Accounting Chapter 12

long term debt was $20 mil at the beginning of the year and 30 mil at the end. During the year an additional 15 mil was borrowed. Repayments on the statement of cash flow during the year were

(5) million under financing activities

Which of the following cash flows are classified as operating activities

- cash from revenue earned in daily transactions -cash flow causing decrease in current liabilities

free cash flow is the amount of cash available to use to

-repay existing financing -build up the company's cash balance -expand the business through additional investing activities

which allows dividends and interest paid to be classified as operating or financing activities

IFRS

which of the following is the best mature of a companys profitability

accrual based net income

an decrease in inventory will be __ net income when determing net cash flow provided by operating activites

added back to

when preparing the statements of cash flow using the indirect method, depreciation expense is

added back to net income under the operating activities section

short term, highly liquid investments that are purchased within three months of maturity can be considerd __- equivalents

cash

the payment of dividends and changes in the dividends payable account are classfied as

financing

when preparing the operating activities section of the statement of cash flows using the indirect method, adding a decrease in accounts receivable to net income allows the inclusion of transaction that

increased cash, but did not affect net income

Credits to the common stock account recorded during the period will be reported as cash __ activities on the statement of cash flows

inflows under financing

Accrual basis accounting is superior to cash basis accounting in that

it provides a better measure of profitability

repayments of loans will be reported as a

negative cash flow under financing activities

when using the indirect method to prepare the operating activities section of the statement of cash flows, the first amount listed is

net income

depreciation expense originally reduced net income, but the expense does not involve paying cash

noncash

the cash flow statement should be evaluated by examining the cash flow pattern

of the subtotals for the three sections of the statement

U.S. GAAp classifies the payment of interest as an ___ activity on the statment of cash flows

operating

the classifications used to categorize cash inflows and outflows on the statement of cash flows includes

operating, financing, investing activities

braden and sons inc paid cash to purchase equipment costing 342 this year. also this year the company sold 70k cash equipment that orginally cost 230k 5

the purchases and the sales of equipment must be shown separately as a decrease to cash 342 and increase 70k

braden and sons inc borrowed 700k cash from trenton savings and loan last year. In addition, the company repaid a 450k note payable to first national bank. how should these transactions be listed in the statement of cash flows

transactions must be shown separately as a decrease to cash for 450 k and an increase of 700k in the financing activities sections

list the steps in preparing a statement of cash flow

1. determine the change in each balance sheet account 2. identify the cash flow category to which each account relates 3. create schedules that summarize the operating, investing, and financing cash flows

when using the indirect method, adding a decrease in prepaid insurance to net income eliminates the effect of recording insurance expense that

decreased net income, but did not impact cash

an increase in prepaid insurance ___net income

is subtracted from

what is the purpose of the statement of cash flow?

it is intended to provide a cash based view of a company

which of the following items would not be classified as a financing activity

repayments of accounts payble

as increase in inventory will be ___ net income when determining net cash flow flow provided by operating activities

subtracted from

how is the change is retained earnings accounted for in the statement of cash flows

the change is accounted for by the addition of net income in operating activities and the subtractions of dividends in financing activities

dovers co's comparative balance sheet indicated that the equipment account increase by

(62,000)

after its first year of business, best measures inc sales revenue were 100k of which 90k was collected and total expenses of 60k of which 20k was paid. which of the following statements is correct?

-cash basis net income= 70k -accural basis ni=40k0uiop

which of the following describes the acceptable methods that may be used to prepare the statements of cash flow?

-direct or indirect method

short term, highly liquid investments that are purchased within three months of maturity can be considered equivalent to cash because they are

-so near maturity that their value is unlikely to change -readily convertible to known amounts of cash

arlingtons inc income statment showed net income income of 57,600 and depreciation expense of 9200 accounts receiable increase 3750 inventory increased 3200, supplies decreased 500 accounts payale increased 2700 and

61,150

a decrease in prepaid insurance is added to net income because

a decrease in prepaid insurance causes an increases in insurance expense and a decrease in net income, but it does not involve cash

when calculating net cash flow provided by operating activities, an increase in accounts payable

added; less

increase in current liabilities are a source of cash; more expense was incurred than was paid decreases in current liabilities are a use of cash, more cash was paid than was expanded increases in current assets are a use of cash, more revenue was earned than collected

adding increases in current liabilities such as income tax payable allows the inclusion of transactions that decreased net income but not cash subtracting decreases in current liabilities such as salaries payable allow that inclusion of transaction that decreased cash but not net subtracting increases in current assets such as accounts receivable allows the inclusion of transactions that increased net income but not cash