Learnsmart Chapter 12

MRC Company reports the following information for 2018: total assets of $65,000 and total cash provided from operations of $20,000; For 2017: total assets of $75,000 and cash provided from operations of $5,000. Cash flow on total assets for 2018 is (round to the nearest tenth):

28.6% $20,000/[(65,000+75,000)/2]=.2857 or 28.57% = 28.6% rounded to the nearest tenth.

The income statement shows Wages Expense of $4,000 for the period. The balance sheet indicates that Wages Payable at the beginning of the year had a balance of $300 and at the end of the year had a balance of $500. Cash paid for wages equals:

3,800

Which of the following items would be correct adjustments to net income to arrive at cash flows from operating activities, using the indirect method?

Add increase in accounts payable; subtract increase in inventory

The statement of cash flows explains the difference between the 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

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 items would not be considered an operating cash payment under the direct method of reporting the statement of cash flows

Cash paid for dividends

Which of the following items would be reported under financing activities on the statement of cash flows?

Cash paid to repay cash loans Cash dividends paid to shareholders Cash received from issuing notes payable

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? (Check all that apply.)

Cash payments for equipment Cash receipts from customers Cash payments on notes

Which of the following items could be "other cash receipts"? Check all that apply.

Cash received from rent Cash received from dividends Cash received from interest

To compute cash flows from financing activities, accountants normally analyze changes in all of the following

Common stock, retained earnings, bond payable, notes payable BUT NOT INTEREST PAYABLE

Which of the following is not one of the five important steps to preparing a statement of cash flows?

Compute the net income

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? (Check all that a

Does the company have the resources to pursue opportunities? Does the company have the ability to pursue opportunities?

Accountants can use a three-stage process to determine cash provided or used 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? (Check all that apply.)

Increase in unearned fees Increase in accounts payable

A net cash _________ occurs when the receipts in a category exceed the payments.

Inflow

Which section of the statement of cash flows is affected by choosing to report using the direct method?

Operating Activities

_______________ activities include those transactions and events that determine net income.

Subtracted

Which of the following statements about the statement of cash flows are correct? (Check all that apply.)

The purpose is to report cash receipts and cash payments during a period. It is a detailed disclosure of cash flows.

Which of the following questions could not be answered from the statement of cash flows?

What are the earnings-per-share of common stock?

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 cash ___________ must satisfy two criteria: (1) be readily convertible to a known amount of cash and (2) be sufficiently close to maturity so its market value is unaffected by interest rate changes

equivalent

The three-step analysis to determine cash provided or used by investing activities includes:

explaining the changes using T-accounts and reconstructed entries reporting the cash flow effects identifying changes in investing-related accounts

In a statement of cash flows, cash received from the sale of a building would be classified under "cash flows from BLANK activities."

investing

A(n) _______ occurs when the receipts in a category exceed the payments.

net cash inflow

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

When a company's net income and cash flows from operations are significantly different, it can sometimes indicate an issue with the (quantity/quality) of earnings.

quality

If all sales are for cash, the amount received from customers will equal the ______reported on the income statement.

sales

The information needed to prepare a statement of cash flows could come from except which of the following sources?

statement of retained earnings

The information needed to prepare a statement of cash flows could come from all of the following sources, except the:

statement of retained earnings.

Which of the following would not be reported under financing activities on the statement of cash flows?

Cash paid for interest owed

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. $12,000+2,000-7,000=$7,000. $7,000+4,000=$11,000

Interest expense reported on the income statement was $1,000. The beginning balance in Interest Payable was $150 and the ending balance was $50. Cash paid for interest during the period is equal to:

$1100

Retained earnings at the beginning and end of the year totaled $10,000 and $55,000, respectively. Net income reported during the period was $50,000. Using this information, dividends declared and paid are equal to:

$5000

And alternative to using the cash account to analyze the changes in cash during period, a company may analyze non-cash accounts including each of the following -retained earnings -expense account -balance sheet accounts -revenue accounts

- Expense accounts -balance sheet accounts -revenue accounts

Click and drag on elements in order There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.

1. Compute the net increase or decrease in cash. 2. Compute and report the net cash provided or used by operating activities. 3. Compute and report the net cash provided or used by investing activities. 4. Compute and report the net cash provided or used by financing activities. 5. Compute the net cash flow by combining net cash provided or used by operating, investing, and financing activities and prove the change.

Depreciation expense is (added/subtracted) (1) to (from) net income, when computing cash flows from operations, using the indirect method.

1. added

Accounts receivable how to debit balance of $4000 at the beginning of the period, and a debit balance of $6000 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 $2000 which will be added to the net income -A decrease of $2000 which will be subtracted from net income -an increase of $2000 which will be subtracted from the net income -An increase of $2000 which will be added to the net income

An increase of $2000 which will be subtracted from net income

There are similarities and differences among U.S. GAAP and IFRS in accounting for cash flows. Identify which statement is incorrect -GAAP and IFRS permit the use of either the director indirect method -both GAAP and IFRS have similar definitions of cash and cash equivalents -both GAAP and IFRS require interest and dividend income to be reported in the operating section

Both GAAP and IFRS Require interest and dividend income to be room ported in the operating section

Select all that apply It is important to analyze the sources and uses of cash because (select all that apply):

Creditors use this information to assist them in deciding whether to loan funds to them. Investors use this information to decide if they will purchase their stock.

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method? (Check all that apply.)

Gain on sale of building Loss on sale of investment Depreciation expense

A company reported total assets at the end of 2017 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 2018 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 in 2018.

Increase of $9,000

Which of the following would be included in the operating section when preparing the statement of cash flows using the indirect method?

Net income

Cash received from customers =

Net sales + Decrease in accounts receivable.

The statement of cash flows does not report activity for which of the following categories?

Purchases and sales of cash equivalents

Identify which of the following items is not a noncash investing and financing activity that must be reported in a note to the statement of cash flows.

Repayment of a note with cash Purchase of a plant asset with cash

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

The __________ helps measure a company's ability to meet its obligations, pay dividends, expand operations, and obtain financing. It is computed by taking cash flow from operations divided by average total assets.

cash flow on total assets

The format of a statement of cash flows includes reporting cash flows from three activities including: equivalent cash financing investing operating

financing investing operating

The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items necessary to obtain net cash provided or used by operating activities.

indirect

_______ activities include those transactions and events that affect long-term assets, such as lending and collecting money for notes receivable and cash receipts from sale of long-term plant assets.

investing

Other asset transactions affect a company's cash flows from investing activities including

investment securities Short-term notes receivable

A(n) _____________ activity includes those transactions and events that determine net income, including the purchase of merchandise, the sale of goods and services to customers, and expenditures to operate the business

operating

A net cash ______ occurs when the payments in a category exceed the receipts.

outflow

An increase in accounts receivable would be________ to (from) net income, when computing cash flows from operations using the indirect method

subtracted