Chapter 12 Post-work Homework

Sales for the year totals $130,000. Beginning accounts receivable is $12,000, and ending accounts receivable totals $15,000. Cost of goods sold is $82,000. How much are cash receipts from customers? -$133,000 -$127,000 -$142,000 -$130,000

$127,000 (The increase in accounts receivable means that revenues are greater than cash receipts from customers. The change in accounts receivable should be subtracted from sales revenue since it represents cash that is included in sales but not collected. Cash collections = $130,000 - ($15,000 - $12,000) = $127,000.)

Kingbird, Inc. had the following transactions during 2017: 1. Issued $317500 of par value common stock for cash. 2. Recorded and paid wages expense of $152400. 3. Acquired land by issuing common stock of par value $127000. 4. Declared and paid a cash dividend of $25400. 5. Sold a long-term investment (cost $7620) for cash of $7620. 6. Recorded cash sales of $1016000. 7. Bought inventory for cash of $406400. 8. Acquired an investment in Zynga stock for cash of $53340. 9. Converted bonds payable to common stock in the amount of $1270000. 10. Repaid a 6-year note payable in the amount of $558800. What is the net cash provided by financing activities? -$(266,700). -$1,536,700. -$292,100. -$1,003,300.

$(266,700) ($317500 - $25400 - $558800 = ($266700)(Cash. st. - iss. div. paid. - N/P. paid))

The following are data concerning cash received or paid from various transactions for Orange Peels Corporation: Sale of land $100,000 Sale of equipment $50,000 Issuance of common stock $70,000 Purchase of equipment $30,000 Payment of cash dividends $60,000 How much is net cash provided by investing activities? -$190,000 -$150,000 -$120,000 -$130,000

$120,000 (Investing activities include acquiring and disposing of investment and property, plant, and equipment, and lending money and collecting loans. The net cash provided by investing activities is $100,000 + $50,000 - $30,000 = $120,000. Issuance of common stock and the payment of dividends are financing activities.)

The following data are available for Something Strange: Issuance of bonds payable $100,000 Sale of investment. $50,000 Issuance of common stock $60,000 Payment of cash dividends $30,000 How much is net cash provided by financing activities? -$160,000 -$90,000 -$130,000 -$190,000

$130,000 (Financing activities deal with obtaining cash from issuing debt and repaying the amounts borrowed, and obtaining cash from stockholders, repurchasing shares, and paying dividends:$100,000 + $60,000 - $30,000 = $130,000.)

Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, how much is net cash provided by operations? -$124,000 -$116,000 -$112,000 -$136,000

$136,000 (Net cash provided by operating activities is computed by adjusting net income for the changes in the three current asset/current liability accounts listed. An increase in accounts payable and a decrease in inventory are added to net income and an increase in accounts receivable is subtracted from net income. The result is: $132,000 + $10,000 + $6,000 - $12,000 = $136,000.)

Taylor Enterprise sold a piece of equipment for $3,000. The original cost was $15,000 and the accumulated depreciation prior to the sale was $10,000. What amount, if any, would appear in the operating activities section of the statement of cash flows using the indirect method? -$0 -$15,000 -$3,000 -$2,000

$2,000 (Since the book value was $5,000 ($15,000 - $10,000) and the sale price was $3,000, a loss of $2,000 would appear on the income statement. The loss is added to net income in the operating activities section.)

The following data are available for Allen Clapp Corporation: Net income. $200,000 Depreciation expense. $40,000 Dividends paid $60,000 Gain on sale of land $10,000 Decrease in accounts receivable $20,000 Decrease in accounts payable $30,000 How much is cash provided operating activities using the indirect method? -$280,000 -$220,000 -$160,000 -$240,000

$220,000 (Net cash provided by operating activities is computed by adjusting net income for the changes in the two current asset/current liability accounts listed. The decrease in accounts receivable is added to net income and the decrease in accounts payable is subtracted from net income. Noncash amounts that are part of income must be removed from net income as well. Depreciation expense is added back and the gain on the sale of land is subtracted from net income ($200,000 + $40,000 - $10,000 + $20,000 - $30,000 = $220,000).)

Accounts receivable arising from sales to customers amounted to $44,000 and $51,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $283,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is -$283,000 -$290,000 -$327,000 -$276,000

$276,000 ($283000 + ($44000 - $51000) = $276000(Net inc. + (beg. A/R - end. A/R)))

Metlock, Inc. reported net income of $264,000 for the year. During the year, accounts receivable increased by $19,000, accounts payable decreased by $8,000 and depreciation expense of $41,000 was recorded. Net cash provided by operating activities for the year is -$234,000 -$278,000 -$264,000 -$250,000

$278,000 ($264000 - $19000 - $8000 + $41000 = $278000(Net inc - A/R inc. - A/P dec.+ dep. exp.))

Concord Corporation had the following transactions during 2017: 1. Issued $200,000 of par value common stock for cash. 2. Recorded and paid wages expense of $96,000. 3. Acquired land by issuing common stock of par value $80,000. 4. Declared and paid a cash dividend of $16,000. 5. Sold a. long-term investment (cost $4,800) for cash of $4,800. 6. Recorded cash sales of $64,000. 7. Bought inventory for cash of $256,000. 8. Acquired an investment in Zynga stock for cash of $33,600. 9. Converted bonds payable to common stock in the amount of $800,000. 10. Repaid a 6-year note payable in the amount of $352,000. What is the net cash provided by operating activities? -$488,000 -$288,000 -$464,000 -$384,000

$288,800 ($640000 - $256000 - $96000 = $288000(Cash Sal. - inv. pur.- wag. payable))

Land costing $137500 was sold for $390500 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land? -$390,500. -$170,500. -$341,000. -$253,000.

$390,500 ($390500(Land sell. pr.))

Simpson Inc. reported $100,000 provided by operating activities. The company invested $30,000 in production equipment and it paid $10,000 in dividends. How much is its free cash flow? -$60,000 -$140,000 -$70,000 -$100,000

$60,000 (Free cash flow is cash remaining from operations after adjustments for capital expenditures and dividends ($100,000 - $30,000 - $10,000 = $60,000).)

Sheridan Company purchased treasury stock with a cost of $45,100 during 2017. During the year, the company paid dividends of $16,400 and issued bonds payable for proceeds of $718,300. Cash flows from financing activities for 2017 total -$747,000 net cash inflow. -$701,900 net cash inflow. -$61,500 net cash outflow. -$656,800 net cash inflow.

$656,800 net cash inflow. ($718300 - $45100 - $16400 = $656800(Bond pay. iss. - trea. st. pur. - div. paid))

Marigold Corp. had the following transactions during 2017: 1. Issued $355000 of par value common stock for cash. 2. Recorded and paid wages expense of $170400. 3. Acquired land by issuing common stock of par value $142000. 4. Declared and paid a cash dividend of $28400. 5. Sold a long-term investment (cost $8520) for cash of $8520. 6. Recorded cash sales of $1136000. 7. Bought inventory for cash of $454400. 8. Acquired an investment in Zynga stock for cash of $59640. 9. Converted bonds payable to common stock in the amount of $1420000. 10. Repaid a 6-year note payable in the amount of $624800.What is the net cash provided by investing activities? -($193,120). -($51,120). -$1,226,880. -$602,080

($51,120) ($8520 - $59640 = ($51120)(Invest. sale - invest. pur.))

An analysis of comparative balance sheets, the current year's income statement, and the general ledger accounts of Hailey Corp. uncovered the following items. Assume all items involve cash unless there is information to the contrary. Indicate how each item should be classified in the statement of cash flows using these four major classifications: operating activity (that is, the item would be listed among the adjustments to net income to determine net cash provided by operating activities under the indirect method), investing activity, financing activity, and significant noncash investing and financing activity. (a) Payment of interest on notes payable (b) Exchange of land for patent. (c) Sale of building at book value. (d) Payment of dividends. (e) depreciation. (f) Conversion of bonds into common stock. (g) receipt of interest on notes receivable. (h) Issuance of capital stock. (i) Amortization of patent. (j) Issuance of bonds for land. (k) Purchase of Land. (l) Receipt of dividends on investment in stock. (m) Loss on disposal of plant assets. (n) Retirement of bonds.

(a) Operating Activity (b) Noncash Investing and Financing (c) Investing Activity (d) Financing Activity (e) Operating Activity (f) Noncash Investing and Financing (g) Operating Activity (h) Financing Activity (i) Operating Activity (j) Noncash Investing and Financing (k) Investing Activity (l) Operating Activity (m) Operating Activity (n) Financing Activity

Accounts Payable decreased during the period by $6,000. What adjustment to net income should be made if the indirect method is used? -An increase of $6,000 -A decrease of $12,000 -A decrease of $6,000 -$0

A decrease of $6,000 (A decrease of $6,000 in accounts payable during the period means that the company paid more for goods during the period than it actually expensed. Net income must be decreased by $6,000 to arrive at cash flow from operations.)

A company's prepaid expenses are $15,000 at the beginning of the year and $8,000 at the end of the year. What adjustment to net income should be made if the indirect method is used? -No adjustment should be made. -Deduct from net income $7,000 -Add to net income $7,000 -Deduct from net income $8,000

Add to net income $7,000 (Since prepaid expenses decreased by $7,000 ($15,000 - $8,000), net income must be increased by the $7,000 that represents an expense that did not involve the outflow of cash.)

Which of the following is a reason that companies favor the indirect method of preparing the statement of cash flows? -Income taxes are lower when the indirect method is used. -It indicates which operating activities used or generated cash. -It is easier and less costly to prepare than the direct method. -It arrives at a larger amount of operating cash flows than with the direct method.

It is easier and less costly to prepare than the direct method.

Which of the following is incorrect about the statement of cash flows? -It provides information about the operating, investing, and financing activities of the business. -It reconciles the ending cash account balance to the balance per the bank statement. -It provides information about cash receipts and cash payments of an entity during a period. -It is the fourth basic financial statement.

It reconciles the ending cash account balance to the balance per the bank statement.

During 2017, Windsor, Inc. sold equipment with a book value of $96,000 for proceeds of $116,000. The company purchased new equipment for $256,000 by signing a long-term note payable. No other transaction impacted long-term asset accounts during 2017. The investing section of the statement of cash flows will report -Net cash inflows of $116,000. -Net cash outflows of $236,000. -Net cash inflows of $20,000. -Net cash outflows of $140,000

Net cash inflows of $116,000. ($116000 - 0 = $116000(Equip. sale proc.))

Metlock, Inc. reported a net loss of $10800 for the year ended December 31, 2017. During the year, accounts receivable decreased $25200, inventory increased $18000, accounts payable increased by $27000, and depreciation expense of $21600 was recorded. During 2017, operating activities -Provided net cash of $66,600. -Used net cash of $12,600. -Provided net cash of $45,000. -Used net cash of $45,000.

Provided net cash of $45,000 ($-10800 + $25200 - $18000 + $27000 + $21600 = $45000((Net loss) + A/R dec. − inv. inc. - A/P inc.+ dep. exp.)

Which of the following statements is correct? -Significant financing and investing activities that do not affect cash are reported in either a separate schedule at the bottom of the statement of cash flows, or in a separate note or supplementary schedule to the financial statements. -Only financing and investing activities that directly affect cash are reported in a company's statement of cash flows. -Significant noncash financing and investing activities are reported on the company's income statement. -Significant financing and investing activities that do not affect cash are not reported since they don't affect cash.

Significant financing and investing activities that do not affect cash are reported in either a separate schedule at the bottom of the statement of cash flows, or in a separate note or supplementary schedule to the financial statements.

Which of the following will not be reported in the statement of cash flows? -The net change in plant assets during the year -Cash receipts from sales of plant assets during the year -Cash payments for plant asset acquisitions during the year -Sources of financing during the period

The net change in plant assets during the year

Which of the following is incorrect about the statement of cash flows> -The statement shows the cash provided (used) for three categories of activity. -The direct method may be used to report cash provided by operations. -The operating section is the last section of the statement. -The indirect method may be used to report cash provided by operations.

The operating section is the last section of the statement.