Chapter 12

Net cash provided by operating activities was $12,000. Net cash provided by investing activities was $2,000. Net cash used in financing activities was $7,000. The cash balance at the beginning of the year was $4,000. The cash balance at the end of the year is:

$12,000(operating)+2,000(investing)-7,000(Financing) =$7,000. $7,000+4,000(beginning balance)=$11,000.

Which of the following is NOT one of the five important steps to preparing a statement of cash flows?

-Compute and report the net cash provided or used by investing activities -Compute and report the net cash provided or used by operating activities -Compute and report the net cash provided or used by financing activities -Compute the net cash flow by combining net cash provided or used by operating, investing, and financing activities and prove the change

The three-step analysis to determine cash provided or used by investing activities includes:

-reporting the cash flow effects -identifying changes in investing-related accounts -explaining the changes using T-accounts and reconstructed entries

The equipment account had a $36,000 balance at the beginning of the year, and a $30,000 balance at the end of the year. The accumulated depreciation account had a balance of $22,000 at the beginning of the year, and a $17,000 balance at the end of the year. The income statement reported depreciation expense of $4,000 for the year. Equipment costing $10,000 was sold for its book value. Cash received from the sale to be reported in the Investing Activities section is $

1000

Net cash used in operating activities was $10,000. Net cash provided by investing activities was $2,000. Net cash provided by financing activities was $5,000. The cash balance at the end of the year was $12,000. The cash balance at the beginning of the year was $

15000; 5000+2000-10000=-3000 ended at 12,000 +3000 to 12,000 for the beginning year balance.

At the beginning of the period, a company reported $100,000 of common stock, $10 par; and $50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000 of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $

50000; (110,000+90,000)-(100,000+50,000)= 200,000 - 150,000 = 50,000

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts?

Bonds Payable; Common Stock

Which of the following transactions would be reported under investing activities in the statement of cash flows?

Cash paid to purchase plant assets; Cash paid to purchase investments in securities

Which of the following items would be reported under Financing activities on the statement of cash flows?

Cash paid to repay cash loans Cash dividends paid to shareholders Cash received from issuing notes payable

Which of the following items would be reported under financing activities on the statement of cash flows?

Cash paid to repay cash loans; Cash dividends paid to shareholders; Cash received from issuing notes payable

Which of the following items would not be adjusted to net income when computing cash flows from operating activities, using the indirect method?

Cash received from sale of building

Which of the following would NOT be reported under financing activities on the statement of cash flows?

Cash received from sales of plant assets

Which of the following would not be reported under financing activities on the statement of cash flows?

Cash received from sales of plant assets

Which of the following is NOT one of the five important steps to preparing a statement of cash flows?

Compute the net income

Which of the following items would be subtracted from net income when reporting cash flows from operating activities, using the indirect method? (Check all that apply.)

Decrease in wages payable Decrease in taxes payable

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method?

Depreciation expense Loss on sale of investment Gain on sale of building

_________ activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

Financing

Accountants can use a three-step process to determine cash provided (or used) by investing activities. Which of the following steps is not part of this process?

Identify adjustments to net income.

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method? (Check all that apply.)

Increase in accounts payable Increase in unearned fees

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method?

Increase in unearned fees Increase in accounts payable

A company reported total assets at the end of 2017 of $95,000; including cash of $35,000, accounts receivable of $20,000, and inventory of $40,000. It reported total assets at the end of 2018 of $110,000; including cash of $44,000; accounts receivable of $29,000, and inventory of $37,000. Compute the net increase or decrease in cash in 2018.

Increase of $9,000; $44,000 (current period balance)- $35,000 (prior period balance)= $9,000 increase.

To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:

Interest Payable

_______ activities include those transactions and events that affect long-term assets, such as lending and collecting money for notes receivable and cash receipts from sale of long-term plant assets.

Investing

The format of a statement of cash flows includes reporting cash flows from three activities including:

Investing, operating, financing

Which of the following items are classified as noncash investing and financing activities?

Issuance of common stock in exchange for land; Retirement of debt by issuing stock; Purchase of a building with a note

Which of the following items would be adjusted to net income when computing cash flows from operating activities, using the indirect method? (Check all that apply.)

Loss on sale of investment Depreciation expense Gain on sale of building

Both the direct and indirect methods of operating activities report which of the following items?

Net cash inflows (outflows)

Which of the following would be included in the operating section when preparing the statement of cash flows using the indirect method?

Net income

The presentation of the _____ section is shown differently depending on if the statement of cash flows is reported using the direct or indirect method.

Operating

A company's cash receipts and cash payments are recorded in the cash account in its general ledger. Identify which of the following could not be determined by analyzing the cash account?

Payment for land by issuing a note

Identify which of the following items is not a noncash investing and financing activity that must be reported in a note to the statement of cash flows.

Purchase of a plant asset with cash Repayment of a note with cash

Which of the following items would be correct adjustments to net income to arrive at cash flows from operating activities, using the indirect method?

Subtract (-) increase in inventory; Add (+) increase in accounts payable

Emerald Jewelery Store had a credit balance in interest payable of $200 at the beginning of the period, and a credit balance of $50 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

The decrease in interest payable of $150 will be subtracted from net income to determine the net cash provided by operating activities.

Inventory at the beginning of the period had a debit balance of $9,000, and a debit balance of $7,000 at the end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:

a decrease (-) of $2,000 which will be added (+) to net income

Dividends paid during a period totaled $5,000. This will be reported on the statement of cash flows as:

a decrease in the financing activities section

Sheldon Company's balance in prepaid insurance at the beginning and end of the year was $2,500 and $1,000, respectively. This will be reported on the statement of cash flows using the indirect method as:

a decrease of $1,500 which will be added to net income

Retained earnings at the beginning and end of the year totaled $25,000 and $75,000, respectively. Net income reported during the period was $70,000. Using this information, dividends paid will be reported as _____ on the statement of cash flows.

a decrease of $20,000 in the financing activities section. Explained: $25,000(beginning returned earnings balance) + $70,000(net come during period) = $95,000. Ending retained earnings is $75,000. $95,000 - 75,000 = dividends of $20,000. Dividends paid will be reported as a decrease in the financing activities section.

Accounts receivable had a debit balance of $10,000 at the beginning of the period, and a debit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

a decrease of $4,000 which will be added to net income

A loss from the sale of an investment would be (added/subtracted), (from) net income when computing cash flows from operations, using the indirect method.

added

LiveLife Company had a credit balance of $10,000 in accounts payable at the beginning of the period, and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

a decrease of $4,000 which will be subtracted from net income

The statement of cash flows reports noncash investing and financing transactions in

a note or separate schedule

The Coffee Cup Company had a credit balance of $500 in interest payable at the beginning of the period, and a credit balance of $600 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

an increase of $100 which will be added to net income

Red Co.'s beginning Common Stock balance was $110,000 and their ending Common Stock balance was $125,000. This will be reported as _____ in the statement of cash flows.

an increase of $15,000 in the financing activities section

Sunshine Company had a credit balance of $4,000 in accounts payable at the beginning of the period, and a credit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

an increase of $2,000 which will be added to net income

Accounts receivable had a debit balance of $4,000 at the beginning of the period, and a debit balance of $6,000 at the end of the period. Based on this information, the adjustment to net income for the period will be reported as:

an increase of $2,000 which will be subtracted from net income

Reid Company's balance in prepaid insurance at the beginning and end of the year was $1,000 and $1,200, respectively. This will be reported on the statement of cash flows using the indirect method as:

an increase of $200 which will be subtracted from net income

inventory at the beginning of the period had a debit balance of $7,000, and a debit balance of $10,000 at the end of the period. Using the indirect method, this will be reported in the operating section of the statement of cash flows as:

an increase of $3,000 which will be subtracted from net income

Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000. This will be reported as _____ on the statement of cash flows.

an increase of $5,000 in the cash flows from financing activities section

Blue Co. sold plant assets costing $15,000 with accumulated depreciation of $10,000 for $7,000. As a result, Blue Co will report _____ on the statement of cash flows in the cash flows from investing activities section.

an increase of $7,000 in the investing activities section; They recognized a gain of $2,000. $7,000 - ($15,000 - $10,000) = $2,000. The gain will be subtracted from net income in the Operating Activities section. The receipt of cash of $7,000 will be reported as an increase in the Investing Activities section.

The __________ helps measure a company's ability to meet its obligations, pay dividends, expand operations, and obtain financing. It is computed by taking cash flow from operations divided by average total assets.

cash flow on total assets

Investing activities are affected by

changes in long-term assets.

Investing activities are affected by...

changes in long-term assets.

It is important to analyze the sources and uses of cash because (select all that apply):

creditors use this information to assist them in deciding whether to loan funds to them. Investors use this information to decide if they will purchase their stock.

A company repaid a long-term debt during the year. They will report this as an (increase/decrease), in____, activities section on the statement of cash flows.

decrease; financing

The Breezy Fan reported a decrease to net income in their income taxes payable account on the statement of cash flows using the indirect method. This means that Breezy Fan's income taxes payable account (increased/decreased) for the period.

decreased

In addition to analyzing the cash account, a second approach to preparing the statement of cash flows is to explain changes in cash by analyzing changes in

equity accounts liability accounts noncash asset accounts

The three-stage process to determine cash provided or used by financing activities includes all of the following steps except: identify an increase or decrease in cash. identify changes in financing-related accounts. report their cash flow effects. explain these changes using reconstruction analysis.

identify an increase or decrease in cash.

When analyzing the noncash accounts to assist in preparing the statement of cash flows, the changes in liabilities, equity and noncash asset accounts are analyzed along with the

income statement accounts

The TeaCup Company reported an increase to net income in their income taxes payable account on the statement of cash flows using the indirect method. This means that TeaCup's income taxes payable account (increased/decreased) for the period.

increased

The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items necessary to obtain net cash provided or used by operating activities.

indirect

Collecting money for notes receivable would be reported on the statement of cash flows as a(n)____ activity.

investing

Collecting money for notes receivable would be reported on the statement of cash flows as a(n)

investing activity

A net cash ______ occurs when the payments in a category exceed the receipts.

outflow

The information needed to prepare a statement of cash flows could come from all of the following sources, except the:

statement of retained earnings.

A gain from the sale of a building would be (added/subtracted) to (from) net income when computing cash flows from operations, using the indirect method.

subtracted

In preparing a cash flows from operating activities using the indirect method, an increase in accounts receivable would be (added/subtracted) to (from) net income.

subtracted

Current liabilities _____ operations, including short-term notes payable and dividends payable are categorized as financing activities. unrelated to

unrelated to