid accounts increase, it indicates the company has paid ______ cash than it recorded as operating expenses.

more

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 return on assets is calculated by dividing ____ by _______.

net income; average total assets

When accounts receivable decrease

net sales are less than cash receipts from customers.

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 Payment of salaries

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

The ratio that is calculated by dividing net income by average total assets is referred to as:

return on assets

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

statement of cash flows

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

the change in the cash balance.

The amount of net cash flows from operating activities calculated using the direct method is

the same as under the indirect method.

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

The direct method presents a summary of all operating transactions that result in either a debit or credit to the _________ account.

cash

The direct method presents a summary of all operating transactions that result in either a debit or credit to the account.

cash

An increase in accounts receivable will result in a(n) ______ in cash from sales revenue when using the direct method to determine cash flows from operations.

decrease

The ____________ method prepares the operating activities section of the statement of cash flows by restating each revenue and expense from the accrual basis to the cash basis. It shows the cash collected from customers and the cash paid for operating expenses.

direct

When using the ___________ method for determining cash flows from operations, noncash expenses are omitted from the Statement of Cash Flows.

direct

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

financing

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

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

operating

Sales on account are $100,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $15,000. What is the cash collected from customers during the period?

$105,000

Sales on account are $200,000. Cash sales during the period are $50,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $30,000. What is the total cash collected from customers during the period?

$240,000

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

Interest paid on bonds purchase of supplies payment on account

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

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