Chapter 21 - Statement of cash flow
19.2.4 Classification of cash flows On July 1, Year 1, Dewey Co. signed a 20-year building lease that it reported as a finance lease. Dewey paid monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its Year 1 statement of cash flows? A. An outflow equal to the Year 1 principal payment only. B. The lease payments should not be reported in the financing activities soon.
A
19.1.2 Statement of cash flows The primary purpose of a statement of cash flows is to provide relevant information about A. The cash receipts and cash disbursements of an entity during a period. B. An entity's ability to meet cash operating needs.
A.
19.1.5 Statement of cash flows Bay Manufacturing Co. purchased a 3-month U.S. Treasury bill. In preparing Bay's statement of cash flows, this purchase would A. Have no effect B. Be treated as an outflow from financing activities
A.
19.3.3 Operating Activities- Indirect Presentation If the indirect method is used to present the statement of cash flows of a business, depreciation expense is A. Presented as an addition to net income in the operating section of the statement B. Not disclosed on the statement.
A.
19.3.9 Operating Activities- Indirect Presentation In the indirect presentation of cash flows from operating activities, net income of a business is adjusted for noncash revenues, gains, expenses, and losses to determine the cash flows from operating activities to net income A. May be either reported in the statement of cash flows or presented separately in a related disclosure. B. Need not be presented.
A.
19.3.11 Operating Activities- Indirect Presentation In its statement of cash flow for the current year, Ness Co. reported cash paid for interest of $70,000. Ness did not capitalize any interest during the current year. Changes occurred in several balance sheet account as follows: Accrued interest payable $17,000 decrease Prepaid interest $23,000 decrease In its income statement for the current year, what amount should Ness report as interest expense? A. $76,000 B. $110,000
A. Current interest expense = ($70,000 - $17,000 + $23,000) = $76,000
19.2.6 Classification of cash flows The following information was taken from the accounting records of Gorky corporation for the year ended December 31, Year 1: Proceeds from issuance of preferred stock: $8,000,000 Dividends paid on preferred stock $800,000 Bonds payable converted to common stock $4,000,000 Payment for purchase of machinery $1,000,000 Proceeds from sale of plant building $2,400,000 2% stock dividend on common stock $600,000 Gain on sale of plant building $400,000 The net cash flows from investing and financing activities that should be presented on Gorky's statement of cash flows for the year ended December 31, Year 1, are respectively A. $1,400,000 and 7,200,000 B. $1,400,000, anf $7,800,000
A. Investing activities include the purchase of machinery and sale of building ($2,400,000 - $1,000,000) $1,400,000 Financing activities include the issuance of preferred stock and the payment of dividends. ($8,000,000 - $800,000) = $7,200,000
19.3.12 Operating Activities- Indirect Presentation A company is preparing its year-end cash flow statement using the indirect method. During the year, the following transaction occurred: Dividends paid $300 Proceeds from issuance of common stock $250 Borrowings under a line of credit $200 Proceeds from the issuance of convertible bonds $100 Proceeds from the sale of a building $150 What is the company's increase in cash flows provided by financing activities for the year? A. $250 B. $550
A. The company's increase in cash flows provided by financing activities [ ($300) + $250 + $200 + $100 ] = $250
19.3.8 Operating Activities- Indirect Presentation In its statement of cash flows issued for the year ended June 30, Prince company reported a net cash inflow from the operating activities of $123,000. The following adjustments were included in the supplementary schedule reconciling cash flow from operating activities with net income: Depreciation $38,000 Increase in net account receivable $31,000 Decrease in inventory $27,000 Increase in account payable $48,000 Increase in interest payable $12,000 Net income is A. $29,000 B. $41,000
A. The net adjustment to net cash inflow from operating activities is (- $38,000 + $31,000 - $27,000 - $48,000 - $12,000) = (94,000) Net income = (Net cash inflow - net adjustment) NI = ( $123,000 - $94,000) = $29,000
19.2.9 Classification of cash flows A company calculated the following data for the period: Cash received from customers $25,000 Cash received from sale of equipment $1,000 Interest paid to bank on note $3,000 Cash paid to employees $8,000 What amount should the company report as net cash provided by operating activities in its statement of cash flows? What amount should the company report as net cash provided by operating activities in its statement of cash flows? A. $14,000 B. $15,000
A. Net cash provided by operating activities ($25,000 - $8,000 - $3,000 = $14,000)
19.1.1 Statement of cash flows A statement of cash flows is to be presented in general-purpose external financial statements by which of the following? A. Publicly held for business only. B. All businesses and nongovernmental not-for-profit entities
B.
19.1.3 Statement of cash flows A corporation issues a balance sheet and income statement for the current year. It also issues comparative income statements for each of the 2 previous years and a comparative balance sheet for 1 previous year. A statement of cash flows. A. Must be issued for the current year only. B. Must be issued for all 3 years.
B.
19.1.4 Statement of cash flows Which of the following cash flows per share should be reported in a statement of cash flows? A. Both basic and diluted cash flows per share. B. Cash flows per share should not be reported.
B.
19.2.1 Classification of cash flows Which collection is reported as an investing activity in statement of cash flows? A. Proceeds from a note payable. B. A note receivable from a related party.
B.
19.2.2 Classification of cash flows Which of the following transaction should be classified as investing activities on an entity's statement of cash flows? A. Increase in accounts receivable B. Sale of property, plant and equipment
B.
19.2.8 Classification of cash flows In preparing its statement of cash flows, if Harlingen Co. omits the payment of cash dividends, the net cash provided by List A and activities will be List B LIST A | LIST B A. Investing | Overstated B. Financing | Overstated
B.
19.3.1 Operating Activities- Indirect Presentation How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method? A. In operating activities as an addition to income B. In operating activities as a deduction to income
B.
19.3.2 Operating Activities- Indirect Presentation In a statement of cash flows (indirect method) of a business, an increase in inventories should be presented as a(n) A. Outflow of cash B. Deduction from income from continuing operations.
B.
19.3.4 Operating Activities- Indirect Presentation Ionia Company reports operating activities in its statement of cash flows using the indirect method. Which of the following items, if any, should Ionia add back to net income to arrive at net operating cash flow? Excess of Treasury stock Acquisition Cost over Sales Proceeds (Cost method) | Bond discount Amortization A. No | Yes B. Yes | No
B.
Kresley Co. has provided the following current account balances for the preparation of the annual statement of cash flows: A/C receivable (1/1) $11,500 (31/1) $14,500 Allowance for uncollectible accounts (1/1) 400 (31/1) 500 Prepaid rent expense (1/1) 6,200 (31/1) 4,100 A/C payable (1/1) 9,700 (31/1) 11,200 Kresly's current-year net income is $75,000. Net cash provided by operating activities in the statement of cash flows should be A. $72,700 B. $75,700
B. Cash provided by operating activities ( $75,000 NI - $3,000 change in A/R + $100 change in allowance + $2,100 decrease in prepaid rent + $1,500 increase in A/P) = $75,700
19.2.10 Classification of cash flows Fara Co. reported bonds payable of $47,000 on December 31, Yr 2. During Year 2, Fara issued $20,000 of bonds payable in exchange for equipment. There was no amortization of bond premium or discount during the year. What amount should Fara report in its Year 2 statement of cash flows for redemption of bonds payable? A. $3,000 B. $17,000
B. Given that $20,000 of bonds were issued and that the ampunt reported increased by only $3,000; $17,000 of bonds must have been redeemed.
19.3.10 Operating Activities- Indirect Presentation Reed Co.'s Year 1 statement of cash flows reported cash provided from operating activities of $400,000. For Year 1, depreciation of equipment was $190,000, impairment of goodwill was $5,000, and dividends paid on common stock were $100,000. In Reed's Year 1 statement of cash flows, what amount was reported as net income? A. $105,000 B. $205,000
B. Net income = (net cash provided by operating activities - depreciation - goodwill impairment) ($400,000 - $190,000 - $5,000) = $205,000
19.2.5 Classification of cash flows Abbott Co. is preparing its statement of cash flows for the year. Abbott's cash disbursements during the year included the following: Payment of interest on bonds payable - $500,000 Payment of dividends to stockholders - $300,000 Payment to acquire 1,000 shares of Marks Co. common stock - $100,000 What should Abbott report as total cash outflows for financing activities in its statement of cash flows under U.S. GAAP? A. $0 B. $300,000
B. Dividends are classified as a financial cash outflow.
19.2.7 Classification of cash flows In a statement of cash flows, which of the following items is reported as a cash outflow from financing activities by a nongovernmental not-for-profit organization? I. Payments to retire real estate mortgage notes II. Interest payments on real estate mortgages notes. III. Payments on the principal of seller-financed debt related to a purchase of equipment. A. I, II, III B. II only C. I and III
C.
