ACC 221 Chapter 21B Smartbook LO 5-9

During the year, Munster Company sold common stock for $50 million, paid dividends of $5 million, and repaid its bonds payable with a face amount of $30 million. In its statement of cash flows, Munster will report net cash flows from financing activities of: $15 million $45 million $20 million $50 million

$15 million Reason: $(50-5-30)million

Which of the following transactions is reported on the statement of cash flows as a significant noncash investing and financing activity? Proceeds are received from the sale of accounts receivable A valuation allowance on a deferred tax asset is recognized Stock dividends are declared and distributed Common stock is issued in exchange for services

Common stock is issued in exchange for services

Steiner Corp. purchases a new machine for $120,000. The company makes a $20,000 downpayment and signs a promissory note for the difference. Which of the following statements is correct regarding this transaction and the classification in a statement of cash flows? Financing cash outflow is $100,000. Investing cash outflow is $120,000. Investing cash outflow is $20,000.

Investing cash outflow is $20,000.

Steiner Corp. purchases a new machine for $120,000. The company makes a $20,000 downpayment and signs a promissory note for the difference. Which of the following statements is correct regarding this transaction and the classification in a statement of cash flows? Investing cash outflow is $20,000. Financing cash outflow is $100,000. Investing cash outflow is $120,000.

Investing cash outflow is $20,000.

Combined financing and investing transactions that, if they had been structured as two separate transactions, would have involved cash are reported in the statement of cash flows as Noncash investing and financing activities Investing activities Financing activities

Noncash investing and financing activities

Which of the following are classified as cash outflows from financing activities? (Select all that apply.) Principal repayment on notes payable Payment of interest on notes payable Purchase of treasury stock Payment of dividends

Principal repayment on notes payable Purchase of treasury stock Payment of dividends

Which of the following would result in a cash inflow from investing activities? Sale of inventory in excess of cost. Sale of the company's common stock for cash. Sale of a machine for cash.

Sale of a machine for cash.

Gerta Company shows salaries expense of $30,000 in its income statement. During the current year, the balance of its salaries payable account increased by $4,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $4,000 should be subtracted from net income. ignored. added to net income.

added to net income.

Kunzen Company shows salaries expense of $15,000 in its income statement. During the current year, the balance of its salaries payable account increased by $2,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $2,000 should be added to net income. ignored. subtracted from net income.

added to net income.

Which of the following represent objectives of preparing a statement of cash flows? (Select all that apply.) classifying the transactions and events correctly determining the correct cash balance identifying all operating, investing, and financing events and transactions adhering to a proper statement format

classifying the transactions and events correctly identifying all operating, investing, and financing events and transactions adhering to a proper statement format

Which of the following transactions must be reported on the statement of cash flows as noncash investing and financing activities? exchange of the company's common stock for a piece of land purchase of inventory on account recording depreciation on equipment acquired by signing a promissory note

exchange of the company's common stock for a piece of land

The purchase and sale of cash equivalents typically are _____ on a statement of cash flows reported as operating activity reported as financing activity reported as investing activity not reported

not reported

Which of the following sources commonly provide funding for investing activities? (Select all that apply.) operating activities continuing operations financing activities

operating activities financing activities

Noncash investing and financing activities can be reported on the same _____ as the statement of cash flows or in the _____ to the financial statements.

page disclosure notes

Which of the following transactions would be classified as financing activities in the statement of cash flows? (Select all that apply.) purchase of another company's common stock purchase of another company's bonds payment of cash dividends repayment of a long-term loan

payment of cash dividends repayment of a long-term loan

An important tool that can be used to ensure that no reportable activities are inadvertently overlooked is a: general ledger spreadsheet chart of accounts t-account

spreadsheet

During the year, Munster Company sold common stock for $50 million, paid dividends of $5 million, and repaid its bonds payable with a face amount of $30 million. In its statement of cash flows, Munster will report net cash flows from financing activities of: $20 million $50 million $45 million $15 million

$15 million Reason: $(50-5-30)million

Munster Company reports the following net cash in its statement of cash flows: net inflow from operating activities: $200; net outflow from investing activities: $300; net outflow from financing activities: $50. The ending balance in cash is $20; the beginning balance must have been $150. $170. $190. $210.

$170. Reason: 20 - 200 + 300 + 50

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 $30. $190. $110. $60.

$190. Reason: 80 + 200 - 220 + 130

During the current period, Kunze Corp. disposed of old equipment and received $2,000 cash; purchased new equipment for $20,000 cash; 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) $18,500 net inflow. $21,000 net inflow. $18,500 net outflow. $21,000 net outflow.

$21,000 net outflow. Reason: 2,000 - 20,000 - 3,000

During the current period, Schmidt Corp. disposed of old equipment and received $1,000 cash; purchased new equipment for $10,000 cash; 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) $7,000 net outflow $6,200 net inflow $8,700 net outflow $6,200 net outflow

$6,200 net outflow Reason: 1,000 - 10,000 + 2,800

Which of the following transactions is reported on the statement of cash flows as a significant noncash investing and financing activity? Stock dividends are declared and distributed Common stock is issued in exchange for services Proceeds are received from the sale of accounts receivable A valuation allowance on a deferred tax asset is recognized

Common stock is issued in exchange for services

Which of the following transactions must be reported on the statement of cash flows as noncash investing and financing activities? Recording depreciation on equipment acquired by signing a promissory note. Declaring a cash dividend. Providing services on account. Converting convertible bonds to common stock.

Converting convertible bonds to common stock.

Which of the following statements regarding reporting of cash from investing and cash from financing activities is correct under the direct and the indirect method? More detail is provided under the indirect method. They are the same More detail is provided under the direct method.

They are the same

Steiner Corp. purchases a new machine for $120,000. The company makes a $20,000 downpayment and signs a promissory note for the difference. This transaction consists of (Select all that apply.) a cash outflow from financing activity. a noncash investing and financing activity. a cash outflow from investing activity.

a noncash investing and financing activity. a cash outflow from investing activity.

Under the indirect method of deriving net cash flows from operating activities, decreases in assets relating to operating activities must be ignored. added to net income. subtracted from net income.

added to net income.

When preparing the statement of cash flows using the indirect method, depreciation expense and losses are ignored. subtracted from net income. added to net income.

added to net income.

Michal Corp.'s land account decreased by $250,000. No specific information regarding this decrease is available. In its statement of cash flows, Michael should report cash outflows from operating activities of $250,000. cash outflows from investing activities of $250,000. cash inflows from operating activities of $250,000. cash inflows from investing activities of $250,000.

cash inflows from investing activities of $250,000.

Carmen Company shows salaries expense of $25,000 in its income statement. During the current year, the balance of its salaries payable account decreased by $3,000. If the company uses the indirect method of presenting the operating activities section of the statement of cash flows, the change of $3,000 should be subtracted from net income. ignored. added to net income.

subtracted from net income.

Under the indirect method of deriving net cash flows from operating activities, decreases in liabilities relating to operating activities must be added to net income. subtracted from net income. ignored.

subtracted from net income.

Under the indirect method of deriving net cash flows from operating activities, increases in assets relating to operating activities must be subtracted from net income. ignored. added to net income.

subtracted from net income.

Under which method(s) will a reconciliation of net income to cash from operating activities be presented? (Select all that apply.) Both the direct and the indirect method The indirect method only The direct method only

Both the direct and the indirect method

Under which method(s) will a reconciliation of net income to cash from operating activities be presented? (Select all that apply.) The indirect method only Both the direct and the indirect method The direct method only

Both the direct and the indirect method

Which of the following transactions is not reported on the statement of cash flows as a significant investing and financing activity? Land is purchased and a mortgage note signed Stock dividends are declared and distributed Equipment is exchanged for a service Machinery is acquired under a long-term lease agreement

Stock dividends are declared and distributed

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also repurchases its own shares for $12 million and issues stock dividends with a market value of $5 million. Net cash flow from financing activities will be $73 million net inflow. $73 million net outflow. $78 million net outflow. $78 million net inflow.

$78 million net inflow. Reason: 100 million - 10million - 12 million (The dividends are stock dividends which are not paid in cash)

Which of the following methods of preparing the statement of cash flows is (are) acceptable under U.S. GAAP? The direct method only The indirect method only Both the direct and the indirect method

Both the direct and the indirect method

Which sections are identical under the direct and indirect method of the statement of cash flows? (Select all that apply.) Cash from financing activities Cash from operating activities Cash from investing activities

Cash from financing activities Cash from investing activities

Which of the following may justify the difference in the rule for classifying interest paid and dividends paid? Interest is paid more frequently than dividends. Interest is tax-deductible, while dividends are not tax-deductible. Interest expense reduces net income, while dividends are a reduction of equity.

Interest expense reduces net income, while dividends are a reduction of equity.

Which of the following are classified as cash outflows from financing activities? (Select all that apply.) Purchase of treasury stock Principal repayment on notes payable Payment of dividends Payment of interest on notes payable

Purchase of treasury stock Principal repayment on notes payable Payment of dividends

Under which method of preparing a statement of cash flows will a reconciliation between net income and cash from operating activities be shown on a separate schedule? The direct method only Both the direct and the indirect method The indirect method only

The direct method only

Under which method of preparing a statement of cash flows will a reconciliation between net income and cash from operating activities be shown on a separate schedule? The indirect method only Both the direct and the indirect method The direct method only

The direct method only

Which of the following methods of preparing the statement of cash flows is (are) acceptable under U.S. GAAP? (Select all that apply.) The indirect method The working capital method The direct method

The indirect method The direct method

Kester Corp.'s land account increased by $140,000. No specific information regarding this increase is available. In its statement of cash flows, Kester should report cash inflows from operating activities of $140,000. cash inflows from investing activities of $140,000. cash outflows from investing activities of $140,000.

cash outflows from investing activities of $140,000.

Which of the following represent objectives of preparing a statement of cash flows? (Select all that apply.) classifying the transactions and events correctly adhering to a proper statement format determining the correct cash balance identifying all operating, investing, and financing events and transactions

classifying the transactions and events correctly adhering to a proper statement format identifying all operating, investing, and financing events and transactions

Amounts reported in the income statement usually are ______ the cash effects of the items reported. less than identical to greater than different from

different from

Financing activities are inflows and outflows of cash resulting from the external financing of a business. internal financing of a business.

external financing of a business.

Investing activities, such as the purchase of new machinery, may be financed by the company's primary operating activities, or by _____ sources.

external, outside, or exterior

Inflows and outflows of cash resulting from the external funding of a business are cash flows from _____ activities.

financing or finance

Noncash investing and financing activities can be reported (Select all that apply.) in the notes to the financial statements on the face of statement of cash flows on the balance sheet

in the notes to the financial statements on the face of statement of cash flows

Cash flows from _____ activities are both outflows and inflows of cash caused by the acquisition and disposal of long-term assets.

investing

Which of the following are classified as cash inflows from financing activities? (Select all that apply.) issuance of bonds dividends received from investment sale of common stock treasury stock purchase

issuance of bonds sale of common stock

An important advantage of using a spreadsheet to analyze transactions that may need to be reported in the statement of cash flows is to make sure that no reportable activity is overlooked. make sure that the statement of cash flows balances. simplify the statement of cash flows.

make sure that no reportable activity is overlooked.

The objective in preparing the statement of cash flows is to identify all transactions and events that represent ______, and ______ ______ activities and to classify and list them in the proper format.

operating investing financing

Common types of cash outflows from investing activities include (Select all that apply.) payments to acquire nontrade receivables. purchases of property, plant, and equipment. purchases of investment securities. payment of trade payables.

payments to acquire nontrade receivables. purchases of property, plant, and equipment. purchases of investment securities.

Which of the following transactions that involve cash flows typically is (are) not reported on a SCF? sale of short-term investments sale of cash equivalents sale of machinery

sale of cash equivalents

Common types of cash inflows from investing activities include (Select all that apply.) sale of property, plant, and equipment. collection of trade receivables. sale of investment securities. collection of nontrade receivables.

sale of property, plant, and equipment. sale of investment securities. collection of nontrade receivables.

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also repurchases its own shares for $12 million and issues stock dividends with a market value of $5 million. Net cash flow from financing activities will be $78 million net outflow. $73 million net outflow. $73 million net inflow. $78 million net inflow.

$78 million net inflow. Reason: 100 million - 10million - 12 million (The dividends are stock dividends which are not paid in cash)

Which of the following transactions is not reported on the statement of cash flows as a significant investing and financing activity? Machinery is acquired under a long-term lease agreement Equipment is exchanged for a service Stock dividends are declared and distributed Land is purchased and a mortgage note signed

Stock dividends are declared and distributed

Margaret is analyzing the current year income statement and the comparative balance sheet in order to prepare the statement of cash flows. She should expect the operating cash flows to be ______ the amounts reported in the income statement. greater than the same as smaller than different from

different from

Transactions that do not involve cash, but that result in significant investing or significant financing activities, are classified as investing activities classified as financing activities disclosed as noncash investing and financing activities

disclosed as noncash investing and financing activities

Under the indirect method of preparing the statement of cash flows, depreciation expense and losses are added back to net income because they (Select all that apply.) increase the cash balance. provide an inflow of cash. do not require an outflow of cash. were subtracted in deriving net income.

do not require an outflow of cash. were subtracted in deriving net income.

Cash received from the sale of common and preferred stock and the issuance of bonds and other debt securities are reported on the statement of cash flows as _____ activities.

financing, financial, or finance

Properly match each cash flow with the correct classification in the statement of cash flows. Interest paid Dividends paid Operating activity Financing activity

Interest paid - Operating activity Dividends paid - Financing activity