ACCT 2301 Ch 14

One of the purposes of the statement of cash flows is to​ ________.

predict the ability of a company to pay debts and dividends

The purposes of the statement of cash flows are to predict future cash flows. determine ability to pay debts and dividends. evaluate management decisions. All of the above

All of the above

Which is a purpose of the Statement of Cash Flows? All of the answers are purposes of the statement of cash flows. To evaluate management decisions To predict ability to pay debt and dividends To predict future cash flows

All of the answers are purposes of the statement of cash flows.

Which of the following does NOT appear on the statement of cash flows when prepared by indirect method? Cash collections from customers Depreciation expense Net income Loss on sale of land

Cash collections from customers

Carson Company has the following data: Cost of Goods Sold $116,000 Beginning Merchandise Inventory 55,000 Ending Merchandise Inventory 45,000 Beginning Accounts Payable 51,000 Ending Accounts Payable 31,000 What is cash paid for merchandise?

Cash paid for merchandise inventory = Cost of Goods Sold - Beginning Merchandise Inventory + Ending Merchandise Inventory + Beginning Accounts Payable - Ending Accounts Payable. In this case, $116,000 - $55,000 + $45,000 + $51,000 - $31,000 = $126,000

Smith Company has the following information on the financial statements: Accounts Receivable at beginning of the year $50,000 Accounts Receivable at end of the year 30,000 Revenues for the year 180,000 Salaries Payable 2,000 Bonds Payable 50,000 Sales Tax Payable 2,000 What is the amount of cash collected from customers?

Cash receipts from customers = Sales Revenue + Beginning Accounts Receivable - Ending Accounts Receivable. Using the data from this problem, $180,000 + 50,000 - 30,000 = $200,000.

If merchandise inventory decrease during the year, which of the following is correct when using a spreadsheet to complete the statement of cash flows by the indirect method?

Decrease in a current asset would be a debit.

Beta Electronics reported the following data for the year ended December 31, 2019: Cash receipt from sale of equipment $30,000 Depreciation Expense 12,000 Cash payment of Dividends 5,000 Cash receipt from issuance of Common Stock 22,000 Net Income 40,000 Cash purchase of Land 25,000 Increase in Current Liabilities 10,000 Decrease in Current Assets other than Cash 8,000 What is the cash flow from financing activities?

Financing activities include $22,000 increase in cash flow from the sale of common stock - decrease in cash flow of $5,000 from payment of dividends = $17,000. The other items are operating or investing activities.

Beta Electronics expects net cash flow from operating activities to be $100,000, and the company plans cash purchases of equipment of $55,000 and repurchases of stock of $4,000. What is Beta's free cash flow?

Free cash flow = Net cash provided by operating activities - Cash payments planned for investments in long term assets - Cash dividends. So, for this problem it would be $100,000 cash provided by operating activities - $55,000 cash payment for equipment = $45,000.

Beta Electronics reports the following data for the year ended December 31, 2019: Cash receipt from sale of equipment $30,000 Depreciation Expense 12,000 Cash payment of Dividends 5,000 Cash receipt from issuance of Common Stock 22,000 Net Income 40,000 Cash purchase of Land 25,000 Increase in Current Liabilities 10,000 Decrease in Current Assets other than Cash 8,000 What is the cash flow from operating activities?

Included in the operating activities section would be net income of $40,000 + depreciation of $12,000 + increase in current liabilities of $10,000 + decrease in current assets of $8,000 = $70,000. The other items are investing or financing activities.

Boston Corporation received $70,000 cash from issuance of notes payable. How is this to be reported on the statement of cash flows?

Increase in financing activities

Beta Electronics reported the following data for the year ended December 31, 2019: Cash receipt from sale of equipment $30,000 Depreciation Expense 12,000 Cash payment of Dividends 5,000 Cash receipt from issuance of Common Stock 22,000 Net Income 40,000 Cash purchase of Land 25,000 Increase in Current Liabilities 10,000 Decrease in Current Assets other than Cash 8,000 What is the cash flow from investing activities?

Investing activities would include $30,000 increase in cash flow from sale of equipment - $25,000 cash paid for purchase of land = $5,000. The other items are operating or financing activities.

Baker Electronics reported the following data for the year ended December 31, 2019: Cash receipt from sale of equipment $40,000 Depreciation Expense 15,000 Cash payment of Dividends 7,000 Cash receipt from issuance of Common Stock 21,000 Net Income 50,000 Cash purchase of Land 20,000 Increase in Current Liabilities 11,000 Decrease in Current Assets other than Cash 10,000 What is the cash flow from investing activities?

Investing activities would include $40,000 increase in cash flow from sale of equipment - $20,000 cash paid for purchase of land = $20,000. The other items are operating or financing activities.

Beta Electronics issued common stock of $30,000 to pay off long-term notes payable of $30,000. In which section should this be recorded?

Non-cash investing and financing activities

Which of the following is an example of a financing activity on the statement of cash flows? Payment of dividends Payment of cash for a utility expense Purchase of land with cash Receiving cash for service completed

Payment of dividends

Which is NOT one of the three basic types of cash flow activities? Retained earnings Operating Investing Financing

Retained earnings

Which of the following is an example of an investing activity on the statement of cash flows? Sold land for cash Purchased land with a mortgage payable Cash revenues received Revenues earned on account

Sold land for cash

Beta Electronics has a plant asset that cost $45,000 and has accumulated depreciation of $10,000. The plant asset is sold for cash at a $1,000 gain. How much increase in cash flow should Beta report for investing activities?

The book value is $35,000 (calculated by $45,000 cost - $10,000 accumulated depreciation). If the plant asset sold at a $1,000 gain, it sold at $36,000 (calculated by $35,000 book value + $1,000 gain). Therefore, since it sold for cash, cash flows from investing activities increases by $36,000.

Regarding the use of a spreadsheet for the preparation of the statement of cash​ flows, which of the following statements is​ incorrect? The spreadsheet starts with the beginning balance sheet and concludes with the ending balance sheet. The spreadsheet cannot be used for the direct method. When companies face complex​ situations, a spreadsheet can help in preparing the statement of cash flows. Accountants can prepare the statement of cash flows directly from the lower part of the spreadsheet.

The spreadsheet cannot be used for the direct method.

Regarding the use of a spreadsheet for the preparation of the statement of cash​ flows, which of the following statements is​ true? The spreadsheet can only be used if the indirect method for operating activities is also used. The T - account approach works well for all companies. The spreadsheet is needed when companies face complex situations. The statement of cash flows cannot be prepared directly from the spreadsheet because additional information is needed.

The spreadsheet is needed when companies face complex situations.

Beta Electronics the following data for the year ended December 31, 2019: Beginning Cash balance $14,000 Cash flows provided by operating activities 12,000 Cash flows used by investing activities (8,000) Cash flows provided by financing activities 9,000 What is the ending cash balance?

The statement of cash flows calculates the net increase or decrease in cash by adding net cash provided from operating, investing, and financing activities to the beginning cash balance. The net increase in cash is (12,000 - 8,000 + 9,000) = $13,000. This is added to the beginning cash balance of $14,000 to arrive at ending cash of $27,000.

Beta Electronics earned net income of $20,000. Included in the net income was $2,000 of depreciation expense. Current assets increased by $2,000 and current liabilities increased by 1,000. How much cash is provided by operating activities?

To calculate cash flows from operating activities take the $20,000 in net income, add back the $2,000 in depreciation expense, deduct the $2,000 increase in current assets, and add the $1,000 increase in current liabilities. So (20,000 + 2,000 - 2,000 +1,000) = $21,000.

Beta Electronics earned net income of $29,000. Included in the net income was $3,000 of depreciation expense. Current assets decreased by $2,000 and current liabilities increased by 4,000. There was also a loss on the sale of a plant asset of $8,000. How much cash is provided by operating activities?

To calculate cash flows from operating activities take the $29,000 in net income, add back the $3,000 in depreciation expense, add the $2,000 decrease in current assets, add the $4,000 increase in current liabilities, and add in the loss of $8,000 on the sale of the plant asset. So (29,000 + 3,000 + 2,000 +4,000 + 8,000) = $46,000.

The payment of interest on a loan is considered a​ ________ on a statement of cash flows prepared using the direct method.

cash outflow for operating activities

Cash flows are defined as __________.

cash received by the business and the cash payments made by the business

Operating activities are most closely related to

current assets and current liabilities.

The statement of cash flows helps users​ ________.

evaluate management decisions

The two formats of the operating activities cash flow are __________.

indirect and direct

Which of the following sections of the statement of cash flows include activities that create revenue and expenses of the​ business? the financing activities section the investing activities section the operating activities section the​ non-cash investing and financing section

the operating activities section

The main categories of cash flow activities on the statement of cash flows are

​operating, investing, and financing.