Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: \[\begin{array} { | l | r | r | r | } \hline&2014 & 2013 & \text { Increase/decrease }\\ \hline \text { Common stock } & \$ 30,000 & \$ 2,000 & \$ 28,000 \\ \hline \text { Retained earnings } & 113,000 & 74,000 & 39,000 \\ \hline \text { Treasury stock } & ( 8,000 & ( 5,000 ) & ( 3,000 ) \\ \hline \text { Total equity } & \$ 135,000 & \$ 71,000 & \$ 64,000 \\ \hline \end{array}\] Note: There were no stock retirements during the year. There were no sales of treasury stock during the year. - There were no sales of treasury stock during the year. Which of the following statements would be TRUE?

A) There was zero net cash flow from transactions involving treasury stock. B) There was $3,000 of positive cash flow from transactions involving treasury stock. C) There was $3,000 negative cash flow from transactions involving treasury stock. D) There was $8,000 negative cash flow from transactions involving treasury stock. A) There was zero net cash flow from transactions involving treasury stock. B) There was $3,000 of positive cash flow from transactions involving treasury stock. C) There was $3,000 negative cash flow from transactions involving treasury stock. D) There was $8,000 negative cash flow from transactions involving treasury stock.

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following sections of the comparative balance sheet: \[\begin{array} { | l | r | r | r | } \hline &{ \mathbf { 2 0 1 4 } } & { \mathbf { 2 0 1 3 } } & { \text { Increase/decrease } } \\ \hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 & \$ ( 2,000 ) \\ \hline \text { Accrued liabilities } & 2,000 & 1,000 & 1,000 \\ \hline \text { Long-term notes payable } & 84,000 & 90,000 & ( 6,000 ) \\ \hline \text { Total liabilities } & \$ 90,000 & \$ 97,000 & \$ ( 7,000 ) \\ \hline & & &\\ \hline \text { Common stock } & 30,000 & 2,000 & 28,000 \\ \hline\text { Retained earnings } & 113,000 & 74,000 & 39,000 \\ \hline \text { Treasury stock } & (8,000) & (5,000) & (3,000) \\ \hline \text { Total equity } & \$ 135,000 & \$ 71,000 & \$ 64,000\\ \hline\\ \hline\text { Total liabilities and equity }&\$225,000&\$168,000&\$57,000\\ \hline \end{array}\] Additional information: • No stock was retired. • No treasury stock was sold. • During 2014, the company repaid $40,000 of long-term notes payable. • During 2014, the company borrowed $34,000 on a new note payable. • Net income for the year was $49,000. - Please prepare the financing section of the statement of cash flows using the following format: \[\begin{array} { | l | l | l | } \hline \text { Financing activities: } & & \\ \hline \text { Issuance of stock } & & \\ \hline \text { Purchase of treasury stock } & & \\ \hline \text { Sale of treasury stock } & & \\ \hline \text { Borrowing on notes payable } & & \\ \hline \text { Repayments of notes payable } & & \\ \hline \text { Payment of dividends } & & \\ \hline \text { Net cash from financing activities } & & \\ \hline \end{array}\]

\[\begin{array} { | l | r | r | } \hlin

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet: \[\begin{array} { | l | r | r | r | } \hline&2014 & 2013 & \text { Increase/decrease }\\ \hline \text { Cash } & \$ 33,000 & \$ 18,000 & \$ 15,000 \\ \hline \text { Accounts receivable } & 22,000 & 35,000 & ( 13,000) \\ \hline \text { Inventory } & 170,000 & 115,000 & 55,000 \\ \hline \text { Total assets } & \$ 225,000 & \$ 168,000 & \$ 57,000 \\ \hline \end{array}\] - How will the change in Inventory be shown on the statement of cash flows?

A) Operating activities minus positive cash flow B) Operating activities minus negative cash flow C) Financing activities minus positive cash flow D) Investing activities minus negative cash flow A) Operating activities minus positive cash flow B) Operating activities minus negative cash flow C) Financing activities minus positive cash flow D) Investing activities minus negative cash flow

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2013: \[\begin{array}{l} \text { From the income statement: }\\ \begin{array} { l r } \text { Revenues: } & \$ 240,000 \\ \text { Cost of goods sold: } & \$ 190,000 \\ \text { Operating expenses: } & \$ 25,000 \end{array}\\ \begin{array} { c c c } \text { From the balance sheet: } & \text { Beginning balance } & \text { Ending balance } \\ \text { Accounts receivable: } & \$ 12,000 & \$ 15,000 \\ \text { Inventory: } & \$ 22,000 & \$ 18,000 \\ \text { Accounts payable: } & \$ 7,000 & \$ 12,000 \\ \text { Accrued liabilities: } & \$ 3,000 & \$ 1,200 \end{array} \end{array}\] - On the statement of cash flows, what amount will be shown for payments to suppliers for operating expenses? (Please assume that accounts payable are for purchases of inventory only.)

A) $26,800 B) $23,200 C) $30,000 D) $18,600 A) $26,800 B) $23,200 C) $30,000 D) $18,600

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet: \[\begin{array} { | l | r | r | r | } \hline&2014 & 2013 & \text { Increase/decrease }\\ \hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 & \$ ( 2,000 ) \\ \hline \text { Accrued liabilities } & 2,000 & 1,000 & 1,000 \\ \hline \text { Long-term notes payable } & 84,000 & 90,000 & ( 6,000 ) \\ \hline \text { Total liabilities } & \$ 90,000 & \$ 97,000 & \$ ( 7,000 ) \\ \hline \end{array}\] - How will the change in Accounts payable be shown on the statement of cash flows?

A) Operating activities minus positive cash flow B) Operating activities minus negative cash flow C) Financing activities minus positive cash flow D) Investing activities minus negative cash flow A) Operating activities minus positive cash flow B) Operating activities minus negative cash flow C) Financing activities minus positive cash flow D) Investing activities minus negative cash flow

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following sections of the comparative balance sheet: \[\begin{array} { | l | r | r | r | } \hline &{ \mathbf { 2 0 1 4 } } & { \mathbf { 2 0 1 3 } } & { \text { Increase/decrease } } \\ \hline \text { Accounts payable } & \$ 4,000 & \$ 6,000 & \$ ( 2,000 ) \\ \hline \text { Accrued liabilities } & 2,000 & 1,000 & 1,000 \\ \hline \text { Long-term notes payable } & 84,000 & 90,000 & ( 6,000 ) \\ \hline \text { Total liabilities } & \$ 90,000 & \$ 97,000 & \$ ( 7,000 ) \\ \hline & & &\\ \hline \text { Common stock } & 30,000 & 2,000 & 28,000 \\ \hline\text { Retained earnings } & 113,000 & 74,000 & 39,000 \\ \hline \text { Treasury stock } & (8,000 )& (5,000) & (3,000) \\ \hline \text { Total equity } & \$ 135,000 & \$ 71,000 & \$ 64,000\\ \hline\\ \hline\text { Total liabilities and equity }&\$225,000&\$168,000&\$57,000\\ \hline \end{array}\] Additional information: • No stock was retired. • No treasury stock was sold. • During 2014, the company repaid $40,000 of long-term notes payable. • During 2014, the company borrowed $34,000 on a new note payable. • Net income for the year was $49,000. - Please prepare the financing section of the statement of cash flows using the following format: $\begin{array}{|l|l|l|} \hline\text { Financing activities: } &\quad\quad&\quad\quad \\ \hline & \\ \hline & \\ \hline & \\ \hline & \\ \hline & \\ \hline \text { Net cash from financing activities } &\\ \hline \end{array}$

\[\begin{array} { | l | r | r | } \hlin

Exam 14: The Statement of Cash Flows

Avatar Company uses the indirect method to prepare its statement of cash flows and provides following information about transactions for the year: • Plant assets, net-beginning balance: $90,000 • Plant assets, net-ending balance: $120,000 • Equipment costing $52,000 was purchased for cash • Equipment with a net asset value of $10,000 was sold for $14,000 • Depreciation expense of $12,000 was recorded during the year What was the net amount of Cash from investing activities?

(Multiple Choice)

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Question 61

Which of the following sections from the statement of cash flows includes activities that affect net income on the income statement?

(Multiple Choice)

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Question 62

The statement of cash flows explains the difference between net income and the change in cash balance.

(True/False)

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Question 63

Which of the following is the CORRECT order of the sections on a statement of cash flows?

(Multiple Choice)

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Question 64

Cash equivalents are assets that can be converted to cash within one year.

(True/False)

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Question 65

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: 2014 2013 Increase/decrease Common stock \ 30,000 \ 2,000 \ 28,000 Retained earnings 113,000 74,000 39,000 Treasury stock (8,000 (5,000) (3,000) Total equity \ 135,000 \ 71,000 \ 64,000 Note: There were no stock retirements during the year. There were no sales of treasury stock during the year. - There were no sales of treasury stock during the year. Which of the following statements would be TRUE?

(Multiple Choice)

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Question 66

The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they purchased equipment for $10,000 cash. Which of the following statements is TRUE?

(Multiple Choice)

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Question 67

Partisan Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000. How would this transaction be shown on the statement of cash flows?

(Multiple Choice)

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Question 68

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: Increase/decrease Accounts payable \ 4,000 \ 6,000 \ (2,000) Accrued liabilities 2,000 1,000 1,000 Long-term notes payable 84,000 90,000 (6,000) Total liabilities \ 90,000 \ 97,000 \ (7,000) Additional information provided: • During 2014, the company repaid $40,000 of long-term notes payable. • During 2014, the company borrowed $34,000 on a new note payable. Using the above information, please analyze the activity in the long-term notes payable account using the flowing T-account format: Long-term notes payable 90,000

(Essay)

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Question 69

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following sections of the comparative balance sheet: Increase/decrease Accounts payable \ 4,000 \ 6,000 \ (2,000) Accrued liabilities 2,000 1,000 1,000 Long-term notes payable 84,000 90,000 (6,000) Total liabilities \ 90,000 \ 97,000 \ (7,000) Common stock 30,000 2,000 28,000 Retained earnings 113,000 74,000 39,000 Treasury stock (8,000) (5,000) (3,000) Total equity \ 135,000 \ 71,000 \ 64,000 Total liabilities and equity \2 25,000 \1 68,000 \5 7,000 Additional information: • No stock was retired. • No treasury stock was sold. • During 2014, the company repaid $40,000 of long-term notes payable. • During 2014, the company borrowed $34,000 on a new note payable. • Net income for the year was $49,000. - Please prepare the financing section of the statement of cash flows using the following format: Financing activities: Issuance of stock Purchase of treasury stock Sale of treasury stock Borrowing on notes payable Repayments of notes payable Payment of dividends Net cash from financing activities

(Essay)

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Question 70

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet: Increase/decrease Cash \ 21,000 \ 18,000 \ 3,000 Accounts receivable 31,000 35,000 (4,000) Inventory 53,000 25,000 28,000 PP\&E, net 120,000 90,000 30,000 Total assets \ 225,000 \ 168,000 \ 57,000 Additional information provided: • Equipment costing $52,000 was purchased for cash. • Equipment with a net asset value of $10,000 was sold for $14,000. • Depreciation expense of $12,000 was recorded during the year. - Please use the following T-account format to analyze the transactions affecting net Property, plant & equipment: Property, plant & equipment, net 90,000

(Essay)

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Question 71

Interest expense incurred on a note payable would be included in the financing section of the statement of cash flows.

(True/False)

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Question 72

In creating a statement of cash flows using the indirect method, depreciation expense is added back as an adjustment to net income under operating activities.

(True/False)

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Question 73

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet: 2014 2013 Increase/decrease Cash \ 33,000 \ 18,000 \ 15,000 Accounts receivable 22,000 35,000 (13,000) Inventory 170,000 115,000 55,000 Total assets \ 225,000 \ 168,000 \ 57,000 - How will the change in Inventory be shown on the statement of cash flows?

(Multiple Choice)

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Question 74

Of the following, which is NOT a cash inflow from a financing activity?

(Multiple Choice)

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Question 75

Parmesan Company uses the direct method for its statement of cash flow. It reports the following information regarding the year 2013: From the income statement: Revenues: \ 240,000 Cost of goods sold: \ 190,000 Operating expenses: \ 25,000 From the balance sheet: Beginning balance Ending balance Accounts receivable: \ 12,000 \ 15,000 Inventory: \ 22,000 \ 18,000 Accounts payable: \ 7,000 \ 12,000 Accrued liabilities: \ 3,000 \ 1,200 - On the statement of cash flows, what amount will be shown for payments to suppliers for operating expenses? (Please assume that accounts payable are for purchases of inventory only.)

(Multiple Choice)

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Question 76

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet: 2014 2013 Increase/decrease Accounts payable \ 4,000 \ 6,000 \ (2,000) Accrued liabilities 2,000 1,000 1,000 Long-term notes payable 84,000 90,000 (6,000) Total liabilities \ 90,000 \ 97,000 \ (7,000) - How will the change in Accounts payable be shown on the statement of cash flows?

(Multiple Choice)

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Question 77

Which of the following describes the operating activities as shown in the statement of cash flows?

(Multiple Choice)

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Question 78

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information: • Repayments on long-term notes payable: $40,000 • New borrowing on long-term notes payable: $34,000 Which of the following statements is accurate regarding the statement of cash flows?

(Multiple Choice)

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Question 79

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following sections of the comparative balance sheet: Increase/decrease Accounts payable \ 4,000 \ 6,000 \ (2,000) Accrued liabilities 2,000 1,000 1,000 Long-term notes payable 84,000 90,000 (6,000) Total liabilities \ 90,000 \ 97,000 \ (7,000) Common stock 30,000 2,000 28,000 Retained earnings 113,000 74,000 39,000 Treasury stock (8,000) (5,000) (3,000) Total equity \ 135,000 \ 71,000 \ 64,000 Total liabilities and equity \2 25,000 \1 68,000 \5 7,000 Additional information: • No stock was retired. • No treasury stock was sold. • During 2014, the company repaid $40,000 of long-term notes payable. • During 2014, the company borrowed $34,000 on a new note payable. • Net income for the year was $49,000. - Please prepare the financing section of the statement of cash flows using the following format: Financing activities: Net cash from financing activities

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Question 80

Which of the following sections from the statement of cash flows includes activities that affect net income on the income statement?

The statement of cash flows explains the difference between net income and the change in cash balance.

Which of the following is the CORRECT order of the sections on a statement of cash flows?

Cash equivalents are assets that can be converted to cash within one year.

The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they purchased equipment for $10,000 cash. Which of the following statements is TRUE?

Partisan Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000. How would this transaction be shown on the statement of cash flows?

Interest expense incurred on a note payable would be included in the financing section of the statement of cash flows.

In creating a statement of cash flows using the indirect method, depreciation expense is added back as an adjustment to net income under operating activities.

Of the following, which is NOT a cash inflow from a financing activity?

Which of the following describes the operating activities as shown in the statement of cash flows?

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

The Master Budget and Responsibility Accounting

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

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