Managerial Accounting Exam 1 Ch 13

36. For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method. a. purchased buildings b. sold patents c. net income d. issued common stock e. paid cash dividends f. depreciation expense

a. I b. I c. O D. F E. F F. O

12. Financing activities include a. lending money b. acquiring investments c. issuing debt d. acquiring long-lived assets

c. issuing debt

17. Which of the following would not be classified as an operating activity? a. interest expense b. income taxes c. payment of dividends d. selling expenses

c. payment of dividends

24. If a gain of $11,000 is realized in selling (for cash) office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a. $44,000 b. $11,000 c. $55,000 d. $66,000

d. $66,000

31. The net income reported on the income statement for the current year was $250,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000, and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: End Beginning Cash $ 50,000 $ 60,000 Accounts receivable 112,000 108,000 Inventories 105,000 93,000 Prepaid expenses 4,500 6,500 Accounts payable (merchandise creditors) 75,000 89,000 What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method? a. $271,000 b. $279,000 c. $327,000 d. $256,000

a. $271,000

27. A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in a. a separate schedule b. the cash flows from financing activities section c. the cash flows from investing activities section d. the cash flows from operating activities section

a. a separate schedule

5. A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under a. investing activities b. financing activities c. noncash investing and financing activities d. operating activities

b. financing activities

15. Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method? a. depreciation expense b. gain on sale of land c. a loss on the sale of equipment d. dividends declared and paid

b. gain on sale of land

8. Which of the following should be shown on a statement of cash flows under the financing activities section? a. the purchase of a long-term investment in the common stock of another company b. the payment of cash to retire a long-term note c. the proceeds from the sale of a building d. the issuance of a long-term note to acquire land

b. the payment of cash to retire a long-term note

19. Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is a. $105,000 b. $118,000 c. $92,000 d. $169,000

c. $92,000

2. Preferred stock issued in exchange for land would be reported in the statement of cash flows in a. the cash flows from financing activities section b. the cash flows from investing activities section c. a separate schedule d. the cash flows from operating activities section

c. a separate schedule

18. Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a. a gain on the sale of land b. a decrease in accounts payable c. an increase in accrued liabilities d. dividends paid on common stock

c. an increase in accrued liabilities

16. Which of the following increases cash? a. depreciation expense b. acquisition of treasury stock c. borrowing money by issuing a six-month note d. the declaration of a cash dividend

c. borrowing money by issuing a six-month note

3. Cash paid to purchase long-term investments would be reported in the statement of cash flows in a. the cash flows from operating activities section b. the cash flows from financing activities section c. the cash flows from investing activities section d. a separate schedule

c. the cash flows from investing activities section

32. The following information is available from the current period financial statements: Net income $165,000 Depreciation expense 28,000 Increase in accounts receivable 16,000 Decrease in accounts payable 21,000 The net cash flow from operating activities using the indirect method is a. $230,000 b. $188,000 c. $198,000 d. $156,000

d. $156,000

21. The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: End Beginning Cash $50,000 $60,000 Accounts /RC 112,000 108,000 Inventories 105,000 93,000 Prepaid exp 4,500 6,500 Accounts payable (merchandise creditors) 75,000 89,000 What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method? a. $198,000 b. $324,000 c. $352,000 d. $296,000

d. $296,000

33. Sales for the year were $600,000. Accounts receivable were $100,000 and $80,000 at the beginning and end of the year, respectively. Cash received from customers to be reported on the statement of cash flows using the direct method is a. $700,000 b. $600,000 c. $580,000 d. $620,000

d. $620,000

25. Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land? a. $173,000 b. $140,000 c. $313,000 d. $33,000

a. $173,000

9. A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under a. investing activities b. financing activities c. noncash investing and financing activities d. operating activities

a. investing activities

29. The current period statement of cash flows includes the following: Cash balance at the beginning of the period $310,000 Net cash flow from operating activities 185,000 Net cash flow used for investing activities 43,000 Net cash flow used for financing activities 97,000 The cash balance at the end of the period is a. $45,000 b. $635,000 c. $355,000 d. $125,000

c. $355,000

4. Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows? a. retirement of bond payable b. acquisition of treasury stock c. declaration of stock dividends d. issuance of long-term debt

d . issuance of long-term debt

6. Cash paid for preferred stock dividends should be shown on the statement of cash flows under a. investing activities b. financing activities c. noncash investing and financing activities d. operating activities

b. financing activities

28. Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land? a. $50,000 b. $71,000 c. $121,000 d. $21,000

a. $50,000

26. Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is a. $50,000 b. $40,000 c. $55,000 d. $35,000

b. $40,000

14. Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method? a. an increase in inventory b. a decrease in accounts payable c. preferred dividends declared and paid d. a decrease in accounts receivable

d. a decrease in accounts receivable

20. On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities b. added to net income in converting the net income reported on the income statement to cash flows from operating activities c. added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends d. deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

a. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities

35. The cost of goods sold during the year was $45,000. Inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable (all owed to merchandise suppliers) were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total a. $46,000 b. $44,000 c. $50,000 d. $40,000

b. $44,000

30. Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method? a. a decrease in inventory b. a decrease in accounts payable c. preferred dividends declared and paid d. a decrease in accounts receivable

b. a decrease in accounts payable

23. A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as follows: a. an increase of $54,000 from investing activities b. an increase of $63,000 from investing activities and a deduction from net income of $9,000 c. an increase of $9,000 from investing activities d. an increase of $54,000 from investing activities and an addition to net income of $9,000

b. an increase of $63,000 from investing activities and a deduction from net income of $9,000

34. Free cash flow is a. all cash in the bank b. cash from operations c. cash from financing less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends d. cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

d. cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

1. On the statement of cash flows, the cash flows from operating activities section would include a. receipts from the issuance of capital stock b. receipts from the sale of investments c. payments for the acquisition of investments d. cash receipts from sales activities

d. cash receipts from sales activities

10. Cash receipts received from the issuance of a mortgage notes payable would be classified as a(n) a. investing activity b. operating activity c. noncash investing and financing activity d. financing activity

d. financing activity

11. The order of presentation of activities on the statement of cash flows is a. operating, investing, and financing b. operating, financing, and investing c. financing, operating, and investing d. financing, investing, and operating

d. financing, investing, and operating

7. Which of the following is a noncash investing and financing activity? a. payment of a cash dividend b. payment of a six-month note payable c. purchase of inventory on account d. issuance of common stock to acquire land

d. issuance of common stock to acquire land

22. On the statement of cash flows, the cash flows from investing activities section would include a. receipts from the issuance of capital stock b. payments for dividends c. payments for retirement of bonds payable d. receipts from the sale of investments

d. receipts from the sale of investments

13. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in a. the cash flows from financing activities section b. the cash flows from investing activities section c. a separate schedule d. the cash flows from operating activities section

d. the cash flows from operating activities section