Accounting Chapter 16
A net cash _______________ occurs when the payments in a category exceed the receipts.
outflow
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
Net cash used in operating activities was $10,000. Net cash provided by investing activities was $2,000. Net cash provided by financing activities was $5,000. The cash balance at the end of the year was $12,000. The cash balance at the beginning of the year was $
15,000
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 $.
50,000
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 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?
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?
Cash payments for equipment Cash payments on notes Cash receipts from customers
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 transactions would be reported under cash flows from operating activities?
Cash received from sales Cash paid to lenders for interest Cash paid for salaries and wages
Cash flows from financing activities identify cash receipts and cash payments related to which of the following types of accounts?
Common Stock Bonds Payable
Which of the following is not one of the five important steps to preparing a statement of cash flows?
Compute the net income
There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.
Compute the net increase or decrease in cash. Compute net cash from or for operating activities. Compute net cash from or for investing activities. Compute net cash from or for financing activities. Compute the net cash from all source; then prove it by adding it to beginning cash to get ending cash.
Which of the following items would be subtracted from net income when reporting cash flows from operating activities, using the indirect method?
Decrease in taxes payable Decrease in wages payable
Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method?
Depreciation expense Gain on sale of building Loss on sale of investment
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?
Does the company have the resources to pursue opportunities? How does a company spend its cash? Can the company pay its debts?
_____________ 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
__________________ 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
Accountants can use a three-step process to determine cash provided 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?
Increase in accounts payable Increase in unearned fees
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, accounts 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 the notes receivable and cash receipts from sale of short-term investments.
Investing
It is important to analyze the sources and uses of cash because
Investors use this information to decide if they will purchase their stock. Creditors use this information assist them in deciding whether to loan funds to them.
Which of the following statements about the statement of cash flows are correct?
It details the sources and uses of cash. The purpose is to report cash receipts and cash payments during a period.
Which of the following would be included in the operating section when preparing the statement of cash flows using the indirect method?
Net income
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.
Which of the following items are classified as noncash investing and financing activities?
Retirement of debt by issuing stock Conversion of preferred stock to common stock Lease of assets in a long-term lease transaction
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.
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 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?
Sheldon Company's balance in prepaid insurance at the beginning and end of the year was $2,5000 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
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
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 added to net income
The statement of cash flows reports noncash investing and financing transaction in
a note or separate schedule
A loss from the sale of an investment would be ______________ to (from) net income when computing cash flows from operations, using the indirect method.
added
A loss from the sale of an investment would be ______________ to net income when computing cash flows from operations, using the indirect method.
added
An increase in wages payable would be _____________ to net income when preparing cash flows from operating activities, using the indirect method.
added
An increase in wages payable would be _______________ to net income, when computing cash flows from operations using the indirect method.
added
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 investing activities section
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 statement of cash flows does not report the following transactions
between cash and cash equivalents
Investors assess cash flows before
buying and selling stock
A company repaid a long-term debt during the year. They will report this as a _____________ in the _____________ activities section on the statement of cash flows.
decrease financing
The three-step analysis to determine cash provided or used by financing activities includes:
determine the cash effects using T-accounts and reconstructed entries reporting the cash flow effects identifying changes in financing-related accounts
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
At the beginning of the year, Rex Co. showed a debit balance in the cash account of $20,500. Total debits to this account during the year were $45,000, and total credits during the year were $35,000. The net ____________ in cash for the year equals $____________.
increase 10,000
Carol Co. prepares a statement of cash flows starting with net income and then adjusting for items that do not affect cash. Carol Co. is using the _________________ method of reporting the statement of cash flows.
indirect
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 _________________ occurs when the receipts in a category exceed the payments.
inflow
Collecting money for notes receivable would be reported on the statement of cash flows as a(n) _______________ activity.
investing
The format of a statement of cash flows includes reporting cash flows from three activities including:
investing financing operating
A ________________ occurs when the receipts in a category exceed the payments.
net cash inflow
The indirect method of computing and reporting net cash flows from operating activities involves adjusting ________ ______________ to obtain the net cash provided or used by operating activities.
net income
A(n) _____________ activity includes those transactions and events that affect net income, including the purchase of goods and services, cash sales to customers, and payment of operating expenses.
operating
The purchase of goods and services, the sale of goods and services to customers, and costs to operate the business are all reported on the statement of cash flows under ____________________ activities.
operating
Lakeview, Inc.'s statement of cash flows reports financing activities with payments that exceed receipts. This means that Lakeview had a net cash _______________ from financing activities.
outflow
The three-step analysis to determine cash provided or used by investing activities includes:
reporting the cash flows effects identifying changes in investing-related accounts determining the cash effects using T-accounts and reconstructed entries
A gain from the sale of a building would be ______________ to (from) net income when computing cash flows from operations, using the indirect method.
subtracted
An increase in accounts receivable would be ______________ to (from) net income, when computing cash flows from operations using the indirect method.
subtracted
In preparing a cash flows from operating activities using the indirect method, an increase in accounts receivable would be _______________ to (from) net income.
subtracted
