Ch. 11 Homework: Statement of Cash Flows

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

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; =$200,000+$50,000-$10,000

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

-accounts payable -inventory -accounts receivable

What 2 activities are identical in every detail under the direct and indirect methods?

-cash flows from financing activities -cash flows from investing activities

Adjustments to net income in calculating operating cash flows include:

-changes in current assets and current liabilities -non operating items -non cash items

What is classified as cash inflows from operating activities on the statement of cash flows?

-collection from customers -interest received on notes receivable

What are common non-cash items requiring adjustment to net income under the indirect method?

-depreciation expense -amortization expense

4 steps in preparing a statement of cash flows in ORDER

1.) calculate the net cash flows from operating activities 2.) determine the net cash flows from investing activities 3.) determine the net cash flows from financing activities 4.) combine operating, investing, and financing activities

How to quickly find a check figure?

calculate the change in the beginning and ending balance of cash

What is the first step in preparing a statement of cash flows in ORDER

calculate the net cash flows from operating activities

What is the final step in preparing a statement of cash flows in the correct order?

combine operating, investing, and financing activities

Increase in accounts receivable will result in ____________ in cash from sales revenue when using the direct method to determine cash flows from operations.

decrease

Which statement 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 non-cash expense

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

detail and presentation ONLY

What method prepares 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

How to calculate the return on assets?

divide net income by total assets

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

financing activities

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

financing activities

Repayments of formal, long-term debt contracts are classified as:

financing activities

What are non-operating items that require adjustments under the indirect method?

gains and losses on the sale of long-term assets

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

increase

___________ 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

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

investing

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

investing activities

This statement regarding the amount of cash from operating activities is correct?

it is identical under the direct and 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

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

more

Non cash items, non-operating 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 indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is ___________ ____________.

net income

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.

non-cash

Depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents ______________ reduction to net income.

non-cash

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

non-operating

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

not reported on the statement of cash flows

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

operating activities

The statement of cash flows classifies items as:

operating, investing, and financing

What results in a cash outflow from investing activities?

purchase of a machine for cash

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

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

return on assets

What results in a cash inflow from investing activities?

sale of a machine for cash

The correct statement concerning a decrease in accounts payable?

since the cash payments were more than the credit purchases, the decrease must be added to purchases to calculate cash payments to suppliers

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

statement of cash flows

Statement of cash flows, the sum of cash inflows and outflows is equal to:

the change in the cash balance

Net cash flows provided by operating activities will be ________ when using the direct method compared to the indirect method.

the same

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

the same as under the indirect method

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

3 classifications on the statement of cash flows are cash flows from:

-operating activities -financing activities -investing activities

What is classified as cash outflows from operating activities on the statement of cash flows?

-payment on account -payment of salaries OR -purchase of supplies -interest paid on bonds -payment on account payable

T OR F: 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