Chapter 13 ACCT 7080 - Mr. Turner

$425,000 Reason: $400,000 + $25,000 = $425,000

A company had sales of $400,000 during a year in which its accounts receivable decreased by $25,000. What is the amount of cash provided by sales to customers in the operating activities section of the statement of cash flows?

$35,000 math: 20k+15k=35k

A company had the following cash flows in the current year: cash payments to purchase investments: $20,000; cash payments to acquire plant assets: $15,000; cash payments to suppliers for inventory: $30,000; cash receipts from collecting accounts receivable: $60,000. What is the negative cash flow from investing activities for the year?

$15,000 math: 30K+15k=45k 60k-45k=15k

A company had the following cash flows in the current year: cash payments to purchase investments: $20,000; cash payments to employees: $15,000; cash payments to suppliers for inventory: $30,000; cash receipts from collecting accounts receivable: $60,000. What is the cash flow from operating activities for the year?

$615,000 Reason: $650,000 - $35,000 = $615,000

A company reported cost of goods sold during the year at $650,000. During the year, its inventory remained unchanged and its accounts payable increased by $35,000. What is the amount of cash paid to purchase inventory during the year?

465,000 math: 500k-20k-15k=465k

A company reported cost of goods sold in its income statement at $500,000. During the year, inventory declined by $20,000 and accounts payable increased by $15,000. The amount of cash paid for purchases of inventory during the year was $

$130,000 Reason: $100,000 + $35,000 - 5,000 = $130,000

A company reported net income of $100,000. During the year, depreciation expense was $35,000 and accounts payable decreased by $5,000. What is the amount of cash provided by operations by the indirect method?

$265,000 Reason: $175,000 + $125,000 - $12,000 - $23,000 = $265,000

A company reported net income of $175,000 in a year in which it recognized depreciation expense of $125,000. In addition, accounts payable decreased $12,000 and accounts receivable increased $23,000. What is the amount of cash flow from operations determined by the indirect method?

580,000 math: 450k+150k=600k 600k-35k+15k=580k

A company that reported net income of $450,000 also recognized depreciation during the year of $150,000. In addition, inventory increased $35,000 and income taxes payable increased $15,000. The amount of cash from operations determined by the indirect method was $

cash flows from operating activities.

A model statement of cash flows starts with

peak pricing

A policy of charging higher prices in periods of higher demand is referred to as

may benefit a growing company every year as it continues to grow. is a legitimate way to increase cash flow in the present period.

Adopting accounting methods that defer or delay the payment of income taxes

False

For a company to survive in the long-run it must have positive cash flows from investing activities.

False

If cash increased during the year and there was also a net loss for the year, there must be positive cash flows from financing and investing activities.

payment of dividends

Cash flows from operating activities include all of the following except:

False

Companies that show profits on the income statement will always show positive cash flows from operating activities.

negative cash flow of $35,000 from the repayment of the loan positive cash flow from the borrowing of $50,000

A company borrowed $50,000 during a year in which it also repaid a previous loan of $35,000. Interest on the two loans combined to be $4,250 during the year. How will these events be presented in the financing activities section of the statement of cash flows?

+$3,000 math: 10K+1k-3k-5k=3k

A company collected $10,000 from customers, received $1,000 in interest income, paid $3,000 in salaries to employees, paid $5,000 to suppliers, and paid $2,000 in dividends to stockholders. What was the net cash flow from operating activities?

$115,000 Reason: $125,000 - $10,000 = $115,000

A company had sales during the year of $125,000. During the year, its accounts receivable increased by $10,000. What is the amount of cash received from customers in the operating activities section of the statement of cash flows?

Accounts Receivable

Calculating cash received from customers begins with sales and is then adjusted for the change in

merchandise inventory from suppliers.

Cash flows from investing activities relate to the acquisition and disposal of all of the following except

True

Depreciation is a non-cash expense.

indirect

Determining cash flow from operating activities by starting with net income and making adjustments for noncash items is referred to as the ____ method.

False

Dividends paid belong in the operating activities section of the statement of cash flows.

positive cash flow of $4,500 and negative cash flow of $6,000

During a year, a company purchased investments for $6,000 and sold investments for $4,500. The investments that were sold previously cost $4,000, resulting in a $500 gain on the sale. How will these transactions be presented in the investing activities section of the statement of cash flows?

+$30,000 math: 10k+35k=45k 45k-15k=30k

During the year, a company received $10,000 from short-term borrowing, received $35,000 from long-term borrowing, paid $15,000 to stockholders as dividends, and had a net operating loss of $40,000. What is the net amount of financing cash flows in the company's statement of cash flows for the year?

a car wash at a gas station snacks at a movie theater nonfood necessities in a grocery store

Examples of complementary products that may be used to create an effective product mix include which of the following?

an increase in accounts receivable a gain from the sale of plant assets a decrease in accrued expenses payable

In determining the amount of cash provided by operating activities by the indirect method, which of the following would require a negative adjustment (i.e., subtraction) from net income?

proceeds from short-term borrowings cash received from the sale of stock to stockholders cash paid to purchase treasury stock cash paid in dividends to stockholders

In the statement of cash flows, cash flows from financing activities include which of the following?

cash received from customers cash paid to suppliers cash paid for interest cash paid to employees

In the statement of cash flows, cash flows from operating activities include which of the following?

True

Interest paid belongs in the operating activities section of the statement of cash flows.

investing activities

Positive cash flows from sales of investments and negative cash flows from purchases of investments are presented in which section of the statement of cash flows?

direct

Supplemental disclosure that reconciles net income to net cash provided by or used in operations is required when the ____ method is used in the body of the statement of cash flows.

end

The final section of the statement of cash flows reconciles the cash balance at the beginning of the accounting period to the cash balance at the _____ of the accounting period.

cash

The first item in a company's balance sheet is usually the asset ______ and cash equivalents.

True

The operating activities section of the cash flow statement includes the cash effects of those transactions reported on the income statement.

False

The principal purpose of a statement of cash flows is to measure the profitability of a business that maintains its accounting records on the cash basis.

False

The purchase of equipment for the manufacturing of inventory belongs in the operating activities section of the statement of cash flows.

False

The purchase or sale of marketable securities is reported in the statement of cash flows as a financing activity.

operating

The section of the statement of cash flows that is most directly related to net income from the income statement is cash flows from _____ activities.

financing

Transactions in which a company both borrows and repays debt are presented in the ______ activities section of the statement of cash flows.

True

True or false: One purpose of the statement of cash flows is to reconcile the change in cash between the beginning and the end of the year.

False

True or false: The amount of cash flow from operations computed by the indirect method is different from the amount of cash flow from operations computed by the direct method.

True

True or false: The statement of cash flows is believed to provide information that is particularly useful to stockholders, creditors, suppliers, and employees.

True

True or false: Trends in cash flow may affect a company's credit rating.

Credit Cash Paid to Retire Bonds Payable in the financing activities section of the statement of cash flows. Debit Bonds Payable in the balance sheet accounts.

What is the correct combination of debit and credit entries to record the retirement of bonds in the worksheet for preparing a statement of cash flows by the indirect method?

They may show expected cash flows in great detail. They may provide useful information for evaluating performance. They are a forecast of future cash receipts and payments.

Which of the following are accurate statements about cash budgets?

To assess the company's need for external financing. To understand the company's ability to generate positive cash flows in the future. To assess the company's ability to meet its obligations and pay dividends.

Which of the following are purposes of the statement of cash flows?

Balance sheet accounts on the top, statement of cash flow categories on the bottom.

Which of the following describe(s) the structure of a worksheet used to prepare a statement of cash flows by the indirect method?

Only when the direct method is used to compute net cash from operations.

Which of the following describe(s) when a reconciliation of net income to net cash provided by or used in operations is required in a statement of cash flows?

To report the company's earnings per share.

Which of the following is NOT a purpose of cash budgets?

an increase in accrued expenses payable a decrease in inventories

Which of the following require(s) a positive adjustment (i.e., addition) to net income to determine the cash provided by operations by the indirect method?

Although both methods result in the same net increase or decrease in cash for the year , net cash flow from operating activities will be different under the two methods .

Which of the following statements regarding the direct and indirect methods of reporting cash flow from operating activities is false?

reducing investments in research and development reducing purchases of inventory

Which of the following steps to increase cash flow might have negative long-term implications?