Exam 14: Statement of Cash Flows

When the indirect method is used to prepare the statement of cash flows,what is the starting point of the operating activities section?

Both the indirect and direct method of preparing a statement of cash flows begin with net income.

What is the proper treatment of a loss on disposal of equipment when using the indirect method to complete the cash flows from operating activities section?

In 2014,Wade Company reported wages expense of $32,000 during the year.The beginning balance in wages payableWages Payable was $1,200,and at the end of the year,the balance in wages payableWages Payable was $1,700.What was the amount of cash that Wade paid for employee wages during the year?

Under the direct method,which of the following would not be included in the operating section of the cash flow statement?

The following information was drawn from Eckerd Company's 2014 and 2013 year-end balance sheets at the end of Year 2 and Year 1. 2014 2013 Bonds payable \ 170,000 \ 150,000 $50,000 of Nnew bonds in the amount of $50,000 were issued at par during 2014Year 2.What is the amount of cash flow associated with the repayment of bond liabilities?

A decrease in retained earningsRetained Earnings may indicate a cash outflow occurred to pay a dividend.

In preparing the statement of cash flows by the indirect method,a decrease in a current liability is deducted from net income.

During the year,the Moyers Company reported the following in 2014: property,plant and equipment Equipment account increased by $25,000 and the A;accumulated Ddepreciation account increased by $2,000.During the year,In addition,the company sold equipment,which that originally cost $12,000 and,and had $9,000 of accumulated depreciation,for $4,500. What will Moyers Company report aswas the additions cash outflow to purchaseproperty,plant,and equipment on its 2014 statement of cash flows?

Vinton Corp.had beginning accounts receivableAccounts Receivable of $36,000 and ending accounts receivableAccounts Receivable of $32,000.If total sales were $110,000,what amount of cash was collected from customers,and how would it be classified on the statement of cash flows?

Leo Company reported sales of $200,000 in 2014during Year 2.Leo's balance sheets for 2014 Year 2 and 2013 Year 1 showed the following: 2014 2013 Accounts receivable \ 90,000 \ 80,000 Accounts payable 64,000 60,000 Based on this information,how much cash did Leo collect from sales during 2014Year 2?

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 \ All inventory purchases are made on account.The amount of cash paid for inventory purchases during 2014 Year 2 was:

What kinds of cash flows are reported as financing activities on the statement of cash flows?

Under the direct method,there is no adjustment for non-cashnoncash items or - this includes gains or and losses.

Under the indirect method,the increase or decrease in long term assets is handled in the investing section of a cash flow statement.

Painter Corporation had the following beginning and ending balances for 2014the current year: Beginning Ending Equipment \ 850,000 \ 870,000 Accumulated depreciation 7300,000 280,000 During the year,Painter sold equipment for $60,000,which that had originally been purchased for $160,000,for cash of $60,000.The old equipment had accumulated depreciation of $120,000 at the time of sale.To replace the equipment Painter purchased new equipment by making a $20,000 down payment and signing a 2-year note for the balance. Required: 1)Calculate the cost of the new equipment. 2)What was the amount of the gain or loss on the sale of the old equipment? If Painter uses the indirect approach to calculate cash flow from operating activities,how will the gain or loss be reported on the statement of cash flows? 3)What was the amount of depreciation expense for the year? How will the depreciation expense affect the statement of cash flows prepared by the indirect method?

The amount of revenue a company recognizes on the income statement normally differs from the amount of cash collected from customers.

During the year2014,the Abbot Company had the following changes in account balances: 1)The accumulated depreciation accountAccumulated Depreciation account had a beginning balance of $25,000 and an ending balance of $35,000.The increase was due to depreciation expense. 2)The long-term notes payableNotes Payable account had a beginning balance of $40,000 and an ending balance of $15,000.The decrease was due to repayment of debt. 3)The accounts receivableAccounts Receivable account had a beginning balance of $60,000 and an ending balance of $50,000. 4)The equipmentEquipment account had a beginning balance of $25,000 and an ending balance of $92,500.The increase was due to the purchase of equipment for cash. 5)The long term investments account (marketable securities)had a beginning balance of $18,000 and an ending balance of $12,500.The decrease was due to the sale of investments at cost. 6)The amount of cash dividends declared and paid during the year was $22,000. 7)The interest payable account had a beginning balance of $2,250 and an ending balance of $1,250. If the net cash flow from operationsoperating activities was $12,000,the net cash flow from investing activities was ($24,000)and the net change in cash was $24,000,what was the net cash flow from financing activities?

What are the two methods used to prepare the statement of cash flows? What section(s)of the statement of cash flows are impacted by the choice of method?

Winkler Company sold equipment for $25,000 cash.The equipment had cost $40,000 and had accumulated depreciation of $22,000 at the time of the sale.Based on this information alone,select the