Chapter 12

The following data are available for Something Strange: Issuance of bonds payable $100,000 Sale of investment 50,000 Issuance of common stock 60,000 Payment of cash dividends 30,000 How much is net cash provided by financing activities? A. $130,000 B. $90,000 C. $190,000 D. $160,000

A. $130,000

Simpson Inc. reported $100,000 provided by operating activities. The company invested $30,000 in production equipment and it paid $10,000 in dividends. How much is its free cash flow? A. $60,000 B. $140,000 C. $70,000 D. $100,000

A. $60,000

A company's prepaid expenses are $15,000 at the beginning of the year and $8,000 at the end of the year. What adjustment to net income should be made if the indirect method is used? A. Add to net income $7,000 B. Deduct from net income $7,000 C. Deduct from net income $8,000 D. No adjustment should be made

A. Add to net income $7,000

What information is provided by free cash flow? A. An indication of both a company's ability to generate cash to pay dividends and to invest in new capital expenditures B. An indication is a company is able to generate cash to invest in new capital expenditures C. An indication of a company's ability to generate net income D. An indication if a company is able to generate cash to pay dividends

A. An indication of both a company's ability to generate cash to pay dividends and to invest in new capital expenditures

Which of the following is not an operating activity A. Payment of a cash dividend B. Payment to suppliers C. Payment of taxes D. Dividends received

A. Payment of a cash dividend

Which one of the following is not added back to net income in determining cash provided by operations under the the indirect method? A. Loss on sale of equipment B. An increase in inventory C. Depreciation expense D. Amortization expense

B. An increase in inventory

Which of the following statements is correct? A. Significant noncash financing and investing activities are reported on the company's income statement. B. Significant financing and investing activities that do not affect cash are reported in either a separate schedule at the bottom of the statement of cash flows, or in a separate note or supplementary schedule to the financial statements C. only financing and investing activities that directly affect cash are reported in a company's statement of cash flows D. Significant financing and investing activities that do not affect cash are not reported since they don't affect cash

B. Significant financing and investing activities that do not affect cash are reported in either a separate schedule at the bottom of the statement of cash flows, or in a separate note or supplementary schedule to the financial statements

Hanover, Inc. purchased land through the issuance of long-term bonds. How is this reported on the statement of cash flows? A. Investing inflow B. Significant noncash investing and financing activity that merits disclosure C. Financing outflow D. Operating activity

B. Significant noncash investing and financing activity that merits disclosure

Under the indirect method of preparing the statement of cash flows, which of the following is added to net income in the operating section A. Decrease in accounts payable B. Gain on sale of equipment C. Depreciation expense D. Increase in accounts receivable

C. Depreciation Expense

How are cash dividends paid to stockholders classified on the statement of cash flows? A. Investing activities B. A combination of operating and investing activities C. Financing activities D. Operating activities

C. Financing activities

Which is an example of a cash flow from a financing activity? A. Purchase of equipment for cash B. Receipt of cash from sale of land C. Issuance of debt for cash D. None of these are financing activities

C. Issuance of debt for cash

Which of the following is incorrect about the statement of cash flows? A. It is the fourth basic financial statement B. It provides information about cash receipts and cash payments of an entity during a period C. It reconciles the ending cash account balance to the balance per the bank statement D. It provides information about the operating, investing, and financing activities of the business

C. It reconciles the ending cash account balance to the balance per the bank statement

During which phase of the corporate life cycle are cash from operations and net income approximately equal? A. Decline B. Growth C. Maturity D. Introductory

C. Maturity

In what section of the statement of cash flows will the issuance of bonds payable to acquire a building be reported A. Cash flows from investing activities B. Cash flows from financing activities C. Noncash investing and financing activities D. Cash flows from operating activities

C. Noncash investing and financing activities

Which is an example of a cash flow from an investing activity? A. Payment of cash to suppliers for inventory B. Payment of cash to repurchase outstanding capital stock C. Receipt of cash from the sale of equipment D. Receipt of cash from the issuance of bonds payable

C. Receipt of cash from the sale of equipment

The following are data concerning cash received or paid from various transactions for Orange Peels Corporation: Sale of land $100,000 Sale of equipment 50,000 Issuance of common stock 70,000 Purchase of equipment 30,000 Payment of cash dividends 60,000 How much is net cash provided by investing activities? A. $190,000 B. $130,000 C. $150,000 D. $120,000

D. $120,000

Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, how much is net cash provided by operations? A. $112,000 B. $116,000 C. $124,000 D. $136,000

D. $136,000

The following data are available for Allen Clapp Corporation: Net income $200,000 Depreciation expense 40,000 Dividends paid 60,000 Gain on sale of land 10,000 Decrease in accounts receivable 20,000 Decrease in accounts payable 30,000 How much is cash provided by operating activities using the indirect method? A. $240,000 B. $280,000 C. $160,000 D. $220,000

D. $220,000

Under the indirect method of preparing the statement of cash flows, which of the following is deducted from net income in the operating activities section A. Decrease in inventory B. Amortization expense C. Increase in wages payable D. Gain on sale of land

D. Gain on sale of land

In which stage of the corporate life cycle will cash flows from the operations and from investing activities be negative, and the cash flows from financing be positive? A. Growth phase B. Maturity phase C. Decline phase D. Introductory phase

D. Introductory phase

What type of activity is the purchase of equipment for cash? A. A non-cash investing activity that goes into a separate schedule of the notes of the statement of cash flows B. Operating activity C. Financing activity D. Investing activity

D. Investing activity

Which activities are reported on the statement of cash flows? A. Financing, operating, and nonoperating B. Investing, financing and nonoperating C. operating and non operating D. Investing, financing and operating

D. Investing, financing, and operating

Which statement is not correct about the usefulness of the statement of cash flows? A. It helps users assess investing and financing activities B. It helps users assess the entity's ability to generate future cash flows C. It helps users assess the entity's ability to pay its obligations D. It helps users assess the profitability of a company

D. It helps users assess the profitability of a company

Under the indirect method of preparing the statement of cash flows, how is an increase in accounts receivable handled A. It is deducted from net sales B. It is added to net sales C. It is added to net income D. It is deducted from net income

D. It is deducted from net income

With which of the following does the indirect method of preparing the statement of cash flows begin? A. Adjustments to reconcile net income to net cash provided by operating activities B. Collections from customers C. Cash sales D. Net Income

D. Net income