ch 11 SB accounting
Sales on account are $100,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $15,000. What is the cash collected from customers during the period?
$100,000 + 20,000 - 15,000 = $105,000
which accounts result in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year
accounts receivable; accounts payable; inventory
which accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year
accounts receivable; accounts payable; inventory
non cash items, non operating items, and changes in current assets and liabilities are necessary adjustments to _ to prepare the operating section for the indirect format of the statement of cash flows
net income
Sales on account are $200,000. Cash sales during the period are $50,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $30,000. What is the total cash collected from customers during the period?
240,000
If interest payable increases, which of the following is true?
Interest paid is lower than the interest expense on the income statement
Which of the following would result in a cash inflow from investing activities?
Sale of a machine for cash
Which of the following statements is correct concerning a decrease in accounts payable?
Since the cash payments were more than the credit purchases, the decrease must be added to purchases to calculate cash payments to suppliers.
When cash from operating activities is presented using the indirect method, net income must be adjusted for increases and decreases in balance sheet accounts that relate to
amounts presented in the income statement
The direct method presents a summary of all operating transactions that result in either a debit or credit to the _ account
cash
direct method presents a summary of all operating transactions that result in either a debit or credit to the _ account
cash
Which of the following sections will be identical in every detail under the direct and indirect methods
cash flows from financing and investing activities
a decrease in accounts payable means
cash payments were more than credit purchases
adjustments to net income in calculating operating cash flows include
changes in current assets and current liabilities; non cash items; non operating items
changes in current assets and current liabilities
changes represent the non cash portion of some revenues and expenses
one of the purposes of adjusting net income for changes to certain balance sheet accounts is to
convert items included in net income to cash
the reason depreciation expense is added to net income when preparing the statement of cash flows
depreciation expense originally reduced net income, is a non cash expense
Cash from operating activities differs between the direct and indirect method with respect to the:
detail and presentation only
the _ method prepares the operating activities section of the statement of cash flows by restating each revenue and expense from the accrual basis to the cash basis. It shows the cash collected from customers and the cash paid for operating expenses
direct
True or false: When presenting the operating activities section of the statement of cash flows, the direct method starts with net income and adjusts it by eliminating the effects of transactions that do not involve cash. The indirect method reports the total cash inflow or cash outflow from each main type of transaction.
false
repayments of formal, long term debt contracts are classified as _ activities
financing
non operating items
gains and losses on the sale of long-term assets that don't affect operating cash flows
an _ in accounts payable indicates that cash payments were less than the credit purchases and must be subtracted from purchases to calculate cash payments to suppliers
increase
two acceptable methods or US GAAP for reporting cash flows from operating activities are the _ method and the _ method
indirect ; direct
cash flows from _ activities are both outflows and inflows of cash related to the acquisition and disposal of long term assets
investing
Which statement regarding the amount of cash from operating activities is correct
it's identical under the direct and indirect method
in order to determine cash flows from financing activities, need to examine changes to
long term liability and stockholders' equity accounts
which are non operating items that require adjustments under the indirect method
losses on the sale of long term assets; gains on the sale of long term assets
when prepaid accounts increase, it indicates the company has paid _ cash than it recorded as operating expenses
more
return on assets is calculated by dividing _ by _
net income; average total assets
when accounts receivable decrease
net sales are less than cash receipts from customers
gains and losses on the sale of long term assets represent common _ items needing adjustment under the indirect method
non operating
gains and losses on the sale of long term assets represent common __ items needing adjustment under the indirect method
non operating
depreciation expense is added back to net income when preparing the cash flow from operating activities section because depreciation represents a _ reduction to net income
noncash
gains and losses on the sale of long-term assets represent common _ items needing adjustment under the indirect method
nonoperating
When using the direct method to prepare the Statement of Cash Flows, depreciation expense is
not reported on the statement of cash flows
When the ______ account decreases, it means the company paid less cash for insurance than it recorded as insurance expense.
prepaid insurance
which of the following would result in a cash outflow from investing activities
purchase of a machine for cash
changes to current assets and current liabilities require adjustment of net income under the indirect method because
related cash may be higher or lower than the accrued amount included in net income
changes to current assets and current liabilities require adjustment of net income under the indirect method because
related cash may be higher or lower than the accrued amount included in the net income
non cash items
revenues and expenses that never affect cash; depreciation and amortization expense
Net cash flows provided by operating activities will be ______ when using the direct method compared to the indirect method.
the same
The amount of net cash flows from operating activities calculated using the direct method is
the same as under the indirect method
when using the direct method, why is cash received from customers greater than sales revenue on the income statement when accounts receivable decreases
there were more collections of accounts receivable than sales on account during the year
True or false: Cost of goods sold must be adjusted to a cash number because the cost of merchandise sold may be more or less than the amount of cash paid to suppliers during the period
true