Chapter 12 Accounting

Lakeview, Inc's statement of cash flows reports financing activities with payments that exceed receipts. This means that Lakeview had a net cash (inflow/outflow) _________________ from financing activities.

outflow

Net cash provided by operating activities was $12,000. Net cash used in financing activities was $7,000. The cash balance at the beginning of the year was $4,000. The cash balance at the end of the year is:

$12,000+(2,000)-7000 7000+4000=$11,000

Which of the following items would be adjusted to net income activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash hen computing cash flows from operating activities, using the indirect method?

- Gain on sale of the building -Depreciation expense -Loss on sales of investment

Which of the following items would be correct adjustments to net income to arrive at cash flows from operations, using indirect method? (Correct all that apply)

-Add increase in payable amounts -Subtract increases in inventory

The statement of cash flows explains the difference between beginning and ending balances of cash and cash equivalents. A cash equivalent must satisfy which of the following criteria>

-Be close to maturity -Be readily convertible to a known amount of cash

The information needed to prepare a statement of cash flows could come from which of the following sources>

-Cash account -Income statement' -Comparative balance sheets

A company's cash receipts and cash payments are recorded in the cash account in its general ledger. Which of the following can be determined by analyzing the cash account?

-Cash payments for the equipment -Cash payments on notes -Cash receipts from customers

Which of the following items could be "other cash receipts"

-Cash received from dividends -Cash received from rent -Cash received from interest

Which of the following items would be reported under financing activities on the statement of cash flows?

-Cash received from issuing notes. -Cash dividends paid to shareholders -Cash paid to repay cash loans

Which of the following items would not be adjusted to net income when computing cash flows from operating activities, using the indirect method?

-Cash received from sale of the building

Information about cash flows can influence decision makers in important ways. Which of the following questions could be answered by the statement of cash flows?

-Does the company have the resources to expand - Is a company financing its expenditures from the operating activities or from sale of assets -Can a company meet unexpected obligations?

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method?

-Increase in unearned fees - Increases in accounts payable

To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:

-Interest Payable

In a statement of cash flows,cash received from the sale of a building would be classified under "cash flows from ___________ activities"

-Investing

Identify which of the following items is not a noncash investing and financing activity that must be reported in a note to the statement of cash flows.

-Repayment of a note with cash -Purchase of a plant asset with cash

Which of the following statements about the statement of cash flows are correct? (Check all that apply)

-The purpose is to report cash receipts and cash payments during a period -It is a detailed disclosure of individual cash flows.

There are five important steps to preparing a statement if cash flows. Rank the steps in order from first to last.

1. Compute the net increase or decrease in cash. 2. Compute and report the net cash provided or used by operating activities. 3. Compute and report the net cash provided or used by investigating activities. 4. Compute and report the net cash provided or used by financing activities. 5. Compute the net cash flow by combining net cash provided or used by operating, investing, and financial activities and prove the change.

A(n)_____________ occurs when the receipts in a category exceed the payments.

Net cash inflow

Both the direct and indirect methods of operating activities report which of the following items?

Net cash inflows (outflows)

Which of the following entries would be included in the operating section, when preparing the statement of cash flows using the indirect method?

Net income

Which of the following questions could not be answered from the statement of cash flows?

Where are the earning per share of common stock?

A loss from the sale of an investment would be (added/subtracted) _______ to (from) net income when computing cash flow from operations, using the indirect method.

added

An increase in wages payable would be (added/subtracted) ________ to (from) net income when prepping cash flows from operating activities, using the indirect method.

added

Depreciation expense is ______________ to (from) net income, when computing cash flows from operations, using the indirect method.

added

The FASB recommends, but does not require, reporting the statement of cash flows using the (direct/indirect) __________ method

direct

The ___________ method separately list each major item of operating cash receipts and each major item of operating cash payments. The cash payments are subtracted from cash receipts to determine the net cash provided (used) by operating activities.

direct

--------- activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners

financing

_______ activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

financing

The____ principle requires that important investing and financing activities that do not affect cash receipts or payments must be disclosed at the bottom of the statement of cash flows, or in a not to the financial statements.

full disclosure

At the beginning if 2010, Rex Co. showed a debit balance in the cash account of $20,500 total debits to the account of $45,000, and total credits to the account of $35,000. The net ____________________________ in cash for 2010 equals $_________________

increase $10,000

Carol Co. prepares a statement of cash flows starting with net income and then adjusting for items necessary to obtain net cash provided or used by operating activities. Carol must be using the (Direct/indirect) ___________________ method of reporting the statement of cash flows.

indirect

____________ activities include those transactions and events that affect long term assets, such as lending and collecting money for notes receivable and cash receipts from sale of the long term plant assets.

investing

A (n) ______ activity includes those transactions and events that determine net income, including the purchase of merchandise, the sale of the goods and services to customers, and expenditures to operate the business.

operating

Which section of the statement of cash flows is affected by choosing to report using the direct method or indirect method>

operating

________________ activities include those transactions and events that determine net income.

operating

When a company's net income and cash flows from operations are significantly different, it can sometimes indicate an issue with the (quantity/quality)_____________ of earnings

quality

A gain from the sale of a building would be (added/subtracted) ________ to (from) net income when computing cash flow from operations, using the indirect method.

subtracted