Ch.12 Accounting 201 SmartBook

Which of the following formulas is correct?

Beginning accounts receivable balance + revenue earned on account - cash collections = ending accounts receivable balance

Bruno Company's bonds payable account had a $200,000 beginning balance and a $210,000 ending balance. During the year, Bruno paid off $100,000 of bond liabilities. Based on this information alone, Bruno's statement of cash flows will include a ______ from financing activities.

$110,000 cash inflow

Kato Company sold land that cost $30,000 and reported a $12,000 loss on the sale. Based on this information alone, the amount of cash inflow from the sale of land was ______.

$18,000 Reason: $30,000 cost - $12,000 loss = $18,000 sales price

Bruno Company's retained earnings account had a $120,000 beginning balance and a $130,000 ending balance. During the year, Bruno paid a $15,000 cash dividend. Based on this information alone, Bruno's reported net income (loss) for the year was ______.

$25,000 Reason: $120,000 beginning balance - $15,000 dividend payment = $105,000 balance before net income. $130,000 actual ending retained earnings balance - $105,000 = $25,000 net income.

Kato Company had a $50,000 beginning balance and a $56,000 ending balance in retained earnings. During the year, Kato earned $10,000 of net income. Based on this information alone, Kato Company paid dividends of ______

$4,000 Reason: $50,000 beginning balance + $10,000 increase from net income = $60,000 expected ending balance - $56,000 actual ending balance = $4,000 dividend payment.

Kato Company had a $17,000 beginning balance and a $19,000 ending balance in treasury stock. During the accounting period, Kato issued treasury stock costing $3,000. Based on this information alone, the amount of treasury stock purchased was ______.

$5,000 Reason: $17,000 beginning balance - $3,000 reissued = $14,000 expected ending treasury stock balance; $19,000 actual ending balance - $14,000 expected ending balance = $5,000 additional treasury stock purchased.

Kato Company's investments securities account had a $10,000 beginning balance and a $14,000 ending balance. During the period Kato sold investment securities that had originally cost $1,000. Assuming all security purchases are made in cash, the amount of cash outflow from the purchase of investment securities was ______.

$5,000. Reason: The beginning balance of $10,000 minus the $1,000 of securities sold = a $9,000 balance before any purchases. $14,000 - $9,000 = $5,000 purchased

Kato Company sold equipment that cost $2,000 and had accumulated depreciation of $1,500. Assuming the income statement showed a $300 gain on the sale, the cash inflow from the sale was ______.

$800 Reason: $2,000 cost - $1,500 accumulated depreciation = $500 book value + $300 gain = $800 sales price

Beginning treasury stock ______ = Ending treasury stock balance

+ Additional treasury stock purchased - Reissue of treasury stock

Beginning unearned revenue ______ = Ending unearned revenue

+ Cash collected for unearned revenue - Revenue recognized

Beginning prepaid insurance ______ = Ending prepaid insurance.

+ Cash purchases of insurance - Insurance expense

Beginning equipment balance ______ = Ending equipment balance

+ Equipment purchased - Equipment sold

Beginning retained earnings ______ = Ending retained earnings

+ Increase due to net income - Decrease due to dividend payments

Beginning mortgage payable ______ = Ending mortgage payable

+ Increase from additional mortgage debt - Decrease due to mortgage repayment

Beginning bonds payable ______ = Ending bonds payable

+ Increase from issuing bonds - Decrease due to bond repayment

Beginning land balance ______ = Ending land balance

+ Land purchased - Land sold

Beginning operating expense payable ______ = Ending operating expense payable

+ Operating expenses incurred on account - Cash payments

Beginning accounts payable ______ = Ending accounts payable

+ Purchases on account - Cash payments on accounts payable

Beginning investment securities balance ______ = Ending investment securities balanc

+ Securities purchases - Securities sales

Beginning balance of interest payable ______ = Ending balance interest payable

+ interest expense incurred on account - cash payments for interest payable

Which of the following signal cash inflows from financing activities? Multiple select question. Decreases in retained earnings caused by cash dividends Increases in short-term notes payable Increases in common stock Increases in treasury stock

Increases in short-term notes payable Increases in common stock

Which of the following events will require disclosure in the noncash investing and financing activities section of the statement of cash flows?

Purchase of a building by issuing common stock

The amount of net cash flow from operating activities shown on the statement of cash flows will be ______ method is used to prepare the statement.

the same regardless which

Beginning inventory ________ = Ending inventory.

- + Purchases - Cost of goods sold

Carson Company's common stock account had a $90,000 beginning balance and a $105,000 ending balance. Based on this information alone, Carson's statement of cash flow will include a $ _________ cash inflow from ________ activities.

- 15,000; financing

FASB gives companies the option to report or not report material investing and financing activities that do not involve cash. True or False?

- False

Which of the following signal cash outflows from financing activities? Multiple select question. Increases in treasury stock Increases in common stock Increases in short-term notes payable Decreases in retained earnings caused by cash dividends

- Increases in treasury stock - Decreases in retained earnings caused by cash dividends

Significant investing and financing events that do not involve the exchange of cash are reported in a separate Schedule of ________ Investing and Financing Activities

- Non-Cash

Which of the following statements are true? Multiple select question. • The statement of cash flows includes forecasts of expected cash outflows for investing activities. • Operating activities is one of three categories of information presented in a statement of cash flows. • Noncash transactions are never shown on a statement of cash flows. • Financing activities is one of three categories of information presented in a statement of cash flows.

- Operating activities is one of three categories of information presented in a statement of cash flows. - Financing activities is one of three categories of information presented in a statement of cash flows.

To calculate the cash collection of interest for the period, adjust interest revenue recognized on account for the change in interest receivable.

- True

When the FASB adopted a requirement for companies to provide a statement of cash flows, most companies used accounting systems that were compatible with the indirect method. True or False:

- True

The statement of cash flows shows ______ activities first.

- operating

Kato Company had a $300,000 beginning balance and a $200,000 ending balance in its mortgage payable account. Based on this information alone, the amount of cash flow from mortgage transactions was ______.

$100,000 outflow

Kato Company's equipment account had a $15,000 beginning balance and an $18,000 ending balance. During the period, Kato purchased equipment costing $4,000. Based on this, the cost of equipment sold during the period was ______.

$1,000 Reason: Beginning balance of $15,000 + $4,000 = $19,000 balance before any sales. Given an $18,000 ending balance, the cost of the equipment sold had to be $1,000.

Kato Company's investments securities account had a $10,000 beginning balance and a $14,000 ending balance. During the period Kato sold investment securities that had originally cost $1,000. The income statement reported a $200 gain on the sale of securities. Based on this, the cash inflow from the investment security sale was ______.

$1,200 Reason: $1,000 cost + $200 gain = $1,200 sales price

Kato Company had a beginning prepaid insurance balance of $1,200 and an ending prepaid insurance balance of $1,300. Given that insurance expense for the period amounted to $1,400, the amount of cash paid to purchase insurance during the period was: (Assume cash was paid for all insurance purchased.)

- $1,500 Reason: There had to be enough insurance purchased to cover the $1,400 of insurance expense recognized plus the $100 increase in the balance of prepaid insurance. Accordingly, the company must have paid $1,500 of insurance

Kato Company's beginning interest payable balance was $240 and the ending balance was $220. Accrued interest expense for the period was $1,800. Based on this, the amount of cash paid for interest expenses during the period was ______.

- $1,820 Reason: The balance in interest payable decreased by $20, so cash paid for interest = $1,800 interest expense + $20 decrease in interest payable or $1,820

Chen Company's utilities payable account had a $1,100 beginning balance and a $1,400 ending balance. Chen reported net income of $13,000. Based on this information alone, the amount of cash inflow from operating activities was ______.

- $13,300 Reason: Rule 2 states that increases in short-term liabilities be added to net income to arrive at cash flow from operations. Therefore, cash flow from operations is $13,000 + $300 = $13,300

The income statement for Kato Company showed net income of $17,500 and depreciation expense of $500. Based on this information alone, the amount of cash flow from operating activities was ______.

- $18,000 Reason: Rule 3 states that noncash expenses must be added back to net income when determining cash flow from operating activities.

Kato Company's beginning unearned revenue balance was $5,600 and the ending balance was $5,000. Revenue recognized was to $22,000. The amount of cash collected from unearned revenue during the period was ______.

- $21,400 Reason: The balance in unearned revenue decreased by $600 so cash collected for unearned revenue = $22,000 - $600 or $21,400

Como Company's prepaid rent account had a $3,600 beginning balance and a $3,200 ending balance. The company's reported net income was $24,000. Based on this information alone, the amount of cash inflow from operating activities was ______.

- $24,400 Reason: Rule 1 states that decreases in short-term assets be added to net income to arrive at cash flow from operations. Therefore, cash flow from operations is $24,000 + $400 = $24,400

The income statement for Kato Company showed net income of $17,500, loss on sale of an asset of $6,900 and depreciation expense of $500. Based on this information alone, the amount of cash flow from operating activities was ______.

- $24,900 Reason: Rule 4 states that losses are added to and gains are subtracted from net income when determining cash flow from operating activities.

Kato Company beginning salaries payable balance was $2,600 and the ending balance was $2,800. Salaries expense for the period was $27,000. Based on this, the amount of cash paid for salaries during the period was ______.

- $26,800 Reason: The balance in salaries payable increased by $200 so cash paid for salaries = $27,000 - $200 or $26,800

Mario Company reported net income of $30,000. Their beginning account receivable balance was $2,000 and the ending balance was $2,200. Based on this information alone, the amount of cash inflow from operating activities was ______.

- $29,800 Reason: Rule 1 states that increases in short-term assets be deducted from net income to arrive at cash flow from operations. Therefore, cash flow from operations is $30,000 - $200 = $29,800

Kato Company's beginning operating expenses payable balance was $600 and the ending balance was $500. Given that operating expense were $2,900, the amount of cash paid for operating expenses during the period was ________.

- $3,000

Kato Company's investments securities account had a $10,000 beginning balance and a $14,000 ending balance. During the period Kato sold investment securities that had originally cost $1,000. Assuming all security purchases are made in cash, the amount of cash outflow from the purchase of investment securities was ______.

- $5,000 Reason: The beginning balance of $10,000 minus the $1,000 of securities sold = a $9,000 balance before any purchases. $14,000 - $9,000 = $5,000 purchased.

Kato Company's interest receivable had a $500 beginning balance and a $460 ending balance. Accrued interest revenue for the period was $6,000. Based on this information alone, the amount of cash inflow from interest revenue was ________.

- $6,040 Reason: The balance in interest receivable decreased by $40 ($500 beginning balance - $460 ending balance). As a result, the company must have collected all of the $6,000 of accrued interest revenue earned during the period plus $40 from the decrease or $6,040

Stella Company had a beginning balance in unearned revenue of $7,300 and a $6,000 ending balance. Reported net income was $62,000. Based on this information alone, the amount of cash inflow from operating activities was ______.

- $60,700 Reason: Rule 2 states that decreases in short-term liabilities be subtracted from net income to arrive at cash flow from operations. Therefore, cash flow from operations is $62,000 - $1,300 = $60,700

Kato Company's beginning accounts payable balance was $5,000 the ending balance was $5,500. Purchases of inventory on account were $69,000. Assuming that accounts payable is used exclusively for the purchase of inventory, the cash paid for inventory purchases during the period was ______.

- $68,500 Reason: Cash paid to purchase inventory = $69,000 purchases - $500 increase in the accounts payable balance or $68,500

Kato Company's inventory account had a beginning balance of $23,000 and an ending balance of $24,000. Cost of goods sold during the period was $68,000. Based on this, the amount of inventory purchased during the period was ______.

- $69,000 Reason: Cost of goods sold + $1,000 increase in the inventory balance = $69,000 of inventory purchases.

Kato Company's beginning accounts receivable balance was $4,000 and the ending balance was $4,200. Sales on account during the period were $70,000. Based on this information alone, the cash inflow from customers was ________.

- $69,800 Reason: The balance in accounts receivable increased by $200 so collections were $70,000 - $200 increase or $69,800

Beginning salaries payable ______ = Ending salaries payable.

- + Accrued salaries expense/payable - Cash payments

Which of the following statements are true? Multiple select question. When assets are sold for more or less than book value, a gain or loss results. Cash flows from the sale of long-term assets are reported in the financing section of the statement of cash flows. Gains and losses are reported in both the operating and investing sections of the statement of cash flows. Net income must be adjusted for gains and losses to determine net cash flow from operating activities.

- When assets are sold for more or less than book value, a gain or loss results. Net income must be adjusted for gains and losses to determine net cash flow from operating activities.

Regarding the statement of cash flows ________.

- a growing number of companies are using the direct method - the majority of companies use the indirect method - most people find the direct method easier to understand

To determine the cash flow from operating activities using the indirect method, ______ net income. Multiple select question. add increases in short-term assets to subtract decreases in short-term assets from add decreases in short-term assets to subtract increases in short-term assets from

- add decreases in short-term assets to - subtract increases in short-term assets from

To determine cash flow from operating activities using the indirect method, noncash expenses, such as depreciation expense are ______.

- added to net income Reason: Rule 3 states that non-cash expenses must be added back to net income when determining cash flow from operating activities

On the statement of cash flows, the net change in cash is ________ to the ________ cash balance to determine the ________ cash balance.

- added; beginning; ending

The amount of net income does not appear on the statement of cash flows when a company uses the ________ method to determine the net cash flow from operating activities.

- direct

The statement of cash flows shows ________ cash balance(s).

- he beginning and ending

A(n) increase in the balance of a long-term asset account suggests that a cash outflow from ______ activities occurred.

- investing

Cash flows related to acquiring or disposing of long-term assets are reported in the ________ activities section of the statement of cash flows.

- investing

The financing activities section of the statement of cash flows includes cash flows for transactions involving ________.

- issuing common stock - borrowing money

The operating activities section of the statement of cash flows includes cash ______. Multiple select question. • outflows for expenses • inflows from dividends • payments to purchase long-term assets • inflows for the issue of common stock

- outflows for expenses - inflows from dividends

The operating activities section of the statement of cash flows includes cash ________.

- outflows for interest - inflows from customers

The financing activities section of the statement of cash flows includes cash ________.

- paid for dividends - paid for a bond liability

The investing activities section of the statement of cash flows includes the cash ______.

- purchase of equipment - sale of marketable securities - collection from a mortgage

The statement of cash flows does NOT include a section titled ________ activities.

- purchasing

When a company prepares a statement of cash flows, a separate schedule of any noncash investing and financing activities is ______.

- required

When a company prepares a statement of cash flows, a separate schedule of any noncash investing and financing activities is ________.

- required

FASB gives companies the option to report or not report material investing and financing activities that do not involve cash.

False

The cash inflow reported from the sale of an asset is equal to the amount of cash collected from selling the asset + the gain or - the loss recognized on the sale.

False

The cash inflow reported from the sale of an asset is equal to the amount of cash collected from selling the asset + the gain or - the loss recognized on the sale. True false question.

False

Which of the following statements are true? Multiple select question. The investing activities section of the statement of cash flows is the same regardless of whether the direct or indirect method is used. correct When preparing the investing activities section of the statement of cash flows it is necessary to reconcile the accumulated depreciation account. Reason: This is not necessary because accumulated depreciation does not affect cash flows. Increases in long-term asset balances suggest cash outflows to purchase assets. correct Decreases in long-term asset balances suggest cash inflows from selling assets.

The investing activities section of the statement of cash flows is the same regardless of whether the direct or indirect method is used. Increases in long-term asset balances suggest cash outflows to purchase assets. Decreases in long-term asset balances suggest cash inflows from selling assets.

To determine the cash flow from operating activities using the indirect method, ______ net income.

add increases in short-term liabilities to subtract decreases in short-term liabilities from

To determine cash flow from operating activities using the indirect method, noncash expenses, such as depreciation expense are ______.

added to net income

To determine cash flow from operating activities under the indirect method, ______ net income

gains must be subtracted from losses must be added to

Kato Company's common stock account had a $140,000 beginning balance and a $160,000 ending balance. Based on this information alone, Kato's statement of cash flow will include a $20,000 cash ______ activities.

inflow from financing

Kato Company had a $250,000 beginning balance and a $200,000 ending balance in bonds payable. During the accounting period, Kato issued $75,000 of bonds. Based on this information alone, Kato's statement of cash flows will include a $125,000 cash ______ activities.

outflow from financing