Ch. 12 Analyzing Cash Flows

APS Company issued 15,000 shares of $1 par common stock for $40 per share during 2014. The company paid dividends of $36,000 and issued long-term notes payable of $330,000 during the year. What amount of cash flows from financing activities will be reported on the statement of cash flows? a. $9,000 net cash inflow. b. $264,000 net cash inflow. c. $705,000 net cash outflow. d. $894,000 net cash inflow.

D

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, accounts receivable collected would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

A

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, dividends received on securities held would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

A

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, income taxes paid would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

A

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, interest paid on note would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

A

Generally, the most important category on the statement of cash flows is cash flows from a. operating activities. b. investing activities. c. financing activities. d. significant noncash activities.

A

If a company reports a net loss, it a. may still have a net increase in cash. b. will not be able to pay cash dividends. c. will not be able to get a loan. d. will not be able to make capital expenditures.

A

If a loss of $9,000 is incurred in selling (for cash) office equipment having a book value of $80,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a. $71,000. b. $80,000. c. $89,000. d. $9,000.

A

Investing activities include a. collecting cash on loans made. b. obtaining cash from creditors. c. obtaining capital from owners. d. repaying money previously borrowed.

A

Laser Performance Inc. has the following information available (amount in thousands). Net Income $30,000 Average Total Liabilities 80,000 Average Current Liabilities 36,000 Cash Provided by Operations 48,000 Cash Sales 130,000 Capital Expenditures 22,000 Dividends Paid 6,000 What is the current cash debt coverage? a. 1.333 times. b. .600 times . c. .833 times . d. .369 times.

A

Peninsula Company reported net income of $260,000 for the year. During the year, accounts receivable increased by $21,000, accounts payable decreased by $9,000 and depreciation expense of $45,000 was recorded. Net cash provided by operating activities for the year is a. $275,000. b. $245,000. c. $227,000. d. $260,000.

A

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.

A

The phase in the product life cycle when a company is purchasing fixed assets and beginning to produce and sell is the a. introductory phase. b. growth phase. c. maturity phase. d. decline phase.

A

The statement of cash flows will not report the a. amount of checks outstanding at the end of the period. b. sources of cash in the current period. c. uses of cash in the current period. d. change in the cash balance for the current period.

A

Which of the following is the first step in preparing the statement of cash flows? a. Determine the net cash provided by operating activities. b. Determine the net income. c. Determine net cash provided by investing and financing activities. d. Determine the net increase (decrease) in cash.

A

Which of the following transactions does not affect cash during a period? a. Write-off of an uncollectible account. b. Collection of an accounts receivable. c. Sale of treasury stock. d. Redeeming bonds before maturity.

A

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $10,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $400,000. 7. Bought inventory for cash of $160,000. 8. Acquired an investment in Zynga stock for cash of $21,000. 9. Converted bonds payable to common stock in the amount of $500,000. 10. Repaid a 6 year note payable in the amount of $220,000. What is the net cash provided by financing activities? a. $<105,000>. b. $395,000. c. $<605,000>. d. $115,000.

A

A company had net income of $990,000. Depreciation expense is $110,000. During the year, accounts receivable and inventory increased $60,000 and $160,000, respectively. Prepaid expenses and accounts payable decreased $8,000 and $16,000, respectively. There was also a loss on the sale of equipment of $12,000. How much cash was provided by operating activities? a. $860,000. b. $884,000. c. $1,180,000. d. $1,228,000.

B

A company would be expected to generate small amounts of cash from operations during the a. introductory phase. b. growth phase. c. maturity phase. d. decline phase.

B

Accounts receivable arising from sales to customers amounted to $120,000 and $105,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $407,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows is a. $407,000. b. $422,000. c. $512,000. d. $392,000.

B

All of the following statements are true regarding cash flow presentations except a. the balance sheet provides only limited information about a company's cash flows. b. the balance sheet provides information about how property, plant, and equipment were financed. c. the income statement does not show how much cash was generated by operating activities. d. if cash from operations is compared to net income, information about the quality of reported net income is revealed.

B

Assume that the E-Zip Corporation uses the indirect method to depict cash flows. Indicate where, if at all, land purchased for cash would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

B

Collections on accounts receivable will lag behind sales, and accrual sales during a period will exceed cash collections during the a. introductory phase. b. growth phase. c. maturity phase. d. decline phase.

B

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's cash debt coverage? a. 0.38 times. b. 0.46 times. c. 1.22 times. d. 0.40 times.

B

If a company has both an inflow and outflow of cash related to property, plant, and equipment, the ______________ in the investing activities section. a. two cash effects must be netted and presented as one item b. cash inflow and cash outflow must be reported separately c. cash outflow is only is presented d. cash inflow and cash outflow can either be reported separately or presented as one item

B

If accounts receivable have increased during the period a. revenues on an accrual basis are less than revenues on a cash basis. b. revenues on an accrual basis are greater than revenues on a cash basis. c. revenues on an accrual basis are the same as revenues on a cash basis. d. expenses on an accrual basis are greater than expenses on a cash basis.

B

Land costing $125,000 was sold for $325,000 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. $125,000. b. $325,000. c. $280,000. d. $200,000.

B

Minette Company reported net income of $120,000 for the year ended December 31, 2014. During the year, inventories decreased by $24,000, accounts payable decreased by $36,000, depreciation expense was $27,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2014 using the indirect method was a. $168,000. b. $126,000. c. $147,000. d. $144.000.

B

Of the items below, the one that appears first on the statement of cash flows is a. noncash investing and financing activities. b. net increase (decrease) in cash. c. cash at the end of the period. d. cash at the beginning of the period.

B

The information in the following table is from the statement of cash flows for a company at four different points in time (Period 1, Period 2, Period 3, and Period 4). Negative values are presented in parentheses. Period 1 Period 2 Period 3 Period 4 Cash provided by operations $ (180,000) $ 90,000 $ 360,000 $ 50,000 Cash provided by investing (300,000) 75,000 90,000 (120,000) Cash provided by financing 290,000 (220,000) ($170,000) $420,000 Net income (120,000) 30,000 300,000 (15,000) Based on this information, which of the following answers most likely corresponds with the introductory phase, growth phase, maturity phase, or decline phase? a. Period 2, Period 1, Period 3, Period 4. b. Period 1, Period 4, Period 3, Period 2. c. Period 3, Period 4, Period 1, Period 2. d. Period 4, Period 3, Period 2, Period 1.

B

The net income reported on the income statement for the current year was $410,000. Depreciation recorded on plant assets was $76,000. Accounts receivable and inventories increased by $40,000 and $16,000, respectively. Prepaid expenses and accounts payable decreased by $2,000 and $32,000, respectively. How much cash was provided by operating activities? a. $380,000. b. $400,000. c. $364,000. d. $572,000.

B

Which of the following activities would be classified as an investing activity? a. Cash received from interest revenue. b. Cash paid (loaned) to a borrower as a loan. c. Cash received from dividend revenue. d. Cash paid to reacquire capital stock.

B

Assume that the E-Zip Corporation uses the indirect method to depict cash flows. Indicate where, if at all, common stock issued for cash would be classified. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

C

Assume that the E-Zip Corporation uses the indirect method to depict cash flows. Indicate where, if at all, treasury stock purchased with cash would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow

C

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, long-term debt retired with cash would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

C

Cash from operations and net income are approximately the same during the a. introductory phase. b. growth phase. c. maturity phase. d. decline phase.

C

Cash generated from operations exceeds investing needs, and the company can begin retiring debt during the a. introductory phase. b. growth phase. c. maturity phase. d. decline phase.

C

Cash receipts from interest and dividends are classified as a. financing activities. b. investing activities. c. operating activities. d. either financing or investing activities.

C

Catalina Company reported a net loss of $10,000 for the year ended December 31, 2014. During the year, accounts receivable decreased $5,000, inventory increased $8,000, accounts payable increased by $10,000, and depreciation expense of $6,000 was recorded. During 2014, operating activities a. used net cash of $3,000. b. used net cash of $7,000. c. provided net cash of $3,000. d. provided net cash of $7,000.

C

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's free cash flow? a. ($72,000,000). b. $54,000,000. c. $259,000,000. d. ($302,000,000).

C

During 2014, Lowes Company sold equipment with a book value of $90,000 for proceeds of $109,000. The company purchased new equipment for $240,000 by signing a long-term note payable. No other transactions impacted long-term asset accounts during 2014. The investing section of the statement of cash flows will report a. net cash outflows of $226,000. b. net cash outflows of $131,000. c. net cash inflows of $109,000. d. net cash inflows of $14,000.

C

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

C

If $2,500,000 of bonds are issued during the year but $4,000,000 of old bonds are retired during the year, the statement of cash flows will show a(n) a. net increase in cash of $1,500,000. b. net decrease in cash of $1,500,000. c. increase in cash of $2,500,000 and a decrease in cash of $4,000,000. d. net loss on retirement of bonds of $1,500,000.

C

If a gain of $45,000 is incurred in selling (for cash) office equipment having a book value of $180,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is a. $135,000. b. $180,000. c. $225,000. d. $45,000.

C

If accounts payable have increased during a period a. revenues on an accrual basis are less than revenues on a cash basis. b. expenses on an accrual basis are less than expenses on a cash basis. c. expenses on an accrual basis are greater than expenses on a cash basis. d. expenses on an accrual basis are the same as expenses on a cash basis.

C

In Jackson Jones Company, land decreased $180,000 because of a cash sale for $180,000, the equipment account increased $60,000 as a result of a cash purchase, and Bonds Payable increased $200,000 from issuance for cash at face value. The net cash provided by investing activities is a. $180,000. b. $320,000. c. $120,000. d. $140,000.

C

Laser Performance Inc. has the following information available (amount in thousands). Net Income $30,000 Average Total Liabilities 80,000 Average Current Liabilities 36,000 Cash Provided by Operations 48,000 Cash Sales 130,000 Capital Expenditures 22,000 Dividends Paid 6,000 What is the cash debt coverage? a. .375 times. b. 1.33 times. c. .600 times. d. 1.625 times.

C

Significant noncash transactions would not include a. conversion of bonds into common stock. b. asset acquisition through bond issuance. c. treasury stock acquisition. d. exchange of plant assets.

C

The payment of a cash dividend would be classified as a(n) a. operating activity. b. investing activity. c. financing activity. d. significant noncash activity.

C

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $10,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $400,000. 7. Bought inventory for cash of $160,000. 8. Acquired an investment in Zynga stock for cash of $21,000. 9. Converted bonds payable to common stock in the amount of $500,000. 10. Repaid a 6 year note payable in the amount of $220,000. What is the net cash provided by investing activities? a. $432,000. b. $212,000 c. ($18,000). d. ($68,000).

C

Assume that the E-Zip Corporation uses the indirect method to depict cash flows. Indicate where, if at all, land and building purchased with a mortgage would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

D

Assume that the Fitzgerald Corporation uses the indirect method to depict cash flows. Indicate where, if at all, a stock dividend declared and issued would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

D

Assume that the Quinn Corporation uses the indirect method to depict cash flows. Indicate where, if at all, stock issued for equipment would be classified on the statement of cash flows. a. Operating activities section. b. Investing activities section. c. Financing activities section. d. Does not represent a cash flow.

D

Cash from investing becomes positive and cash from financing becomes more negative during the a. introductory phase. b. growth phase. c. maturity phase. d. decline phase.

D

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's current cash debt coverage? a. 1.16 times. b. 2.88 times. c. 0.82 times. d. 1.22 times.

D

LKN Company reported net income of $80,000 for the year. During the year, accounts receivable increased by $6,000, accounts payable decreased by $4,000 and depreciation expense of $10,000 was recorded. Net cash provided by operating activities for the year is a. $90,000. b. $70,000. c. $72,000. d. $80,000.

D

McLaughlin Company issued common stock for proceeds of $372,000 during 2014. The company paid dividends of $66,000 and issued a long-term note payable for $250,000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $54,000. The financing section of the statement of cash flows will report net cash inflows of a. $252,000. b. $556,000. c. $306,000. d. $502,000.

D

The issuance of debt to purchase assets would be classified as a(n) a. operating activity. b. investing activity. c. financing activity. d. none of these answers are correct.

D

Vangaurd Company purchased treasury stock with a cost of $55,000 during 2014. During the year, the company paid dividends of $20,000 and issued bonds payable for proceeds of $836,000. Cash flows from financing activities for 2014 total a. $816,000 net cash inflow. b. $831,000 net cash inflow. c. $75,000 net cash outflow. d. $761,000 net cash inflow.

D

Which one of the following affects cash during a period? a. Recording depreciation expense. b. Declaration of a cash dividend. c. Write-off of an uncollectible account receivable. d. Payment of an accounts payable.

D

Which one of the following items is not necessary in preparing a statement of cash flows? a. Determine the change in cash. b. Determine the cash provided by operations. c. Determine cash from financing and investing activities. d. Determine the cash in each of the bank accounts.

D

Zoum Corporation had the following transactions during 2014: 1. Issued $125,000 of par value common stock for cash. 2. Recorded and paid wages expense of $60,000. 3. Acquired land by issuing common stock of par value $50,000. 4. Declared and paid a cash dividend of $10,000. 5. Sold a long-term investment (cost $3,000) for cash of $3,000. 6. Recorded cash sales of $400,000. 7. Bought inventory for cash of $160,000. 8. Acquired an investment in Zynga stock for cash of $21,000. 9. Converted bonds payable to common stock in the amount of $500,000. 10. Repaid a 6 year note payable in the amount of $220,000. What is the net cash provided by operating activities? a. $305,000. b. $290,000. c. $240,000. d. $180,000.

D