Accounting Chapter 11

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?

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

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

cash

Neue Inc. reports sales revenue of $200,000; in addition, its accounts receivable balance decreased by $15,000. Neue's cash flows from sales were:

$215,000

What is the first step in preparing a statement of cash flows

calculate the net cash flows from operating activities

When prepaid accounts increase, it indicates the company has paid ______ cash than it recorded as operating expenses.

more

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ____ ____

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($200,000 + 50,000-10,000)

which of the following 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 payable -accounts receivable -notes receivable -bonds payable -inventory

-accounts payable -accounts receivable -inventory

which of the following items are classified as cash inflows from operating activities on the statement of cash flows? -sale of a building -payment of utilities -collection from customers -collection of interest -borrowing from bank

-collection from customers -collection of interest

If interest payable increases, which of the following is true? -Interest paid is greater than the interest expense on the income statement -interest paid is lower than the interest expense on the income statement -interest paid is equal to interest expense on the income statement

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

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

True

Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be

added to net income

what is the final step in preparing a statement of cash flows

combine operating, investing, and financing activities

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

An increase in accounts receivable will result in a(n)_____ in cash from sales revenue when using the direct method to determine cash flows from operations

decrease

Using the indirect method to report cash flows from operating activities, a(n)______ in the accounts receivable from the prior period is added to net income in the _____ activities section of the statement of cash flows

decrease; operating

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

detail and presentation only

The ______ method prepares the operating actives 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

cash flows from ____ activities include both inflows and outflows of cash from the external funding of a business

financing

cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as_____ activities

financing

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

increase

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

investing

the purchase and sale of long-term assets and current investments are classified as

investing activities

An increase is accounts receivable indicates that the company collected_____ cash than the amount of_____

less; sales revenue

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

long-term liability and stockholders' equity accounts

the starting point for preparing the operating activities section using the indirect method is:

net income

depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n)_____ 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

cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

operating activities

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

prepaid insurance

the statement of cash flows provides summary information about cash ____ and cash ____ during the year

receipts; payments

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows

In a statement of cash flows, the sum of cash inflows and outflows is equal to

the change in the cash balance

The amount of net cash flows 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

which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows? -depreciation expense originally reduced net income, but it is not classified as an operating activity -depreciation expense originally reduced net income, but it actually represents a cash inflow for the company -depreciation expense is not included in net income, so its cash effect must be accounted for separately -depreciation expense originally reduced net income, bit its a noncash expense

depreciation expense originally reduced net income, but its a noncash expense

Issuing stock to owners is classified as a(n)_____ activity

financing

Noncash items, nonoperating 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

the return on assets is calculated by dividing ____ by _____

net income; average total assets

Adjustments to net income in calculating operating cash flows include:

-noncash items -changes in current assets and current liabilities -nonoperating items

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

in preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for

-gain from sale of asset -depreciation expense -loss from sale of asset

the two types of adjustments to net income for the indirect method are adjustments for

-components of net income that do not affect cash -changes in operating assets and liabilities during the period that affected cash and were not in net income

which of the following are common noncash items requiring adjustments to net income under the indirect method? -salaries expense -depreciation expense -insurance expense -prepaid expense -amortization expense

-depreciation expense -amortization expense

which of the following are nonoperating items that require adjustments under the indirect method? -gains on the sale of long-term assets -depreciation expense -amortization expense -losses on the sale of long-term assets

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

The three classifications on the statement of cash flows

-operating activities -financing activities -investing activities

Kleister Company issues bonds for $100 million and repays a long-term notes payable of $10 million. The company also sells its own common shares for $12 million and pays cash dividends of $5 million. Which of the following are cash outflows from financing activities?

-payment of cash dividends -repayment of notes payable

which of the following items are classified as cash outflows from operating activities on the statement of cash flows? -payment on account -issuance of bonds -payment of salaries -purchase of building -purchase of supplies on account

-payment on account -payment of salaries

Which of the following are cash outflows from investing activities? -repayment of long-term debt -purchase of building -purchase of land -payment of income taxes -purchase of long-term investments

-purchase of building -purchase of land -purchase of long-term investments

which of the following cash transactions are classified as cash inflows from investing activities? -sale of building -sale of equipment -sale of investments -borrowing from bank -sale of merchandise inventory

-sale of building -sale of equipment -sale of investments

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of all operating transactions that result in either a debit or a credit to cash?

Direct

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

When accounts receivable decrease

net sales are less than cash receipts from customers

depreciation expense and amortization expense represent _____ items requiring adjustments to net income under the indirect method

noncash

changes to current assets and current liabilities require adjustment of net income under the indirect method because

related cash may be higher or lower then the accrued amount included in net income

the ratio that is calculated by dividing net income by average total assets is referred to as:

return on assets