ACCt smart book 16

Investing activities are affected by

changes in long term assets

Interest expense reported on the income statement was $1,000. The beginning balance in Interest Payable was $150 and the ending balance was $50. Cash paid for interest during the period is equal to:

$1,100

Reid Company pays for insurance policies in advance, recording the expenditure to Prepaid Insurance. The balance in the prepaid insurance account at the beginning and end of the year was $1,000 and $1,200, respectively. Insurance expense during this period totaled $10,000. Using this information, what is the total cash paid for insurance during the period?

$10,200

Income taxes expense reported on the income statement was $2,500. The beginning balance in Income Taxes Payable was $1,000 and the ending balance was $1,500. Cash paid for taxes during the period is equal to:

$2,000

Accounts receivable had a debit balance of $4,000 at the beginning of the period, and a debit balance of $3,000 at the end of the period. Credit sales for the period totaled $22,000. Using this information, cash receipts for the period totaled:

$23,000

Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $10,000 at the end of the period. Cost of goods sold for the period totaled $40,000. Using this information, purchases for the period must have totaled:

$41,000

Inventory at the beginning of the period had a debit balance of $7,000, and a debit balance of $10,000 at the end of the period. Cost of goods sold for the period totaled $45,000. Using this information, purchases for the period must have totaled:

$48,000

There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.

1.compute the net increase or decrease in cash. 2. Compute net cash from or for operating activities 3.Compute net cash for investing 4Compute net cash from or for financing activties 5.Compute the net cash from all sources; then prove it by adding it to the begging cash to get ending cash

Net cash provided by operating activities was $12,000. Net cash provided by investing activities was $2,000. Net cash used in financing activities was $7,000. The cash balance at the beginning of the year was $4,000. The cash balance at the end of the year is:

11,000

At the beginning of the period, a company reported $100,000 of common stock, $10 par; and $50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000 of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $

50000

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts? (Check all that apply.)

Bonds Payable Common Stock

The information needed to prepare a statement of cash flows could come from which of the following sources? (Check all that apply.)

Cash account Income statement Comparative balance sheets

Which of the following transactions would not be classified as an operating activity on the statement of cash flows?

Cash dividends paid to shareholders

Which of the following items would not be considered an operating cash payment under the direct method of reporting the statement of cash flows?

Cash paid for dividends

Which of the following transactions would not be reported under investing activities in the statement of cash flows?

Cash paid for interest on long-term notes

Which of the following transactions would be reported under investing activities in the statement of cash flows? (Check all that apply.)

Cash paid to purchase investments in securities Cash paid to purchase plant assets

A company's cash receipts and cash payments are recorded in the cash account in its general ledger. Which of the following can be determined by analyzing the cash account? (Check all that apply.)

Cash payments for equipment Cash receipts from customers Cash payments on notes

Which of the following items could be "other cash receipts"? (Check all that apply.)

Cash received from dividends Cash received from rent Cash received from interest

Which of the following items would be reported under financing activities on the statement of cash flows? (Select all that apply).

Cash received from issuing notes payable Cash dividends paid to shareholders Cash paid to repay debt

Which of the following items would not be adjusted to net income when computing cash flows from operating activities, using the indirect method?

Cash received from sale of building

Which of the following would not be reported under financing activities on the statement of cash flows?

Cash received from sale of plant assets

Which of the following is not one of the five important steps to preparing a statement of cash flows?

Compute the net income

Which of the following items are classified as noncash investing and financing activities? (Check all that apply.)

Conversion of preferred stock to common stock Retirement of debt by issuing stock Lease of assets in a long-term lease transaction

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method? (Check all that apply.)

Depreciation expense Gain on sale of building Loss on sale of investment

_________ activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

Financing

Information about cash flows can influence decision makers in important ways. Which of the following questions could be answered by the statement of cash flows? (Check all that apply.)

How does a company spend its cash? Can the company pay its debts? Does the company have the resources to pursue opportunities?

Accountants can use a three-step process to determine cash provided (or used) by investing activities. Which of the following steps is not part of this process?

Identify adjustments to net income.

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method? (Check all that apply.)

Increase in unearned fees Increase in accounts payable

A company reported total assets at the end of the previous year of $95,000; including cash of $35,000, accounts receivable of $20,000, and inventory of $40,000. It reported total assets at the end of the current year of $110,000; including cash of $44,000; accounts receivable of $29,000, and inventory of $37,000. Compute the net increase or decrease in cash for the current year.

Increase of $9,000

To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:

Interest Payable

_______ activities include those transactions and events such as lending and collecting money for notes receivable and cash receipts from sale of short-term investments.

Investing

Both the direct and indirect methods of operating activities report which of the following items?

Net cash inflows (outflows)

The presentation of the _____ section is shown differently depending on if the statement of cash flows is reported using the direct or indirect method.

Operating

A company's cash receipts and cash payments are recorded in the cash account in its general ledger. Identify which of the following could not be determined by analyzing the cash account?

Payment for land by issuing a note

Identify which of the following items is a noncash investing and financing activity that must be reported in a note to the statement of cash flows. (Check all that apply.)

Retirement of debt by issuing stock Lease of an asset in a long-term lease transaction

Which of the following items would not be a correct adjustment to net income to arrive at cash flows from operating activities, using the indirect method?

Subtract increase in taxes payable

Which of the following statements about the statement of cash flows are correct? (Check all that apply.)

The purpose is to report cash receipts and cash payments during a period. It details the sources and uses of cash.

True or false: The direct method of reporting operating cash flows begins with revenue and adjusts for changes in related balance sheet accounts.

True

Which of the following questions could not be answered from the statement of cash flows?

What are the earnings-per-share of common stock?

Information on the statement of cash flows helps users answer all of the following questions except:

Why did the company invest in long-term assets?

Dividends paid during a period totaled $5,000. This will be reported on the statement of cash flows as:

a decrease in the financing activities section

Sheldon Company's balance in prepaid insurance at the beginning and end of the year was $2,500 and $1,000, respectively. This will be reported on the statement of cash flows using the indirect method as:

a decrease of $1,500 which will be added to net income

Emerald Jewelery Store had a credit balance in interest payable of $200 at the beginning of the period, and a credit balance of $50 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

a decrease of $150 which will be subtracted from net income

Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $7,000 at the end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:

a decrease of $2,000 which will be added to net income

Retained earnings at the beginning and end of the year totaled $25,000 and $75,000, respectively. Net income reported during the period was $70,000. Using this information, dividends paid will be reported as _____ on the statement of cash flows.

a decrease of $20,000 in the financing activities section.

Accounts receivable had a debit balance of $10,000 at the beginning of the period, and a debit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

a decrease of $4,000 which will be added to net income

LiveLife Company had a credit balance of $10,000 in accounts payable at the beginning of the period, and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

a decrease of $4,000 which will be subtracted from net income

The statement of cash flows reports noncash investing and financing transactions in

a note or separate schedule

The Coffee Cup Company had a credit balance of $500 in interest payable at the beginning of the period, and a credit balance of $600 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

an increase of $100 which will be added to net income

Red Co.'s beginning Common Stock balance was $110,000 and their ending Common Stock balance was $125,000. This will be reported as _____ in the statement of cash flows.

an increase of $15,000 in the financing activities section

Sunshine Company had a credit balance of $4,000 in accounts payable at the beginning of the period, and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

an increase of $2,000 which will be added to net income

Accounts receivable had a debit balance of $4,000 at the beginning of the period, and a debit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

an increase of $2,000 which will be subtracted from net income

Reid Company's balance in prepaid insurance at the beginning and end of the year was $1,000 and $1,200, respectively. This will be reported on the statement of cash flows using the indirect method as:

an increase of $200 which will be subtracted from net income

Inventory at the beginning of the period had a debit balance of $7,000, and a debit balance of $10,000 at the end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:

an increase of $3,000 which will be subtracted from net income

Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000. This will be reported as _____ on the statement of cash flows.

an increase of $5,000 in the cash flows from financing activities section

When creating a statement of cash flows using the direct method, loss on sale of assets is:

never reported

The statement of cash flows explains the difference between beginning and ending balances of cash and cash equivalents. A cash equivalent must exhibit all of the following criteria, except:

be held at a local institution.

The three-step analysis to determine cash provided or used by investing activities includes:

determining the cash effects using T-accounts and reconstructed entries reporting the cash flow effects identifying changes in investing-related accounts

activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

financing

If rent receivable decreases during the period, cash received from renters is _____ rent revenue reported on the income statement.

greater than

The three-step process to determine cash provided or used by financing activities includes all of the following steps except:

identify an increase or decrease in cash.

When analyzing the noncash accounts to assist in preparing the statement of cash flows, the changes in liabilities, equity and noncash asset accounts are analyzed along with the

income statement accounts

The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items that do not affect cash.

indirect

A net cash (inflow/outflow) ? occurs when the receipt's in a category exceed the payment

inflow

Collecting money for notes receivable would be reported on the statement of cash flows as a(n)

investing

The format of a statement of cash flows includes reporting cash flows from three activities including:

investing financing operating

A(n) _______ occurs when the receipts in a category exceed the payments.

net cash inflow

In addition to analyzing the cash account, a second approach to preparing the statement of cash flows is to explain changes in cash by analyzing changes in

noncash asset accounts equity accounts liability accounts

When creating a statement of cash flows using the direct method, depreciation is:

not reported

A net cash ______ occurs when the payments in a category exceed the receipts.

outflow

The three-step analysis to determine cash provided or used by financing activities includes:

reporting the cash flow effects identifying changes in financing-related accounts determine the cash effects using T-accounts and reconstructed entries

If all sales are for cash, the amount received from customers will equal the reported on the income statement.

sales

The formula used to compute the cash received from customers under the direct method is:

sales plus decrease in accounts receivable OR minus increase in accounts receivable

The information needed to prepare a statement of cash flows could come from all of the following sources, except the:

statement of retained earnings.

The statement of cash flows does not report the following transactions

transactions between cash and cash equivalents

Current liabilities _____ operations, including short-term notes payable and dividends payable are categorized as financing activities.

unrelated to