AC Chapter 12

Long-term Notes Payable was $20 million at the beginning of the year and $30 million at the end. During the year an additional $15 million was borrowed. Repayments on the statement of cash flow during the year were ______.

$(5) million under financing activities

Which balance sheet line item will help explain a difference between revenue / net income on the income statement and cash from operating activities on the statement of cash flows?

Accounts Receivable

Which of the following cash flows are classified as operating activities? (Check all that apply.)

Cash flow causing decrease in current liabilities Cash from revenue earned in daily transactions

After its first year of business, Best Measures, Inc.'s sales revenue were $100,000 of which $90,000 was collected and total expenses of $60,000 of which $20,000 was paid. Which of the following statements is correct? (Select all that apply.)

Cash-basis net income equals $70,000. Accrual-basis net income equals $40,000.

When operating cash flows are calculated using the indirect method, which of the following is the correct adjustment to convert net income into net cash from operating activities?

Deduct from net income increases in current assets

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

Depreciation Expense originally reduced net income, but the expense does not involve paying cash.

Which of the following are the classifications on the statement of cash flows? (Check all that apply.)

Financing Operating Investing

indirect method

Indirect cash flow method, on the other hand, the calculation starts from the net income, and then we go along adjusting the rest.

Cash flows associated with intangible assets are ______ activities.

Investing

Changes in property, plant and equipment relate to the ______ activities on the statement of cash flows.

Investing

Which of the following are financing activities and show the appropriate cash effect? (Check all that apply.)

Issuance of bonds; inflow Repurchase of stock; outflow Repayment of bond face value; outflow

How is the change in cash classified on the statement of cash flows?

It is the sum of the operating, investing, and financing activities sections.

direct method

The direct cash flow method starts with cash transactions such as cash received and cash paid while ignoring the non-cash transactions

Depreciation Expense is ______ net income in a statement of cash flows prepared using the indirect method because it ______.

added back to; is a noncash expense

When operating cash flows are calculated using the indirect method, if Accrued Liabilities increased, then the change is ______ during the period.

added to net income because less cash was paid than expensed

When calculating net cash flow provided by operating activities, an increase in Accounts Payable is ______ net income because payments to suppliers are ______ than new purchases.

added to; less

ABC Company issued 30,000 shares of common stock in January. In August, the company repurchased 5,000 shares for the treasury. When reporting these transactions in the statement of cash flows, ABC Company ______ combine them into one transaction in the ______ activities section.

cannot; financing

The complete list of items needed to prepare a statement of cash flows includes ______.

comparative balance sheets, complete income statement, and additional data concerning accounts in investing and financing activities

The payment of dividends and changes in the Dividends Payable account are classified as.....activities

financing

The changes in the non-cash balance sheet accounts explain the differences between the ______.

income statement and the statement of cash flows

When using the indirect method in preparing the statement of cash flows, if revenues generated during the period are greater than the cash collected, then the ______ net income.

increase in Accounts Receivable will be subtracted from

When preparing the operating activities section of the statement of cash flows using the indirect method, adding a decrease in Accounts Receivable to net income allows the inclusion of transactions that ______.

increased cash, but did not affect net income

The issuance of common stock would be reported as a cash ______ activities on the statement of cash flows.

inflow under financing

Accrual-basis accounting is superior to cash-basis accounting in that ______.

it provides a better measure of profitability

An increase in Accounts Payable indicates that ______ was purchased than paid. Thus the increase will be ______ net income on the statement of cash flows prepared using the indirect method.

more; added to

The starting point for preparing the operating activities section using the indirect method is ______.

net income

Repaying principal to lenders is classified as a cash ______ activities on the statement of cash flows.

outflow under financing

Repurchases of treasury stock would be reported as a cash ______ activities on the statement of cash flows.

outflow under financing

When using the indirect method, subtracting an increase in Accounts Receivable from net income eliminates the effect of recording credit sales ______.

that increased net income, but did not impact cash

When using the indirect method, subtracting a decrease in Deferred Revenue from net income eliminates the effect of recording revenue ______.

that increased net income, but did not impact cash this period