accounting financial ch11

Cash flows from investing activities can be discovered by analyzing changes in a company's:

long-term asset accounts Changes in long-term liabilities and shareholders' equity accounts are analyzed in the financing section on the statement of cash flows.

In the long run, a company must generate positive cash flow from __________ or it will not survive.

operating activities In the long run, a company must generate positive cash flow from operating activities or it will not survive.

Oblique, Inc., prepares its statement of cash flows using the indirect method. In calculating cash from operating activities, increases in current assets other than Cash should be:

subtracted from net income

All of the following would be included in the operating activities section when preparing the statement of cash flows under the indirect method, except:

subtracting a decrease in prepaid expenses

Decrease in salary payable $ 1,500 Increase in accounts payable 2,000 Decrease in accounts receivable 3,500 Net income 108,000 Increase in inventory 5,800 Decrease in prepaid expenses 1,200 Depreciation expense - equipment 5,000 Depreciation expense - buildings 7,500 Gain on sale of equipment 1,300 Loss on sale of land 2,500 Using the above data, determine the net cash provided/used by operating activities for Asakura Corporation for the current year. Assume the indirect method is used.

$121,100 Assuming the indirect method, the net cash provided by operating activities for Asakura Corporation is $121,100.

Our Taylor, Inc., reported credit sales of $2,500,000 for 2019. Cost of goods sold was $900,000. The following additional information is available from the company's records: December 31, 2019 December 31, 2018 Accounts receivable $60,000 $40,000 Inventory 75,000 80,000 Accounts payable 30,000 25,000 How much cash did the company collect from customers in 2019?

$2,480,000 Accounts Receivable as increased by $20,000 ($60,000 - $40,000). This increase is subtracted from sales ($2,500,000 - $20,000) = $2,480,000.

Thompson Inc. began and ended the year with a Retained Earnings balance of $820,000 and $630,000, respectively. Thompson's reported Net Income during the year of $180,000. The only transaction that affected Retained Earnings was the declaration and payment of a cash dividend. Determine the amount of dividends declared and paid by Thompson, Inc. during the year.

$370,000 The amount of cash dividends declared and paid by Thompson, Inc. this year was $370,000. To determine the amount of cash dividends declared and paid, analyze Retained Earnings using the following formula, substituting X for the unknown amount, Dividends: Beginning Balance of RE + Net Income - Dividends = Ending Balance of RE $820,000 + $180,000 - X = $630,000 - X = $630,000 - $820,000 - $180,000 X = $370,000

During the current year, Morgan, Inc., had net income of $657,000. Morgan also recorded $203,000 in deprecation expense and had the following changes in its balance sheet accounts: Accounts Receivable $ 28,000 increase Inventories 12,000 decrease Accounts Payable 21,000 decrease Compute the net cash provided by operating activities using the indirect method.

$823,000

Our Taylor, Inc., reported credit sales of $2,500,000 for 2019. Cost of goods sold was $900,000. The following additional information is available from the company's records: December 31, 2019 December 31, 2018 Accounts receivable $60,000 $40,000 Inventory 75,000 80,000 Accounts payable 30,000 25,000 How much cash was paid for inventory in 2019?

$890,000 To determine cash paid for inventory, first determine the amount of inventory purchased during the year using the beginning and ending balances of inventory, as well as Cost of Goods Sold. The following formula is used for this calculation, substituting X for the unknown, purchases: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold $80,000 + X - $75,000 = $900,000 X = $900,000 - $80,000 + $75,000 X = $895,000 (Purchases on Account) Once the amount of purchases on account is determined, you can now determine the amount of cash paid for these purchases using the amount of the purchases on account (just calculated) and the beginning and ending balance of Accounts Payable. The following formula is used for this calculation, substituting X for the unknown amount, Payment for Inventory: Beginning A/P + Purchases on account - Payments for Inventory = Ending A/P $25,000 + $895,000 - X = $30,000 - X = $30,000 - $25,000 - $895,000 X = $890,000 This same progression is also shown through the following T-accounts: Inventory Beginning 80,000 Purchases 895,000 900,000 Cost of Goods Sold Ending 75,000 Accounts Payable 25,000 Beginning Payments for Inv. 890,000 895,000 Purchases on Account 30,000 Ending

Which of the following transactions decrease cash? 1) Purchase inventory from cash 2) Pay trade accounts payable 3) Accruing operating expenses 4) Purchase stock in R&D partner 5) Charging depreciation

1, 2, 4 Purchasing inventory for cash will increase inventory and decrease cash. Paying toward accounts payable, decreases cash and decreases accounts payable. The purchase of stock would d

The operating activities section has a relationship with which part of the balance sheet?

Current assets and current liabilities

Purchasing Land by signing a Note Payable would appear in the non-cash investing and financing activities section of the statement of cash flows.

Financing activities

The purchase of treasury stock would be included in which section of the statement of cash flows?

Financing activities

Where is the gain resulting from the sale of equipment shown under the indirect method?

In the operating activities section as a deduction Under the indirect method, the gain resulting from the sale of equipment is shown in the operating activities section as a deduction.

Luke Land Development purchased Land during the year by signing a 10-year, $300,000, 4% Note Payable. Under which section of the statement of cash flows would this purchase of Land appear?

Non-cash investing and financing activities Purchasing Land by signing a Note Payable would appear in the non-cash investing and financing activities section of the statement of cash flows.

Cash-related transactions that affect the income statement are included in which section of the statement of cash flows?

Operating Cash-related transactions that affect the income statement are included in the operating section of the statement of cash flows.

Receiving of cash dividends would be included in which section of the statement of cash flows?

Operating Activities

The activity classifications in the statement of cash flows include:

Operating, investing, and financing activities Cash flows from operating activities represent the day-to-day operations of the business (changes in current assets and current liabilities, depreciation, gains/losses). Investing activities represents the cash flows from the changes in long-term assets. Financing activities represents the cash flows from the changes in long-term liabilities and owners' equity.

Which of the following financial statements explain why a company's cash balance changed over a period of time?

Statement of cash flows After computing the cash inflows/outflows from operating, investing and financing activities on the statement of cash flows, this overall change in cash can be added to the beginning balance of cash and it should equal the ending balance in the cash account.

Which of the following is an objective of the statement of cash flows?

These are all objectives of the statement of cash flows

Both of the following companies are merchandisers that began operations this year. X Company Y Company Cash from operating activities $ 20,000 $ 60,000 Cash from investing activities (200,000) (100,000) Cash from financing activities 230,000 90,000 Net increase in cash $ 50,000 $ 50,000 Which of these two companies appears to have made the larger purchases of property, plant, and equipment during the year?

X Company When the investing activities section shows cash used (outflows exceed inflows) we can assume that we purchased long-term assets. X company used $200,000 and Y company used $100,000 insinuating that X company purchased more long-term assets than Y company.

Oblique, Inc., prepares its statement of cash flows using the indirect method. In calculating cash from operating activities, increases in current liabilities should be

added to net income

All of the following would be included in the operating activities section when preparing the statement of cash flows under the indirect method, except:

adding a decrease in accounts payable

All of the following would be included in the operating activities section when preparing the statement of cash flows under the indirect method, except:

adding a gain from the sale of a fixed asset A gain on the sale of a fixed asset acts like a revenue on the income statement, increasing net income. In addition, it increased the cash proceeds from the sale of the fixed asset, which will appear in the investing activities section. Because a gain is included in both net income and in the investing activities section, it must be subtracted in the operating activities section so that it is not included twice on the statement of cash flows.