Accounting Chapter 14 Quiz

Source TodaySource Today earned net income of $ 72 comma 000$72,000 after deducting depreciation of $ 7 comma 000$7,000 and all other expenses. Current assets decreased by $ 6 comma 000$6,000​, and current liabilities increased by $ 8 comma 000$8,000. How much was Source Today'sSource Today's cash provided by operating activities​ (indirect method)?

$93,000

The purposes of the statement of cash flows are to

All of the above

Destiny Corporation is preparing its statement of cash flows by the indirect method. Destiny has the following items for you to consider in preparing the​ statement:

O+ a. Increase in accounts payable F- b. Payment of dividends O- c. Decrease in accrued liabilities F+ d. Issuance of common stock O- e. Gain on sale of building O+ f. Loss on sale of land O+ g. Depreciation expense O- h. Increase in merchandise inventory O+ i. Decrease in accounts receivable I- j. Purchase of equipment

Which item does not appear on a statement of cash flows prepared by the indirect​ method?

Collections from customers

Cash flow items must be categorized into one of four categories. Identify each item as operating​ (O), investing​ (I), financing​ (F), or​ non-cash (N).

a. Cash purchase of merchandise inventory O b. Cash payment of dividends F c. Cash receipt from the collection of long-term notes receivable I d. Cash payment for income taxes O e. Purchase of equipment in exchange for notes payable N f. Cash receipt from the sale of land I g. Cash received from borrowing money F h. Cash receipt for interest income O i. Cash receipt from the issuance of common stock F j. Cash payment of salaries O

Financial statements all have a goal. The statement of cash flows does as well. Describe how the statement of cash flows helps investors and creditors perform each of the following​ functions a. Predict future cash flows. b. Evaluate management decisions. c. Predict the ability to make debt payments to lenders and pay dividends to stockholders

a. The statement of cash flows helps predict future cash flows by reporting =past cash =receipts and payments ​, which are good predictors of future cash flows. b. The statement of cash flows helps evaluate management decisions by reporting on​ managers' =investments. c. The statement of cash flows helps predict the ability to make debt payments to lenders and pay dividends to stockholders by reporting =where cash came from and how cash was spent.

Operating activities are most closely related to

current assets and current liabilities.

The main categories of cash flow activities are

operating, investing, and financing.

Mountain Water Corp. issued common stock of​ $28,000 to pay off​ long-term notes payable of ​$28,000. In what​ section(s) would these transactions be​ recorded?

​Non-cash investing and financing​ activities, $28,000