module 4 a
A corporation uses the indirect method of preparing the statement of cash flows. A fixed asset has been sold for $25,000, representing a gain of $4,500. The value of this transaction appearing in the operating activities section of the statement of cash flows is
$(4,500)
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a decrease in the Investment account of $100,000 which occurred because of the sale of the Investment for cash of $125,000 ( a gain of $25,000)?
Add the $125,000 as Cash received from the sale of investment in the Cash flow from Investing Activities section of the Statement of Cash Flow.
When preparing the statement of cash flows, to make sure that the statement 'balances,' the final figure (cash at the end of the time period) should be compared to what amount?
Cash balance shown on the balance sheet as of the same date
Which of the following increases cash?
borrowing money by issuing a 6-month note
A 10-year bond was issued at face value for $250,000 cash. This transaction should be shown on a statement of cash flows under
financing activities
Which of the following methods of reporting cash flows from operating activities adjusts net income for revenues and expenses not involving the receipt or payment of cash?
indirect method
A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under
investing activities
Financing activities include
issuing debt
What is summary of the cash receipts and cash payments for a specific period of time, such as a month or a year called?
statement of cash flow
Which of the following is not one of the four basic financial statements?
statement of changes in financial position
The Statement of Cash Flows provides useful information about a company's ability to generate cash from operations and meet its financial obligations.
true
Firefly Inc. sold land for $225,000 cash. The land had been purchased 5 years earlier for $275,000. The loss on the sale was reported on the income statement. On the statement of cash flows, what amount should Firefly report as an investing activity from the sale of the land?
$225,000
A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as an increase of
$63,000 from investing activities and a deduction from net income of $9,000
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a increase in the Common Stock account of $150,000 and an increase in the Paid-In Capital in Excess Par - Common Stock of $25,000 for which cash of $175,000 was received for the issuance of additional common stock.
Add the $175,000 as Cash received from the issuance of common stock in the Cash flow from Financing Activities section of the Statement of Cash Flow.
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a decrease in the land account of $200,000 due to sale of the land for cash of $200,000?
Add the $200,000 as Cash received from the sale of land in the Cash flow from Investing Activities section of the Statement of Cash Flow.
Using the Exhibit below, assume that the balance of Accounts Receivable was $70,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Receivable is $60,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts receivable on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payable Decrea
Add: Decrease in Accounts Receivable $10,000
Using the Exhibit below, assume that the balance of Accounts Payable was $50,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Payable is $55,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts payable on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payable Decreases in ac
Add: Increase in Accounts Payable of $5,000
A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in
a separate section of noncash investing and financing activities at the bottom of the statement
Which of the following would not be on the statement of cash flows?
cash flows from contingent activities
issuance of common stock to acquire land
cash flows from contingent activities
What is the section of the statement of cash flows that reports cash flows from transactions affecting the equity and debt of the business called?
cash flows from financing activities
What is the section of the statement of cash flows that reports cash flows from transactions affecting investments in noncurrent assets called?
cash flows from investing activities
What is the section of the statement of cash flows that reports the cash transactions affecting the determination of net income called?
cash flows from operating activities
The statement of cash flows is not useful for
computing the net worth of a company
Analyze the truth of these statements: Assume a corporation issued $2,000,000 of common stock in exchange for $2,000,000 of fixed assets. When preparing the Statement of Cash Flows using the indirect method this would be recorded in the Cash Flows from Investing Activities section as a cash outflow.
false
Analyze the truth of this statement: The indirect method of reporting cash flows from operating activities focuses on the differences between net income and cash flows from operating activities, and the data needed are generally not readily available and are more costly to obtain than is the case for the direct method.
false
The Statement of Cash Flows is prepared instead of the Retained Earnings Statement.
false
The ending cash balance as determined on the Statement of Cash Flows is not the same as the Cash that is used on the Balance Sheet.
false
The statement of cash flows is not one of the basic financial statements.
false
Cash received from the issuance of a mortgage note payable would be classified as a(n)
financing activity
Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would
increase by $48,000
Which of the following is a noncash investing and financing activity?
issuance of common stock to acquire land
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a decrease in the Bonds Payable account of $75,000 for which cash of $75,000 was paid to reduce this long-term liability?
less than 75 k from financing
The order of presentation of activities on the statement of cash flows is
operating, investing, financing
Which of the following is an example of a cash flow from a financing activity?
payment of cash for dividends
Which of the following is an example of a cash flow from an investing activity?
payment of cash to purchase land
Which of the following is an example of a cash flow from financing activity?
payment of cash to repurchase common stock
Which of the following is an example of a cash flow from a financing activity?
payment of cash to retire bonds payable
Which of the following is an example of a cash flow from a financing activity?
receipt of cash for issuance of bonds payable
Which of the following is an example of a cash flow from an operating activity?
receipt of cash from customers on account
Which of the following is an example of a cash flow from an investing activity?
receipt of cash from the sale of equipment
Using the Exhibit below, assume that the balance of Merchandise Inventory was $170,000 at the beginning of the current year. Furthermore, assume that the balance of Merchandise Inventory is $150,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of merchandise inventory on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payabl
Add: Decrease in Merchandise Inventory $20,000
Using the Exhibit below, assume that the balance of Accounts Payable was $50,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Payable is $35,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts payable on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payable Decreases in ac
Deduct: Decrease in Accounts Payable of $15,000
Using the Exhibit below, assume that the balance of Accounts Receivable was $70,000 at the beginning of the current year. Furthermore, assume that the balance of Accounts Receivable is $75,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of accounts receivable on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payable Decrea
Deduct: Increase in Accounts Receivable of $5,000
Which of the following statements describes the statement of cash flows?
It reports a firm's major cash inflows and outflows for a period.
Using the Exhibit below, assume that the amount of Net Income on the Income Statement for the year was $71,800. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of net income on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payable Decreases in accrued expenses payable Increases in accrued expenses payable
Start the Cash Flow from Operating Activities section with the $71,800
Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?
discarding an asset that had been fully depreciated
Using the Exhibit below, assume that the balance of Merchandise Inventory was $170,000 at the beginning of the current year. Furthermore, assume that the balance of Merchandise Inventory is $185,000 at the end of the current year. When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of merchandise inventory on the Cash flow from operating activities section? EXHIBIT Increase (Decrease) Net Income (loss) $XXX Adjustments to reconcile net income to net cash flow from operating activities: Depreciation of fixed assets XXX Losses on disposal of assets XXX Gains on disposal of assets (XXX) Changes in current operating assets and liabilities: Increases in *noncash current operating assets (XXX) Decreases in **noncash current operating assets XXX Increases in **current operating liabilities XXX Decreases in *current operating liabilities (XXX) *SUBTRACT **ADD Increases in accounts receivable Decreases in accounts receivable Increases in inventory Decreases in inventory Increases in prepaid expenses Decreases in prepaid expenses Decreases in accounts payable Increases in accounts payabl
Deduct: Increase in Merchandise Inventory $15,000
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of an increase in the Equipment account of $150,000 which represented purchase of new equipment that required a payment of $150,000 cash?
Less the $150,000 as Cash paid for the purchase of equipment in the Cash flow from Investing Activities section of the Statement of Cash Flow.
When preparing the Statement of Cash Flow using the indirect method for the current year, which of the following statements would describe the proper presentation of a payment of $40,000 for cash dividends?
Less the $40,000 as Cash paid for dividends in the Cash flow from Financing Activities section of the Statement of Cash Flow.
