ch 11 SB accounting

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?

$100,000 + 20,000 - 15,000 = $105,000

which accounts result 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

which 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

non cash items, non operating 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

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

If interest payable increases, which of the following is true?

Interest paid is lower than the interest expense on the income statement

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

Sale of a machine for cash

Which of the following statements is correct concerning a decrease in accounts payable?

Since the cash payments were more than the credit purchases, the decrease must be added to purchases to calculate cash payments to suppliers.

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

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

cash

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

cash

Which of the following sections will be identical in every detail under the direct and indirect methods

cash flows from financing and investing activities

a decrease in accounts payable means

cash payments were more than credit purchases

adjustments to net income in calculating operating cash flows include

changes in current assets and current liabilities; non cash items; non operating items

changes in current assets and current liabilities

changes represent the non cash portion of some revenues and expenses

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 reason depreciation expense is added to net income when preparing the statement of cash flows

depreciation expense originally reduced net income, is a non cash expense

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

detail and presentation only

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

True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.

false

repayments of formal, long term debt contracts are classified as _ activities

financing

non operating items

gains and losses on the sale of long-term assets that don't affect operating cash flows

an _ in accounts payable indicates that cash payments were less than the credit purchases and must be subtracted from purchases to calculate cash payments to suppliers

increase

two acceptable methods or US GAAP for reporting cash flows from operating activities are the _ method and the _ method

indirect ; direct

cash flows from _ activities are both outflows and inflows of cash related to the acquisition and disposal of long term assets

investing

Which statement regarding the amount of cash from operating activities is correct

it's identical under the direct and indirect method

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

long term liability and stockholders' equity accounts

which are non operating items that require adjustments under the indirect method

losses on the sale of long term assets; gains on the sale of long term assets

when prepaid accounts increase, it indicates the company has paid _ cash than it recorded as operating expenses

more

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

gains and losses on the sale of long term assets represent common _ items needing adjustment under the indirect method

non operating

gains and losses on the sale of long term assets represent common __ items needing adjustment under the indirect method

non operating

depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a _ reduction to net income

noncash

gains and losses on the sale of long-term assets represent common _ items needing adjustment under the indirect method

nonoperating

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

not reported on the statement of cash flows

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

prepaid insurance

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

purchase of a machine for cash

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

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 the net income

non cash items

revenues and expenses that never affect cash; depreciation and amortization expense

Net cash flows provided by operating activities will be ______ when using the direct method compared to the indirect method.

the same

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

the same as under the indirect method

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

True or false: Cost of goods sold must be adjusted to a cash number because the cost of merchandise sold may be more or less than the amount of cash paid to suppliers during the period

true