Final 22

Fox Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. Fox's cash balance was $27,000 on January 1. During the year, there was a sale of land that resulted in a gain of $25,000 and proceeds of $40,000 were received from the sale. What was Fox's cash balance at the end of the year?

$208,000 351,000 - 420,000 + 250,000 = 181,000 181,000 + 27,000 = 208,000

In its income statement, Fox Co. reported cost of goods sold of $540,000. Changes occurred in several balance sheet accounts as follows: Inventory $40,000 increase Accounts payable-suppliers 160,000 increase What amount should Fox report as cash paid to suppliers in its cash flow statement, prepared under the direct method?

$420,000

Fox Co. purchased new equipment by paying $40,000 cash, and signing a $60,000 note payable. Later that year, Fox sold used equipment for $150,000, receiving $55,000 cash and a note receivable for the rest. Fox also reported a $5,000 gain for both book and tax purposes on this sale. In what separate inflow and/or (outflow) amount(s) should these equipment transactions be reported in the investing activities section of Fox's statement of cash flows?

($40,000) and $55,000

Fox, Inc. had the following activities related to its financial operations during the current year: Distribution of cash dividend declared last year to preferred shareholders $ 20,000 Payment for early retirement of bonds payable (carrying amount $245,000) 250,000 Net proceeds from 2-year note receivable ($15,000 interest and $325,000 principal) 310,000 Payment to buy common stock from Fox shareholders (originally issued for $25,000) 60,000 In Fox's statement of cash flows, net cash provided or (used) in financing activities should be:

(5,000) (20,000) + (250,000) + 325,000 + (60,000) = (5,000)

For the current year, Fox Co. had net cash provided by operating activities of $232,000; net cash used by investing activities of $540,000; and cash provided by financing activities of $321,000. Fox's beginning cash balance was $19,000 on January 1. During the year, there was a sale of equipment that resulted in a loss of $4,000 and proceeds of $10,000 were received from the sale. What was Fox's net increase or (decrease) in cash for the year?

13,000 232,000 - 540,000 + 321,000 = 13,000

Fox Company's worksheet for the preparation of its current annual statement of cash flows included the following: December 31 January 1 Accounts receivable $29,000 $23,000 Allowance for uncollectible accounts 1,000 800 Prepaid rent expense 8,200 12,400 Accounts payable 22,400 19,400 Fox's net income is $150,000. What amount should Fox include as net cash provided by operating activities in the statement of cash flows?

151,400 150,000 - 6,000 + 200 + 4,200 + 3,000 = 151,400

Fox Company's worksheet for the preparation of its current annual statement of cash flows included the following: December 31 January 1 Accounts receivable $23,000 $29,000 Allowance for uncollectible accounts 1,000 2,000 Prepaid rent expense 9,000 14,500 Accounts payable 19,500 22,000 Fox's net income is $150,000. What amount should Fox include as net cash provided by operating activities in the statement of cash flows?

158,000 150,000 + 6,000 - 1,000 + 5,500 - 2,500 = 158,000

Fox Co.'s statement of cash flows reported cash provided from operating activities of $250,000, and these other items: $75,000 increase in accounts receivable, $50,000 decrease in inventory, $95,000 increase in accounts payable, and $20,000 increase in interest payable. In Fox's statement of cash flows, what amount was reported as net income?

160,000 250,000 + 75,000 - 50,000 - 95,000 - 20,000 = 160,000

Fox Co. had net cash used by operating activities of $31,000; net cash provided by investing activities of $120,000; and cash used by financing activities of $95,000. Fox's ending cash balance was $11,000 on December 31. During the year, there was a redemption of Fox bonds that resulted in a loss of $20,000 and payment of $400,000. What was Fox's cash balance at the beginning of the year?

17,000

In preparing its cash flow statement for the year ended December 31, Fox collected the following data: Payment on purchase of equipment 50,000 Proceeds on sale of Owl Inc. bonds (par value $200,000) 170,000 Loss on sale of bonds 20,000 Amortization of bond discount 5,000 Proceeds on sale of MJM Co. stock (carrying amount $68,000) 75,000 Gain on sale of stock 7,000 In its December 31 annual statement of cash flows, what amount should Fox report as net cash provided from investing activities?

195,000 -50,000 + 170,000 + 75,000 = 195,000

In its cash flow statement for the current year, Fox Co. reported cash received for bond interest of $25,000. Purchased at a discount, Fox increased its bond investment account by $2,000 for amortization during the current year, and an decrease occurred in this balance sheet account: Accrued interest receivable $5,000 In its income statement for the current year, what amount should Fox report as interest revenue?

22,000 25,000 + 2,000 - 5,000 = 22,000

On January 2, Fox Co.'s board of directors declared a cash dividend of $550000 to stockholders of record on January 18, payable on February 10. The dividend is permissible under law in Fox's state of incorporation. Selected data from Fox's prior year December 31 balance sheet are as follows: Accumulated depletion $250,000 Capital stock 500,000 Additional paid-in capital 150,000 Retained earnings 300,000 The $550,000 dividend includes a liquidating dividend of

250,000 550,000 Dividend - 300,000 RE = 250,000

Fox Co.'s statement of cash flows reported cash provided from operating activities of $400,000, and dividends received on common stock of $10,000, depletion of an oil field of $100,000, and $50,000 of proceeds from the sale of Owl Co. common stock resulting in a loss of $7,000. In Fox's statement of cash flows, what amount was reported as net income?

293,000 400,000 - 100,000 - 7,000 = 293,000

Fox, Inc. had the following activities related to its financial operations during the current year: Proceeds from issuing bonds (par value $400,000) $ 375,000 Declaration of cash dividend to preferred shareholders to be paid next year 31,000 Proceeds from sale of Treasury stock (carrying amount at cost, $43,000) 50,000 Payments on 2-year note payable ($5,000 interest and $100,000 principal) 105,000 In Fox's statement of cash flows, net cash provided from financing activities should be:

325,000 375,000 + 50,000 - 100,000 = 325,000

In its income statement, Fox Co. reported cost of goods sold of $450,000. Changes occurred in several balance sheet accounts as follows: Inventory $160,000 decrease Accounts payable-suppliers 40,000 decrease What amount should Fox report as cash paid to suppliers in its cash flow statement, prepared under the direct method?

330,000 450,000 + (160,000) + 40,000 = 330,000

Fox, Inc. reported net income of $300,000 for the current. Changes occurred in several balance sheet accounts as follows: Equipment $25,000 increase Accumulated depreciation 10,000 decrease Note payable 30,000 increase Additional current year information: • During the year, Fox received $20,000 for the sale of equipment costing $80,000 that was 80% depreciated. • In December, Fox purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000. In Fox's statement of cash flows for the year, net cash provided by operating activities should be:

350,000 300,000 + 54,000 - 4,000 = 350,000

Fox, Inc. had the following activities related to its financial operations during the current year: Payment for early retirement of bonds payable (carrying amount $370,000) $ 375,000 Distribution of cash dividend declared in last year to preferred shareholders 31,000 Carrying amount of convertible preferred stock in Fox, converted into common shares 60,000 Proceeds from sale of Treasury stock (carrying amount at cost, $43,000) 50,000 In Fox's statement of cash flows, net cash used in financing activities should be:

356,000 (375,000) + (31,000) + 50,000 = (356,000)

Fox Co. sold equipment during the current year, recording a gain of $5,000. Fox originally paid $90,000 on purchasing the equipment several year ago, and it was 65% depreciated when Fox sold it. Fox's tax rate for the year of the sale is 40%. What amount should Fox report as the cash inflow from this sale on their statement of cash flows?

36,500 90,000 - (90,000 x 65%) = 31,500 90,000 - 58,500 = 31,500 31,500 + 5,000 = 36,500q

Fox's unamortized bond premium account decreased by $25,000 during the year. In its income statement, Fox Co. reported bond interest expense of $83,000. Change also occurred in the following balance sheet account: Bond interest payable increased $20,000 What amount should Fox report as bond interest paid to bondholders in its cash flow statement, prepared under the direct method?

88,000 83,000 + 25,000 - 20,000 = 88,000

Fox Co. signed a 20-year building lease that it reported as a capital lease, paying each monthly lease payment when due. How should Fox report the effect of the lease payments in the financing activities section of its statement of cash flows?

An outflow equal to the principal payments only

Fox Co. signed a 20-year building lease that it reported as a capital lease, paying each monthly lease payment when due. The present value of the minimum lease payments was $500,000, and the payments during the first lease year totaled $33,500, of which $20,000 represented interest and the rest represented reduction of lease liability. How should Fox report the effect of the lease payments in the financing activities section of its statement of cash flows for this first lease year?

As a $13,500 outflow 33,500 - 20,000 = 13,500

Fox Co. prepares its statement of cash flows using the indirect method. Fox's unamortized bond discount account decreased by $25,000 during the year. How should Fox report the change in unamortized bond discount in its statement of cash flows?

As an addition to net income in the operating activities section

Fox Co. purchased a six-month U.S. Treasury bill. Fox's policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Fox's statement of cash flows?

As an outflow from investing activities

2021 SpringHomeSyllabusZoomAttendanceDiscussionsMyLab and MasteringGradesPeople Chapter 22 - Statement of Cash Flows CPA Exam Due May 3 at 11:59pm Points 20 Questions 20 Time Limit None Allowed Attempts Unlimited Take the Quiz Again Attempt History AttemptTimeScoreKEPTAttempt 29 minutes18 out of 20LATESTAttempt 29 minutes18 out of 20Attempt 14 minutes3 out of 20 Correct answers are hidden. Score for this attempt: 18 out of 20 Submitted May 2 at 1:03am This attempt took 9 minutes. Question 11 / 1 pts In its income statement, Fox Co. reported cost of goods sold of $450,000. Changes occurred in several balance sheet accounts as follows: Inventory $160,000 decrease Accounts payable-suppliers 40,000 decrease What amount should Fox report as cash paid to suppliers in its cash flow statement, prepared under the direct method? $330,000 $250,000 $570,000 $650,000 Choice " $330,000 " is correct. In order to compute the cash paid to suppliers for inventory, the $450,000 CGS account (on the accrual basis) must be adjusted to cash paid for inventory based on balance sheet changes in both the Inventory and the Accounts Payable accounts, as follows: $450,000 CGS + ($160,000) decrease in Inventory + $40,000 decrease in AP = $330,000 The Inventory decrease means $160,000 of inventory included in CGS expense this year was purchased last year, not this year, so the cash was not necessarily paid this year for it, and the $40,000 decrease in AP means that it was owed last year for inventory, but was paid for this year. Note: Under the more commonly used Indirect Method, the 2 adjustments for Inventory and AP would appear appear separately as: Decrease in Inventory $160,000: Decrease in a Cur. Asset = increased CF Decrease in Accounts Payable ($ 40,000): Decrease in a Cur. Liab. = decreased CF The $450,000 CGS amount is included in NI, at the top of the Indirect Method Operating Section, so does not appear as a separate line item. Question 21 / 1 pts In its cash flow statement for the current year, Fox Co. reported cash received for bond interest of $25,000. Purchased at a discount, Fox increased its bond investment account by $2,000 for amortization during the current year, and an decrease occurred in this balance sheet account: Accrued interest receivable $5,000 In its income statement for the current year, what amount should Fox report as interest revenue? $22,000 $28,000 $18,000 $32,000 Choice " $22,000 " is correct. Interest is reported on the cash basis in the Statement of Cash Flows, and on the accrual basis in the Income Statement, so conversion from cash to accrual follows: Cash basis interest received $25,000 Add amortization of bond discount 2,000 For Discount, Interest Rev. (or Exp.) is > Cash Subtract decrease in interest receivable (5,000) Received this year, but revenue recorded last year Accrual basis interest revenue $22,000 Question 31 / 1 pts Which of the following is not disclosed on the statement of cash flows when prepared under the indirect method, either on the face of the statement or in a separate schedule? A reconciliation of net income to net cash flow from operations The major classes of gross cash receipts and gross cash payments The amount of interest paid The amount of income taxes paid Choice " The major classes of gross cash receipts and gross cash payments " is correct. The major classes of gross cash receipts and gross cash payments is not disclosed on the statement of cash flows using the indirect method, nor is it shown in a separate schedule. It is a requirement for the direct method only." The following are required disclosures of a statement of cash flows under the indirect method: a. Changes in inventory, receivable, and payables to reconcile net income to net cash flow from operations. b. The amount of income taxes paid. c. The amount of interest paid (net of amount capitalized). Question 41 / 1 pts Fox Company's worksheet for the preparation of its current annual statement of cash flows included the following: December 31 January 1 Accounts receivable $29,000 $23,000 Allowance for uncollectible accounts 1,000 800 Prepaid rent expense 8,200 12,400 Accounts payable 22,400 19,400 Fox's net income is $150,000. What amount should Fox include as net cash provided by operating activities in the statement of cash flows? $148,600 $151,400 $145,400 $151,000 Choice " $151,400 " is correct. $151,400 net cash provided by operating activities, as follows: Net income $ 150,000 Increase in A/R (Cur.Asset-Opposite CF adj.) (6,000) Increase in allowance (Contra Asset-Same CF adj.) 200 Decrease in prepaid rent (Cur.Asset-Opposite CF adj.) 4,200 Increase in A/P (Liability-Same CF adj.) 3,000 $ 151,400 Question 51 / 1 pts Fox, Inc. reported net income of $300,000 for the current. Changes occurred in several balance sheet accounts as follows: Equipment $25,000 increase Accumulated depreciation 10,000 decrease Note payable 30,000 increase Additional current year information: • During the year, Fox received $20,000 for the sale of equipment costing $80,000 that was 80% depreciated. • In December, Fox purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000. In Fox's statement of cash flows for the year, net cash provided by operating activities should be: $316,000 $358,000 $324,000 $350,000 Choice " $350,000 " is correct. Based on the facts given, cash provided by operations is computed as follows: Net income $ 300,000 Depreciation expense (calculated below) 54,000 Gain on sale of equipment (calculated below) (4,000) Cash provided by operations $ 350,000 Depreciation Expense: $64,000 AD on equipment sold ($80,000 Equipment x 80% Depreciated) that reduced the AD account - the $10,000 decrease in Accumulated Depreciation (AD) = $54,000 Depreciation Expense. For AD to have decreased $10,000 (a credit decrease), after $64,000 was subtracted (debited) from the AD account, Depreciation Expense (debit) must be $54,000, with the corresponding $54,000 credit to AD: $54,000 credit - $64,000 debit = $10,000 credit decrease to AD. The $54,000 depreciation expense is included as a decrease to NI on the IS, but does not represent any cash being paid, so the $54,000 depreciation expense must be added to NI in the Operating Section. Equipment Sale & Gain: The journal entry for the equipment sold is: Cash 20,000 Accumulated depreciation 64,000 Gain 4,000 Equipment 80,000 The $4,000 gain is based on $20,000 cash received less $16,000 Book Value ($80,000 cost less $64,000 AD or 80% x $80,000). This gain is included as an increase to NI on the IS, but the $20,000 cash received should be shown in the Investing Section only, no part of this entry represent cash for the Operating Section, so the $4,000 gain must be subtracted from NI in the Operating Section (Indirect Method). Question 61 / 1 pts How should a loss from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method? Ignored in both the operating and the investment activities In operating activities as an addition to income In investment activities as a reduction of the cash inflow from the sale In operating activities as a deduction from income Choice " In operating activities as an addition to income " is correct. In a statement of cash flows using the indirect method, loss from the sale of used equipment for cash should be reported in operating activities as an addition to income. Cash transactions of long-term assets and securities (stocks/bonds) of other entities, except for the very short-term classified as Trading Securities are reported in the investment activities section, and no activity from these types of transactions should be reported in the operating activities section. However, using the indirect method, gains or losses are included in net income, the first line item of the operating section, so to remove it, gains must be deducted from, and losses must be added back, to net income in the operating section. IncorrectQuestion 70 / 1 pts Fox Co. prepares its statement of cash flows using the indirect method. Fox's unamortized bond discount account decreased by $25,000 during the year. How should Fox report the change in unamortized bond discount in its statement of cash flows? As a subtraction from net income in the operating activities section As an addition to net income in the operating activities section As a financing cash outflow As a financing cash inflow Choice " As an addition to net income in the operating activities section " is correct. When a bond is issued at a discount, the amortization of the bond discount account (a contra liability) is credited, reducing this account, resulting in an interest expense that is greater than cash interest (see entry below) Because interest expense (reducing NI in the indirect method operating section) is greater than cash interest by the discount amortization amount, the discount amortization must be added back to net income to get to cash interest. Bond discount amortiztion is a net income-related, operating activity, not a financing activity. Memorize these 2 rules for the bond issuing company (or the bondholder), and entries, that will always help when dealing with bonds: 1. When bond discount is amortized, interest expense (or bondholder's interest revenue) is always greater than cash interest. 2. hen bond premium is amortized, interest expense (or bondholder's interest revenue) is always less than cash interest. Issuer's Bond Interest Entry - Discount Issuer's Bond Interest Entry - Premium Interest Expense Interest ExpenseCash (or Interest Payable) Premium on Bond Payable (Reducing this Liab.) Discount on Bond Payable (Reducing Cash (or Interest Payable) this Contra Liability account) IncorrectQuestion 80 / 1 pts Fox Co. had $100,000 in cash-basis pretax income for the current year. At year-end, accountsreceivable had decreased by $10,000 and accounts payable had increased by $6,000 from their beginning year balances. Compared to the accrual basis method of accounting, Fox's cash pretax income is:

Higher by $16,000

Which of the following items is included in the investing activities section of the statement of cash flows?

Cash effects of lending and collecting loan principal

Which of the following items is not included in the financing activities section of the statement of cash flows?

Cash effects of lending and collecting loan principal

Which of the following items is included in the financing activities section of the statement of cash flows?

Cash effects of transactions obtaining resources from owners and providing them with a return on their investment Paying $50,000 to Owl Co. for their first annual equipment lease payment.

Fox Co. sold used equipment for a cash amount equaling its carrying amount for both book and tax purposes. Later that year, Fox replaced the equipment by paying cash and signing a note payable for new equipment. The cash paid for the new equipment exceeded the cash received for the old equipment. How should these equipment transactions be reported in Fox's statement of cash flows?

Cash inflow equal to the cash received and a cash outflow equal to the cash paid

In a statement of cash flows, which of the following items is reported as a cash outflow from financing activities? I. Payments to retire mortgage notes II. Interest payments on mortgage notes III. Dividend payments

I and III only

Fox Corp., a calendar-year company, had sufficient retained earnings as a basis for dividends, but was temporarily short of cash. Fox declared a dividend of $100,000 on April 1, 20x7, and issued promissory notes to its stockholders in lieu of cash. The notes, which were dated April 1, 20x7, had a maturity date of March 31, 20x8, and a 10% interest rate. How should Fox account for the scrip dividend and related interest?

Debit retained earnings for $100,000 on April 1, 20x7, and debit interest expense for $7,500 on December 31, 20x7

Which statement of cash flows method would require the disclosure of the noncash transaction of acquiring a factory financed entirely by issuing a 10-year note payable?

Direct and Indirect

How should a gain from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method?

In operating activities as a deduction from income

How should a loss from the sale of used equipment for cash be reported in a statement of cash flows using the indirect method?

In operating activities as an addition to income

In preparing its statement of cash flows, if Fox Co. omits the payment for its purchase of Owl Co. bonds, which activities section is affected, and how affected?

Investing is overstated

Fox Co. had $100,000 in cash-basis pretax income for the current year. At year-end, accountsreceivable had increased by $10,000 and accounts payable had decreased by $6,000 from their beginning year balances. Compared to the accrual basis method of accounting, Fox's cash pretax income is:

Lower by $16,000

A property dividend should be recorded in retained earnings at the property's:

Market value at the date of declaration

In a statement of cash flows, if used equipment is sold at a loss, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment:

Minus the loss

In preparing its cash flow statement for the year, which activity should Fox Co., a car manufacturer, include in the investing activities section?

Payment for a 2-year loan to a Fox employee

Which of the following items is not included in the investing activities section of the statement of cash flows?

Receiving $5,000 of interest on Owl Co. Bonds

Fox Co. signed an equipment lease that it reported as an operating lease, paying each monthly lease payment when due. How should Fox report the effect of the lease payments in the financing activities section of its statement of cash flows?

The lease payments should not be reported in the financing activities section

Which of the following is not disclosed on the statement of cash flows when prepared under the indirect method, either on the face of the statement or in a separate schedule?

The major classes of gross cash receipts and gross cash payments