Exam 14: Statement of Cash Flows

Under the indirect method,losses would be added to net income when determining the amount of cash flow fromnet cash flow from operating activities.

Frost Company reported a $4,000 increase in Ddividends Ppayable,a $60,000 increase in Rretained Eearnings,and $64,000 in net income for 2014during the year.Based on this information,the company must have paid dividends equal to $4,000 during 2014the year.

The direct method shows the specific sources and uses of cash that are associated with operating activities.

Diaz Company had the following comparative balance sheet information for 2014 and 2013at the end of Year 2 and Year 1: Diaz Company Comparative Balance Sheets Cash Accounts receivable Inventory Prepaid insurance Property, plant and equipment Accumulated depreciation Total Accounts payable Bonds payable Common stock Retained earnings Total 2014 30,000 48,000 158,000 10,000 70,000 14,000 90,000 140,000 2013 28,000 50,000 156,000 8,000 60,000 18,000 120,000 120,000 Diaz reported net income for 2014Year 2 of $40,000.No There were no sales or disposals of property,plant,and& equipment was disposed of during the year.Diaz uses the indirect method to prepare the statement of cash flows.

All of the following are additions to net income when preparing the statement of cash flows under the indirect method except:

Which of the following statement is incorrect regarding the investing activities section of the statement of cash flows?

The Upton Company reported a beginning balance of $1,600 and an ending balance of $2,200 in its unearned revenue accountUnearned Revenue account for 2014Year 2.During the year,$8,000 of revenue was recognized.Based on this information,how much cash was received from customers?

The difference between the direct and the indirect method applies only to cash from what type of activity?

Which of the following statements is incorrect regarding the use of the indirect method when preparing the operating activities of the statement of cash flows?

All of the following are deducted from net income when preparing the statement of cash flows under the indirect method except:

In preparing the statement of cash flows by the indirect method,an increase in a current asset is subtracted from net income.

Arch Associates reports the following comparative balance sheets and income statement information. Arch Associates Comparative Balance Sheets Cash Accounts receivable Prepaid insurance Inventory Property, plant and equipment Total assets Accounts payable Salaries payable Long term notes payable Stockholders' equity Total liabilities and equity 12/31/2013 \ 12,000 4,000 10,000 6,000 12,000 \ 44,000 \ 8,000 10,000 8,000 18,000 44,000 12/31/2014 22,000 8,000 8,000 2,000 10,000 50,000 12,000 4,000 6,000 28,000 50,000 $\quad$$\quad$$\quad$$\quad$$\text { Income Statement }$ $\quad$$\quad$$\quad$$\text { Year Ended 12/31/14 }$ Revenue \ 70,000 Cost of goods sold 40,000 Gross margin 30,000 Operating expense Net income \ Which of the following cash flows would be included under the operating activities section of the cash flow statement? (Assume the direct method is used. )

Under the indirect method,the increase or decrease in current liabilities is handled in the operating section of a cash flow statement.

The indirect method reverses adjusts for the differences between the accrual-based income statement and "cash flows from operating activities."

Which of the following would not be reported as an investing activity on the statement of cash flows?

A net decrease in the equipmentEquipment account indicates that equipment must have been sold at a loss during the year.

Would issuing a mortgage to purchase a building be reported on the statement of cash flows? If so,where would it be reported? If not,why not?

The following income statement was drawn from the annual reportincome statement of Gibbons Company for its first year of operations: Cash revemue Depreciation expense 20,000 Accrued interest expense 6,000 Cash operating expense Operating income 10,000 Gain on the sale of equipment Net income Using the direct method,tThe amount of cash flow fromnet cash flow from operating activities is:equals:

Which of the following would be shown as a deduction from net income when calculating net cash flow from operating activities using the indirect method?

All cash exchanges between a company and its owners are reported as investing activities in the statement of cash flows.