ACC 210 Chapter 11 SmartBook

Sales on account are $100,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $15,000. What is the cash collected from customers during the period?

$105,000 $100,000 + 20,000 - 15,000 = $105,000

A review of Elisa Company's financial statements reveals the following information: cost of goods sold: $200,000; increase in inventory: $10,000; increase in accounts payable: $20,000. Cash paid to suppliers was:

$190,000

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year?

Accounts receivable Inventory Accounts payable

Joann is preparing a statement of cash flows as part of a homework assignment. She hopes to find a check figure that will help her assess the accuracy of her results. What should Joann do to quickly find a check figure?

Calculate the change in the beginning and ending balance of cash

Which of the following sections will be identical in every detail under the direct and indirect methods.

Cash flows from financing activities Cash flows from investing activities

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Collection from customers Collection of interest

The direct method presents a summary of all operating transactions that result in either a debit or credit to the ________ account.

cash

Cash from operating activities differs between the direct and indirect method with respect to the:

detail and presentation only

The three classifications on the statement of cash flows are cash flows from (Select all that apply.)

financing activities. investing activities. operating activities.

Which of the following nonoperating items require adjustments to net income under the indirect method?

gains from sale of long-term assets losses from sale of long-term assets

The statement of cash flows provides summary information about cash ________ and cash ________ during the year.

inflow outflow

Cash flows from ______ activities are both outflows and inflows of cash related to the acquisition and disposal of long-term assets.

investing

When using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ________ _________

net income

The financial statement that provides information about cash receipts and cash disbursements for the period is the

statement of cash flows.

Sales on account are $200,000. Cash sales during the period are $50,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $30,000. What is the total cash collected from customers during the period?

$240,000 Sales on account + cash sales + the change in accounts receivable = cash collected for the period. $200,000 + 50,000 - 10,000 = $240,000

Which of the following are common noncash items requiring adjustment to net income under the indirect method?

amortization expense depreciation expense

Which of the following represents the final step in preparing a statement of cash flows in the correct order?

combine operating, investing, and financing activities

When using the ________ method for determining cash flows from operations, noncash expenses are omitted from the Statement of Cash Flows.

direct

A decrease in accounts receivable will result in a(n) _________ in cash from sales revenue when using the direct method to determine cash flows from operations.

increase

A(n) ________ in accounts payable indicates that cash payments were less than credit purchases and must be subtracted from purchases to calculate cash payments to suppliers.

increase

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a(n) ______ reduction to net income.

noncash

Which of the following items are classified as cash outflows from operating activities on the statement of cash flows?

payment on account payable Interest paid on bonds purchase of supplies Payment of salaries payment on account

Which of the following describes the acceptable methods that may be used to report cash flows from operating activities on the statement of cash flows?

Indirect method Direct method

Adjustments to net income in calculating operating cash flows include:

Noncash items Changes in current assets and current liabilities Nonoperating items

________ activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

Operating

Cash transactions involving the purchase and sale of long-term assets and current investments are classified on the statement of cash flows as _______ activities.

investing

When prepaid accounts increase, it indicates the company has paid ______ cash than it recorded as operating expenses.

more

The return on assets is calculated by dividing ____ by _______.

net income; average total assets

When accounts receivable decrease

net sales are less than cash receipts from customers.

Depreciation expense and amortization expense represent ______ items requiring adjustments to net income under the indirect method.

noncash

Gains and losses on the sale of long-term assets represent common _______ items needing adjustment under the indirect method.

nonoperating

The statement of cash flows classifies items as

operating, investing, and financing.

Which of the following are cash outflows from investing activities?

purchase of long-term investments purchase of land Purchase of building

An increase in accounts receivable will result in a(n) ______ in cash from sales revenue when using the direct method to determine cash flows from operations.

decrease

A review of Munchen Corporation's financial statements reveals the following information: cost of goods sold: $100,000; decrease in inventory: $5,000; increase in accounts payable: $10,000. Cash paid to suppliers was:

$85,000

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 it is a noncash expense.

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of all operating transactions that result in either a debit or a credit to cash?

Direct

Which of the following are nonoperating items that require adjustments under the indirect method?

Gains on the sale of long-term assets Losses on the sale of long-term assets

Which of the following would result in a cash outflow from investing activities?

Purchase of a machine for cash.

When using the direct method, why is cash received from customers greater than sales revenue on the income statement when accounts receivable decreases?

There were more collections of accounts receivable than sales on account during the year.

True or false: Cost of goods sold must be adjusted to a cash number because the cost of merchandise sold may be more or less than the amount of cash paid to suppliers during the period.

True

Which of the following represents the first step in preparing a statement of cash flows in the correct order?

calculate the net cash flows from operating activities

Cash flows from ______ activities include both inflows and outflows of cash from the external funding of a business.

financing

Cash flows from ________ activities include both inflows and outflows of cash from the external funding of a business.

financing

Cash inflows and outflows involving stockholders and creditors are classified on the statement of cash flows as _______ activities.

financing

Repayments of formal, long-term debt contracts are classified as ______ activities.

financing

When the ______ account decreases, it means the company paid less cash for insurance than it recorded as insurance expense.

prepaid insurance

The ratio that is calculated by dividing net income by average total assets is referred to as:

return on assets

In a statement of cash flows, the sum of cash inflows and outflows is equal to

the change in the cash balance.

The amount of net cash flows from operating activities calculated using the direct method is

the same as under the indirect method.

In order to determine cash flows from financing activities, we need to examine changes to

long-term liability and stockholders' equity accounts

The purchase and sale of long-term assets and current investments are classified as

investing activities.

Noncash items, nonoperating items, and changes in current assets and liabilities are necessary adjustments to _______ ________ to prepare the operating section for the indirect format of the statement of cash flows.

net income

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

net income

When using the direct method to prepare the Statement of Cash Flows, depreciation expense is

not reported on the statement of cash flows.

Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be

added to net income.

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

operating activities

Changes to current assets and current liabilities require adjustment of net income under the indirect method because

related cash may be higher or lower than the accrued amount included in net income