FinancialAccountingCH12

In 2017, Medrano Manufacturing reported $3.9 billion in cash flows from operating activities but only $2.7 billion in net income. What is one reason that Medrano would report this difference? A : They received $1.2 billion from stockholders' equity items when they sold a new issue of common stock. B : They sold $1.2 billion in securities they had purchased from other companies. C : They recorded $1.2 billion in noncash expenses on their income statement. D : They sold $1.2 billion in old equipment that was related to their operating activities.

C : They recorded $1.2 billion in noncash expenses on their income statement.

What can be determined by converting net income from an accrual basis to a cash basis under either the direct or the indirect method? A : net cash provided by goods sold B : operating expenses C : net cash provided by operating activities D : gross sales revenue

C : net cash provided by operating activities

Q 12.1: Identify the type of activity that includes lending money and collecting on the loans. A : investing activities B : financing activities C : noncash investing and financing activities D : operating activities

A :investing activities

12.21: Jose is analyzing the financial statements of two companies. The first company has a net income that is significantly higher than their cash flows provided by operating activities, whereas the second company has net income and cash flows provided by operating activities that are very similar. What can Jose assume about these two companies? A : The first company is in the decline phase of the corporate life cycle, whereas the second company is in the growth phase of the corporate life cycle. B : The first company is in the maturity phase of the corporate life cycle, whereas the second company is in the decline phase of the corporate life cycle. C : The first company is in the growth phase of the corporate life cycle, whereas the second company is in the maturity phase of the corporate life cycle. D : The first company is in the introductory phase of the corporate life cycle, whereas the second company is in the growth phase of the corporate life cycle.

C : The first company is in the growth phase of the corporate life cycle, whereas the second company is in the maturity phase of the corporate life cycle.

Determine the net income for Fishtail Industries provided the following: increase in AR $2,500 decrease in inventory $330 depreciation expense $5250 dividends paid $1,800 net cash provided by operating activities 42,000 Equipment with a Book Value of $14,000 was sold for $12,250. A : $37,170 B : $49,370 C : $59,130 D : $37,830

37,170 The $1,750 net loss on the sale and depreciation are added to the changes in the current asset accounts: $1,750 + $5,250 - $2,500 + $330 = $4,830. Deducting this amount from the net cash provided by operating activities results in net income of $37,170 ($42,000 - 4,830)

Q 12.41: In which of the following ways does the growth phase of the corporate life cycle differ from the maturity phase? A In the growth phase, cash flow provided by operating activities is significantly less than net income, but in the maturity phase, cash flow provided by operating activities is similar to net income. B In the growth phase, cash flow provided by operating activities is significantly more than net income, but in the maturity phase, cash flow provided by operating activities is significantly less than net income. C In the growth phase, cash flow provided by operating activities is significantly less than net income, but in the maturity phase, cash flow provided by operating activities is significantly more than net income. D In the growth phase, cash flow provided by operating activities is similar to net income, but in the maturity phase, cash flow provided by operating activities is significantly more than net income.

A In the growth phase, cash flow provided by operating activities is significantly less than net income, but in the maturity phase, cash flow provided by operating activities is similar to net income.

Which of the following is associated with financing activities? A : issuing debt B : acquiring long-lived assets C : acquiring investments D : lending money

A : issuing debt

Blanco National Forestry purchased land in exchange for bonds. How would this be recorded differently in the statement of cash flows than if the land was purchased with cash?

The purchase with bonds should be disclosed in a separate schedule, whereas the purchase with cash should be included in cash flows from investing activities.

Q 12.31: Relying entirely on a firm's statement of cash flows while ignoring its income statement is A : not recommended, because doing so would mean complete exclusion of accrual-based accounting. B : not recommended, because doing so would mean complete exclusion of cash-based accounting. C : recommended, because doing so would mean complete exclusion of accrual-based accounting. D : recommended, because doing so would mean complete exclusion of cash-based accounting.

A : not recommended, because doing so would mean complete exclusion of accrual-based accounting.

When looking at the financial statements, you notice that a company has cash flows from operating and investing activities that are significantly lower than their cash flows from financing activities. What can you assume about the company? A They are likely in either the introductory phase or growth phase of the corporate life cycle. B They are likely in either the maturity phase or the decline phase of the corporate life cycle. C They are likely in either the growth phase or the maturity phase of the corporate life cycle. D They are likely in either the introductory phase or the maturity phase of the corporate life cycle.

A They are likely in either the introductory phase or growth phase of the corporate life cycle.

Which of the following two items are similar in that they both are added back to net income to calculate the cash flows from operating activities? A depreciation expenses and losses from the disposal of plant assets B increases in current asset accounts and decreases in current liability accounts C depreciation expenses and gains from the disposal of plant assets D decreases in current asset accounts and decreases in current liability accounts

A depreciation expenses and losses from the disposal of plant assets

Kendall Publishing needs to replace one of their textbook printers, but they do not have adequate cash on hand to purchase the printer. In addition, they do not want to increase their debt load. The new printer costs $40,000, and their old printer is worth $8,000. Which of the following methods would allow Kendall to purchase the printer without affecting cash? A : Issue new shares of common stock to the printer supplier in exchange for the printer. B : Obtain a loan to pay for the printer. C : Issue new bonds to the printer supplier in exchange for the printer. D : Offer their old printer to the printer supplier in exchange for a new printer.

A : Issue new shares of common stock to the printer supplier in exchange for the printer.

On the statement of cash flows, how are cash receipts from interest and dividends classified? A : as operating activities B : as investing activities C : as financing activities D : as significant noncash activities

A : as operating activities 只要是和revenue有关，就是运营活动。investing activities和投资回本有关，而利润放在operating里。

In good years, Dailey Industries often loans cash to other companies, but in difficult years, they have to borrow cash from other entities. How would they record these differently on the statement of cash flows? A Loaning money would be classified as an operating activity, whereas borrowing money would be classified as a financing activity. B Loaning money would be classified as an investing activity, whereas borrowing money would be classified as a financing activity. C Loaning money would be classified as a financing activity, whereas borrowing money would be classified as an operating activity. D Loaning money would be classified as a financing activity, whereas borrowing money would be classified as an investing activity.

B Loaning money would be classified as an investing activity, whereas borrowing money would be classified as a financing activity.

12.8: What is the result of an increase in accounts payable during a period? A : Expenses on an accrual basis are less than expenses on a cash basis. B : Expenses on an accrual basis are greater than expenses on a cash basis. C : Expenses on an accrual basis are the same as expenses on a cash basis. D : Revenues on an accrual basis are less than revenues on a cash basis.

B : Expenses on an accrual basis are greater than expenses on a cash basis.

Q 12.32: Why is the adjusted trial balance an unreliable source for preparing the statement of cash flows? A : The cash balance does not appear on an adjusted trial balance. B : The statement of cash flows requires more detail. C : The cash balance changes considerably from the trial balance to the adjusted trial balance. D : The post-closing trial balance contains the necessary balance.

B : The statement of cash flows requires more detail. The statement of cash flows is not prepared from an adjusted trial balance. It requires detailed information concerning the changes in account balances that occurred between two points in time. An adjusted trial balance will not provide the necessary data.

Which of the following describes free cash flow? A : cash provided by investing activities less capital expenditures B : cash provided by operations less capital expenditures and cash dividends C : cash provided by operations less cash dividends D : cash provided by investing activities less capital expenditures and cash dividends

B : cash provided by operations less capital expenditures and cash dividends

Holcomb Industries sold a piece of machinery with a purchase value of $918,000 and accumulated depreciation of $856,800 for $80,000. They realized a gain of $18,800 on the sale. How would this transaction affect overall cash flows? A : Cash flows would increase by $61,200. B : Cash flows would increase by $80,000. C : Cash flows would increase by $98,800. D : Cash flows would increase by $18,800.

Cash flows would increase by $80,000. The change in cash flows is only affected by the inflow of $80,000 cash from the sale. All the other account adjustments are noncash transactions and would not be reflected on the statement of cash flows.

Accounts receivable arising from sales to customers amounted to $250,000 and $175,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $300,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is A : $250,000. B : $475,000. C : $450,000. D : $375,000.

D : $375,000.

Which of the following statements about free cash flow is true? A : Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends. B : Significant free cash flow indicates less potential to finance new investments. C : Significant free cash flow indicates less potential to pay additional dividends. D : Free cash flow is not reported on the statement of cash flows.

D : Free cash flow is not reported on the statement of cash flows.

What effect will a decrease in inventory have on free cash flows? A : It will have no effect on free cash flows. B : It will stabilize free cash flows. C : It will decrease free cash flows. D : It will increase free cash flows.

D : It will increase free cash flows.

Jacob is assessing the corporate life cycle of two companies. He notices that Monaco Enterprises is purchasing many long-term assets and that Resendez Industries is selling many long-term assets. What should Jacob conclude about these two companies? A : Monaco Enterprises is in the maturity phase, whereas Resendez Industries is in the growth phase. B : Monaco Enterprises is in the decline phase, whereas Resendez Industries is in the maturity phase. C : Monaco Enterprises is in the growth phase, whereas Resendez Industries is in the introductory phase. D : Monaco Enterprises is in the introductory phase, whereas Resendez Industries is in the decline phase.

D : Monaco Enterprises is in the introductory phase, whereas Resendez Industries is in the decline phase.

12.11: Which component of net income does not affect cash flow? A : payment of cash dividends B : issuance of notes payable C : purchase of inventory D : depreciation on plant assets

D : depreciation on plant assets

Michelle is investigating the financial statements of two companies. One company is in the maturity phase of the corporate life cycle, and the other company is in the decline phase. What financial activity might both companies be involved in? A : issuing common stock B : issuing bonds C : taking out new loans D : purchasing treasury stock

D : purchasing treasury stock

When preparing the statement of cash flows, Jaida calculated the following amounts: net cash from op activities $14.8 mill net cash used by investing activities 3.2 net cash provided by financing activities 5.7 net increase in cash 23.7 However, when comparing the net increase in cash she calculated to the actual difference in the beginning and ending balance of the Cash account, they did not agree. Why? A : Jaida subtracted the net cash from investing activities rather than adding it. B : Jaida added the net cash from financing activities rather than subtracting it. C : Jaida subtracted the net cash from financing activities rather than adding it. D : Jaida added the net cash from investing activities rather than subtracting it.

Jaida added the net cash from investing activities rather than subtracting it. The sum of the operating, investing, and financing activities sections should equal the net increase or decrease in cash for the period. When this amount is added to the beginning cash balance to arrive at the ending cash balance, the ending cash balance should be the same as the balance of the Cash account reported on the balance sheet. If these amounts do not agree, then an error was made. In Jaida's case, if the three amounts are added together ($14.8 + $3.2 + $5.7), they equal $23.7 million. However, she should have subtracted the cash flows used by investing activities ($14.8 - $3.2 + $5.7) for a total of $17.3 million increase in cash.

If a company uses the indirect method to depict cash flows, where, if at all, would accounts receivable collected be classified on the statement of cash flows? a) investing activities section b) financing activities section c) operating activities section d) noncash activities

c) operating activities section accounts receivable给supplier的钱都是属于operating activities section