smartbook

investing activities

Purchase of a new delivery truck

$20,000

Rent-a-wreck, Inc.'s property, plant and equipment balance, net of depreciation, at the beginning of the year was $100,000 and at the end was $150,000. During the year, depreciation expense was $10,000 and $80,000 of new equipment was purchased for cash. What is the amount of proceeds from the disposal of property, plant and equipment shown on the statement of cash flows for the year? $30,000 $0 $40,000 $20,000

Allows the inclusion of transactions that decreased cash but not net income

Subtracting decreases in current liabilities such as Salaries Payable

operating

The _____ activities section of the statement of cash flows indicates how well a company is able to generate cash through its normal business activities and management of working capital. (Enter one word per blank.)

convert items included in net income to cash

When preparing the statement of cash flows using the indirect method, one of the purposes of adjusting net income for changes to certain balance sheet accounts is to ______. ensure that net income is properly stated convert items included in net income to cash derive the correct ending balance of cash

cannot; financing

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company ______ combine them into one transaction in the ______ activities section. cannot; investing can; financing can; investing cannot; financing

Allows the inclusion of transactions that decreased net income but not cash

Adding increases in current liabilities such as Income Tax Payable

Operating activities

Payment of Accounts Payable

Financing activities

Payment of dividends to stockholders

spending

Which of the following classifications is not used to categorize cash inflows and cash outflows on the statement of cash flows? Financing Operating Spending Investing

noncash

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 cash decrease negative increase

direct

The _____ method prepares the operating activities 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. (Enter one word per blank.)

inflow; investing

The sale of property, plant, and equipment results in a cash _____(inflow/outflow) to the _____ section of the statement of cash flows. (Enter one word per blank.)

capital acquisition ratio free cash flow ratio

Two common ways to assess a company's ability to internally finance its expansion needs are the ______. (Check those that apply.)

$9,000; investing

Vango, Inc. sold its delivery van with an original cost of $40,000 and an accumulated depreciation balance at the time of sale of $30,000. Given it was sold at a $1,000 loss, proceeds from the disposal of the van will equal ______ on the statement of cash flows under ______ activities.

increase

When Accounts Receivable decrease, cash from customer collections will _____ . (Enter one word per blank.)

direct

Which method of preparing the operating activities section of the statement of cash flows reports the gross receipts and gross payments? Direct Accrual Indirect Cash

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

Which of the following are cash outflows from investing activities? (Select all that apply) repayment of long-term debt purchase of long-term investments payment of income taxes Purchase of building purchase of land

false

True or false: Changes in cash are classified as either operating activities, direct activities or indirect activities.

positive cash flow from financing activities

A company that reports a significant negative cash flows from investing activities will most likely report a ______. positive cash flow from investing activities a large cash dividend positive cash flow from financing activities negative cash flow from operating activities

amounts received from issuing stocks and debt were less than repurchasing or repayments of stocks and debt

A net cash outflow from financing activities means ______. amounts received from issuing stocks and debt were greater than repurchasing or repayments of stocks and debt sales were less than the purchases of long-lived assets and investments revenues were greater than expenses amounts received from issuing stocks and debt were less than repurchasing or repayments of stocks and debt sales were greater than the purchases of long-lived assets and investments revenues were less than expenses

decrease; investing

A purchase of an intangible asset results in a(n) _____ (increase/decrease) to net cash flow provided by _____ activities. (Enter one word per blank.)

investing

Cash paid for property, plant and equipment is found in the cash outflows from the _____ activities section of the statement of cash flows. (Enter only one word per blank.)

subtracted from

An increase in Accounts Receivable will be ______ Sales Revenue when determining Cash collected from customers on the statement of cash flows using the direct method to determine cash flows from operations.

sales revenue was earned than cash was collected

An increase in accounts receivable on a comparative balance sheet indicates that more ______ during the accounting period. expenses incurred than sales revenue earned sales revenue was earned than expenses incurred sales revenue was earned than cash was collected cash was collected than sales revenue earned

Cash inflow of $8,000

Barclay, Inc. sold equipment that originally cost $30,000 four years ago for $8,000 cash. The equipment had accumulated depreciation totaling $24,000. How will this transaction be listed in the investing activities section of Barclay's statement of cash flows? Cash inflow of $8,000 Cash inflow of $2,000 Cash outflow of $6,000 Cash outflow of $30,000

An increase in interest expense A decrease in the number of shares outstanding

Cashews, Inc.'s financing activities section of the statement of cash flows reported a significant cash inflow from the issuance of bonds and cash outflow from the repurchase of treasury stock; all other financing activities were insignificant. As a result, which of the following may be expected to occur in the near future? (Check all that apply.) An increase in dividends An increase in interest expense A decrease in the number of shares outstanding A decrease in interest expense

investing and financing

Companies are required to report material noncash transactions from _____ and _____ activities in either a supplementary schedule to the statement of cash flows or as a disclosure in the notes to the financial statements. (Enter one word per blank.)

$500,000

During the year, Cashews, Inc. borrowed $100,000 cash from a bank, received $700,000 of from issuing bonds, repaid $300,000 note payable from a bank, and sold $200,000 of short-term investments. The net cash inflow (outflow) from financing activities (assuming no other financing activities) equals ______. $(700,000) $500,000 $300,000 $700,000 $(300,000) $(500,000)

Repayment of loan principal: cash outflow under financing activities Net proceeds from stock issuance: cash inflow under financing activities Cash paid for interest: cash outflow under operating activities

Identify which of the following are properly reported in a statement of cash flows. (Check all that apply.) Repayment of loan principal: cash outflow under financing activities Net proceeds from stock issuance: cash inflow under financing activities Repurchase of treasury stock: cash inflow under financing activities Cash paid for interest: cash outflow under operating activities Payment of accrued liabilities: cash outflow under financing activities

decrease; operating

If the direction of change in Accounts Receivable is a(n) _____ (increase/decrease) from the prior period, the amount of that change is added to net income in the _____ activities section of the statement of cash flows. (Enter one word per blank.)

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

In preparing the operating activities section of a statement of cash flows using the indirect method, net income should be adjusted for ______. (Check all that apply.) gain from sale of asset depreciation expense issuance of bonds for cash loss from sale of asset payment of a noncurrent liability

financing

Issuing stock to owners is classified as a(n) _____ activity. (Enter one word per blank.)

operating, investing, financing activities

Select the categories found on a statement of cash flows. (Check all that apply.) operating activities accrual activities investing activities capital activities financing activities

reported in a supplementary schedule to the statement of cash flows

Material noncash investing and financing transactions are ______. reported in the body of the income statement reported in a supplementary schedule to the statement of cash flows reported within the body of the statement of cash flows not reported in any part of the financial statement because cash flow is not affected

Allows the inclusion of transactions that increased net income but not cash

Subtracting increases in current assets such as Accounts Receivable

operating; operations

The ______ activities section is very important, since ______ are the only continuing, internal source of cash for the business. investing; capital contributions financing; capital contributions investing; investments operations; capital contributions operating; operations financing; operations

comparative balance sheets, complete income statement, and additional data concerning accounts in investing and financing activities

The complete list of items needed to prepare a statement of cash flows includes ______. comparative balance sheets, complete income statement, and additional data concerning accounts in investing and financing activities current year balance sheet, comparative income statements, and the retained earnings statement comparative balance sheets, retained earnings statement, and additional data concerning accounts in investing and financing activities current year balance sheet, comparative income statements, and additional data concerning accounts in investing and financing activities

true

True or false: Two common ways to assess a company's ability to internally finance expansion needs are the capital acquisition ratio and free cash flow.

Decreases in interest payable Increases in accounts receivable

When preparing the statement of cash flows using the T-Account Approach, which of the following would be found on the credit side of the operating activities section of the single, large T-account representing the changes in cash? (Select all that apply.)

Increases in accrued expenses Decreases in accounts receivable

When preparing the statement of cash flows using the T-Account Approach, which of the following would be found on the debit side of the operating activities section of the single, large T-account representing the changes in cash? (Select all that apply.) Increases in accrued expenses Increases in dividends payable Decreases in interest payable Decreases in accounts receivable Increase in common stock

that increased net income, but did not impact cash

When using the indirect method, subtracting an increase in Accounts Receivable from net income eliminates the effect of recording credit sales ______. that increased net income, but did not impact cash that increased net income and increased cash flow that decreased net income, but did not impact cash that decreased net income and decreased cash flow

Cash flow causing decrease in current liabilities Cash from revenue earned in daily transactions

Which of the following cash flows are classified as operating activities? (Check all that apply.) Payment of dividends Cash for reacquiring common stock into treasury Cash for purchasing a warehouse to be used in the business Cash flow causing decrease in current liabilities Cash from revenue earned in daily transactions Cash from sale of investments

Depreciation and amortization expense Decreases in operating assets Loss on sale of investing asset

Which of the following items would be added to Net income in the operating activities section of the statement of cash flows prepared using the indirect method? (Check all that apply.) Depreciation and amortization expense Decreases in operating assets Loss on sale of investing asset Gain on sale of investing asset Decreases in operating liabilities

Depreciation Expense originally reduced net income, but the expense does not involve paying cash.

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 is not included in net income, so its cash effect must be accounted for separately. Depreciation Expense originally reduced net income, but the expense does not involve paying cash. Depreciation Expense originally reduced net income, but it actually represents a cash inflow for the company.