Chapter 12 Accounting

The statement of cash flows does not report the following transactions:

between cash and cash equivalents

Net cash provided by operating activities was $12,000. Net cash provided by investing activities was $2,000. 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:

$11,000. $12,000+2,000-7,000=$7,000. $7,000+4,000=$11,000

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

1. Compute the net increase or decrease in cash 2. Compute net cash provided or used by operating activities 3. Compute net cash provided or used by investing activities 4. Compute net cash provided or used by financing activities 5. Compute the net cash from all sources and prove the charge

The equipment account had a $36,000 balance at the beginning of the year, and a $30,000 balance at the end of the year. The accumulated depreciation account had a balance of $22,000 at the beginning of the year, and a $17,000 balance at the end of the year. The income statement reported depreciation expense of $4,000 for the year. Equipment costing $10,000 was sold for its book value. Cash received from the sale to be reported in the Investing Activities section is $___________

1000

Net cash used in operating activities was $10,000. Net cash provided by investing activities was $2,000. Net cash provided by financing activities was $5,000. The cash balance at the end of the year was $12,000. The cash balance at the beginning of the year was $

15000; 5000+2000-10000=-3000 ended at 12,000 +3000 to 12,000 for the beginning year balance.

At the beginning of the period, a company reported $100,000 of common stock, $10 par; and $50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000 of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $

50000; (110,000+90,000)-(100,000+50,000)= 200,000 - 150,000 = 50,000

Red Co.'s beginning Common stock balance was $110,000 and their ending Common stock balance was $125,000. This will be reported as __________ in the statement of cash flows.

An increase of $15,000 in the financing activities section

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? (Check all that apply.)

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

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts? (Check all that apply.)

Bonds Payable Common Stock

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? (Check all that apply.)

Can the company pay its debts? How does a company spend its cash? Does the company have the resources to pursue opportunities?

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 building

Which of the following is not one of the five important steps to preparing a statement of cash flows?

Compute the Net income

Which of the following is not one of the five important steps to preparing a statement of cash flows?

Compute the net income

The (direct/indirect) method separately lists 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

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method? (Check all that apply.)

Gain on sale of building Loss on sale of investment Depreciation expense

Accountants can use a three-step process to determine cash provided (or used) by investing activities. Which of the following steps is not part of this process?

Identify adjustments to net income.

Which of the following items are classified as noncash investing and financing activities? (Check all that apply.)

Purchase of a building with a note Retirement of debt by issuing stock Issuance of common stock in exchange for land

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. (Check all that apply.)

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

Which of the following items would not be a correct adjustment to net income to arrive at cash flows from operating activities, using the indirect method?

Subtract increase in taxes payable

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 cash flows.

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

What are the earnings-per-share of common stock?

Information on the statement of cash flows helps users answer all of the following questions except:

Why did the company invest in long-term assets?

The statement of cash flows reports noncash investing and financing transactions in

a note or separate schedule

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

added

Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000. This will be reported as _____ on the statement of cash flows.

an increase of $5,000 in the cash flows from financing activities section

Blue Co. sold plant assets costing $15,000 with accumulated depreciation of $10,000 for $7,000. As a result, Blue Co will report _____ on the statement of cash flows in the cash flows from investing activities section.

an increase of $7,000 in the investing activities section

A company repaid a long-term debt during the year. They will report this as an (increase/decrease) ______ in the ______ activities section on the statement of cash flows.

decrease financing

The format of a statement of cash flows includes reporting cash flows from three activities including:

financing, operating, investing

The three-stage process to determine cash provided or used by financing activities includes all of the following steps except:

identify an increase or decrease in cash.

The three-step analysis to determine cash provided or used by financing activities includes:

identifying changes in financing-related accounts explaining the changes using T-accounts and reconstructed entries reporting the cash flow effects

The three-step analysis to determine cash provided or used by investing activities includes:

identifying changes in investing-related accounts explaining the changes using T-accounts and reconstructed entries reporting the cash flow effects

A net cash (inflow/outflow) occurs when the receipts in a category exceed the payments

inflow

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

interest payable

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

net cash inflow

The indirect method of computing and reporting net cash flows from operating activities involves adjusting _________ _________ to obtain the net cash provided or used by operating activities

net income

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

net income

A net cash ______ occurs when the payments in a category exceed the receipts.

outflow

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

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

subtracted

In preparing cash flows from operating activities using the indirect method, an increase in accounts receivable would be (added/subtracted) to (from) net income

subtracted