ACCT CHAPTER 11 (Extra credit and Concept videos)

Which of the following items would not be classified as a financing activity?

Repayments of accounts payable

Which of the following methods for reporting cash flows from operating activities begins with net income and works backward to calculate net cash flow from operating activities?

Indirect method

Roberts Inc. sells common stock for $10 million and pays dividends of $1 million. Net cash inflows from financing activities will be:

$9 million

Which of the following are cash inflows from financing activities?

-Borrowing from bank -Issuance of common stock to investors

Which of the following are cash inflows from financing activities?

-Issuing stock to investors for cash -Issuance of bonds

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

-depreciation expense -amortization expense

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

-depreciation expense -amortization expense

Collection Account

Cash inflow

Sale of services for cash

Cash inflow

Both dividends paid and dividends declared during the year are reported in the statement of cash flows.

False

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

Operating

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

One of the purposes of adjusting net income for changes to certain balance sheet accounts is to

convert items included in net income to cash.

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

net income

The basic purpose of the statement of cash flows is to

report the activities that changed the cash balance during the year

True or false: If a company chooses to prepare the operating section of the statement of cash flows using the direct method, it must also report using the indirect method.

true

Norbert Company reports the following net cash in its statement of cash flows: net inflow from operating activities: $200; net outflow from investing activities: $220; net inflow from financing activities: $130. The current year beginning balance of cash was $80. The cash balance at the end of the year will be

$190

During the current period, Schmidt Corp. sold equipment for $1,000, purchased new equipment for $10,000, paid an accounts payable balance of $2,500, and sold an investment costing $2,000 for $2,800. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$6,200 net outflow.

During the current period, Schmidt Corp. sold equipment for $1,000, purchased new equipment for $10,000, paid an accounts payable balance of $2,500, and sold an investment costing $2,000 for $2,800. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$8,700 net outflow Rationale: 1,000 - 10,000 + 2,800

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 -Inventory -Accounts payable

Which of the following are significant noncash activities? (Select all that apply.)

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

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

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

1) calculate the net cash flows from the 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 activites

Carola Inc. issues common stock for $20 million and pays dividends of $2 million. Net cash inflows from financing activities will be:

18 million

Net cash inflows from investing activities: $40,000 Net cash inflows from financing activities: $45,000 Cash at the beginning of the year: $340,000 Cash at the end of the year: $ 420,000 What was the company's cash flows from operating activities?

A cash outflow of $5,000

Croft Company sold land costing $10,000 for $12,000. In the investing activities section of the statement of cash flows, the company will report:

An inflow of $12,000

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

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 non-cash expense.

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

Financing

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

Non-cash activities

A decrease in accounts payable represents a cash ______ from operating activities, whereas a decrease in accounts receivable represents a cash _____ from operating activities.

Outflow; inflow

Which of the following is an example of a cash outflow for a financing activity?

Payment of cash for treasury stock

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

Sale of a machine for cash.

Which is a significant non-cash activity?

Signing a note payable in exchange for land.

The direct method for preparing the statement of cash flows reports

cash received and cash paid from operating activities.

Using the __________ method of reporting cash flows from operating activities, we show cash received from customers and cash paid to employees.

direct

The two generally accepted formats for reporting cash flows from operating activities using U.S. GAAP are the

direct and indirect method.

Wiese Company presents its statement of cash flows using the direct method. Wiese must also prepare the operating section using the indirect method and report it:

either along with the direct method on the face of the statement or in the financial statement notes

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

financing

Issuing stock to owners is classified as a ________ activity.

financing

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

financing

The payment of dividends is classified as a ___________ activities.

financing

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

financing, investing, and operating activities

Norbert Company reports the following net cash flows in its statement of cash flows: net inflow from operating activities: $200; net outflow from investing activities: $220; net inflow from financing activities: $130. The current year beginning balance of cash was $80. During the current year, cash must have

increased by $110.

The _________ method of reporting cash flows from operating activities begins with net income.

indirect

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

inflows and outflows

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

investing

We determine the net cash flows from investing activities by analyzing changes in _____ accounts from the balance sheet.

long-term asset

In order to determine cash flows from financing activities, we need to examine changes to

long-term liability and stockholders' equity accounts

Diamond Company's land account decreased by 10 million. Cash received from sale of land

may be higher or lower than $10 million.

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

Dividends received are classified as operating activities cash flows, while dividends paid are classified as financing activities cash flows because dividends received increase _____, and dividends paid decrease ____.

net income; retained earnings

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

non-cash

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.

Dividends ________________ are classified as operating activities cash flows, while dividends _______________ are classified as financing activities cash flows.

received; paid

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

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

the change in the cash balance.

Adjustments to net income in calculating operating cash flows include:

-Non-cash items -Non-operating items -Changes in current assets and current liabilities

Which of the following are classified as cash outflows from investing activities?

-Purchase of an investment -Purchase of land

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.

During the current period, Kunze Corp. disposed of old equipment for $2,000, purchased new equipment for $20,000, collected an accounts receivable balance of $2,500, and purchased an investment for $3,000. Net cash from investing activities is (indicate the amount and whether it is a net inflow or outflow)

$21,000 net outflow.

Which of the following financial statements provide(s) useful information to prepare the statement of cash flows?

-The income statement -The balance sheet

The direct method for reporting cash flows from operating activities reports cash inflows and outflows from operations such as:

-cash received from customers -payments for inventory

Which of the following are cash outflows from investing activities?

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

True or false: Every time land is sold, the line item for the sale of land in the investing activities section of the Statement of Cash Flows will equal the change in the asset account on the balance sheet.

False

Using the indirect method to report cash flows from operating activities, how is the change in 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 subtraction of dividends in financing activities.

The balance of retained earnings:

-increases with net income -decreases with dividends declared

Wi-Fi, Inc., reported a net income of $50,000 for the current year. The beginning and ending balances for Retained Earnings for the year are $100,000 and $130,000 respectively. How much did Wi-Fi pay as dividends for the year?

$20,000

Noncash investing and financing activities are either: (Select all that apply.)

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

Which of the following are classified as cash inflows from investing activities?

-Sale of land -Sale of equipment

Which of the following statements is correct regarding the information content of the income statement and the balance sheet?

Both provide information that help determine cash flows.

Payment on account

Cash outflow

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.

non-cash

Which of the following cash transactions are classified as cash inflows from investing activities?

-Sale of building -Sale of investments -Sale of equipment

Which of the following is an example of a cash inflow from an investing activity?

Receipt of cash from the sale of equipment

Payment of salaries

Cash outflow

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

non-operating