Accounting 325 Chapter 23

Alex Company prepares its statement of cash flows using the direct method for operating activities. For the year ended December 31, 2018, Alex Company reports the following activity: Sales on account $2,100,000 Cash sales 1,110,000 Decrease in accounts receivable 915,000 Increase in accounts payable 108,000 Increase in inventory 72,000 Cost of goods sold 1,575,000 What is the amount of cash payments to suppliers reported by Alex Company for the year ended December 31, 2018? $1,611,000 $1,395,000 $1,755,000 $1,539,000

$1,539,000

During 2018, Stout Inc. had the following activities related to its financial operations: Carrying value of convertible preferred stock in Stout, converted into common shares of Stout $ 540,000 Payment in 2018 of cash dividend declared in 2017 to preferred shareholders 279,000 Payment for the early retirement of long-term bonds payable (carrying amount $3,930,000) 3,975,000 Proceeds from the sale of treasury stock (on books at cost of $387,000) 450,000 The amount of net cash used in financing activities to appear in Stout's statement of cash flows for 2018 should be $2,985,000. $3,822,000. $3,264,000. $3,804,000.

$3,804,000.

Donnegan Company reported operating expenses of $375,000 for 2018. The following data were extracted from the company's financial records: 12/31/17 12/31/18 Prepaid Expenses $ 60,000 $69,000 Accrued Expenses 210,000 255,000 On a statement of cash flows for 2018, using the direct method, cash payments for operating expenses should be $321,000. $429,000. $339,000. $411,000.

$339,000.

Foxx Corp.'s comparative balance sheet at December 31, 2018 and 2017 reported accumulated depreciation balances of $1,245,000 and $900,000, respectively. Property with a cost of $75,000 and a carrying amount of $57,000 was the only property sold in 2018. Depreciation charged to operations in 2018 was $363,000. $327,000. $402,000. $345,000.

$363,000.

Alex Company prepares its statement of cash flows using the direct method for operating activities. For the year ended December 31, 2018, Alex Company reports the following activity: Sales on account $2,100,000 Cash sales 1,110,000 Decrease in accounts receivable 915,000 Increase in accounts payable 108,000 Increase in inventory 72,000 Cost of good sold 1,575,000 What is the amount of cash collections from customers reported by Alex Company for the year ended December 31, 2018? $3,210,000 $2,295,000 $4,125,000 $3,015,000

$4,125,000

During 2018, Oldham Corporation, which uses the allowance method of accounting for doubtful accounts, recorded a provision for bad debt expense of $45,000 and in addition it wrote off, as uncollectible, accounts receivable of $10,000. As a result of these transactions, net cash flows from operating activities would be calculated (indirect method) by adjusting net income with a $35,000 decrease. $35,000 increase. $10,000 increase. $45,000 increase.

$45,000 increase.

The following information on selected cash transactions for 2018 has been provided by Mancuso Company: Proceeds from sale of land $315,000 Proceeds from long-term borrowings 600,000 Purchases of plant assets 216,000 Purchases of inventories 1,020,000 Proceeds from sale of Mancuso common stock 360,000 What is the cash provided (used) by investing activities for the year ended December 31, 2018, as a result of the above information? $1,275,000. $384,000. $99,000 $315,000.

$99,000

Xanthe Corporation had the following transactions occur in the current year: 1. Cash sale of merchandise inventory. 2. Sale of delivery truck at book value. 3. Sale of Xanthe common stock for cash. 4. Issuance of a note payable to a bank for cash. 5. Sale of a security held as an available-for-sale investment. 6. Collection of loan receivable. How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? Two items Five items Four items Three items

Three items

A company can convert net income to net cash flow from operating activities through either the direct method or the indirect method. T/F?

True

Companies classify some cash flows relating to investing or financing activities as operating activities. T/F?

True

An objective of the statement of cash flows is to a. disclose changes during the period in all asset and all equity accounts. b. disclose the change in working capital during the period. c. provide information about the operating, investing, and financing activities of an entity during a period. d. None of these answers are correct.

c. provide information about the operating, investing, and financing activities of an entity during a period.

Cash equivalents are a. treasury bills, commercial paper, and money market funds purchased with excess cash. b. investments with original maturities of three months or less. c. readily convertible into known amounts of cash. d. All of these answers are correct.

d. All of these answers are correct.

An analysis of the machinery accounts of Noller Company for 2018 is as follows: Machinery, Net of Accumulated Accumulated Machinery Depreciation Depreciation Balance at January 1, 2018 $500,000 $125,000 $375,000 Purchases of new machinery in 2018 for cash 200,000 — 200,000 Depreciation in 2018 — 100,000 (100,000) Balance at Dec. 31, 2018 $700,000 $225,000 $475,000 The information concerning Noller's machinery accounts should be shown in Noller's statement of cash flows (indirect method) for the year ended December 31, 2018, as a(n) a. $200,000 decrease in cash flows from investing activities. b. subtraction from net income of $100,000 and a $200,000 decrease in cash flows from financing activities. c. $100,000 increase in cash flows from financing activities. d. addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities.

d. addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities.

The amortization of bond premium on long-term debt should be presented in a statement of cash flows (using the indirect method for operating activities) as a(n) a. addition to net income. b. financing activity. c. investing activity. d. deduction from net income.

d. deduction from net income.

A company should add back bond premium amortization to net income to arrive at net cash flow from operating activities. T/F?

False

Cash payments for operating expenses are computed by subtracting an increase in prepaid expenses and a decrease in accrued expenses payable from operating expenses. T/F?

False

When numerous adjustments are necessary, companies often use a cash flow worksheet instead of preparing a statement of cash flows. T/F?

False

When prepaid expenses decrease during a period, expenses on the accrual-basis are lower than they are on a cash-basis. T/F?

False