The following items were reported on the balance sheets and income statement for Flying Mullet Company: $\begin{array}{lr} \text { Accounts receivable, December } 31,2017 & \$ 85,000 \\ \text { Accounts receivable, December } 31,2018 & 98,000 \\ \text { Sales-2018 } & 750,000 \end{array}$How would the change in accounts receivable be reported in the Operating Activities section of the statement of cash flows under the indirect method?

A) As an addition to sales B) As a deduction from sales C) As an addition to net income D) As a deduction from net income A) As an addition to sales B) As a deduction from sales C) As an addition to net income D) As a deduction from net income

A review of Jan's Lakeside Resort's statement of cash flows showed the following:$\begin{array}{lr} \text { Cash flows from operating activities } & 35,000 \\ \text { Cash flows from investing activities } & 75,000 \\ \text { Cash flows from financing activities } & (125,000) \end{array}$ From this information,the most likely explanation is that Jan's is

A) using cash from operations and selling long-term assets to pay back debt B) using cash from operations and borrowing to purchase long-term assets. C) using its profits to expand growth. D) using cash from investors to provide for operations. A) using cash from operations and selling long-term assets to pay back debt B) using cash from operations and borrowing to purchase long-term assets. C) using its profits to expand growth. D) using cash from investors to provide for operations.

The following items were reported on the balance sheets and income statement for Carlton Co.: $\begin{array}{lr} \text { Accounts receivable, December } 31,2017 & \$ 185,000 \\ \text { Accounts receivable, December } 31,2018 & 178,000 \\ \text { Sales-2018 } & 850,000 \end{array}$What amount would be reported in the Operating Activities section of the statement of cash flows for collections from customers under the direct method assuming that all sales are on credit?

A) $850,000 B) $857,000 C) $843,000 D) Cannot be determined without further information A) $850,000 B) $857,000 C) $843,000 D) Cannot be determined without further information

Tulsa Corp.reported the following information for 2017 and 2018:$\begin{array}{lr} \text { Interest payable, December } 31,2017 & \$ 5,700 \\ \text { Interest payable, December 31,2018 } & 6,200 \\ \text { Interest expense-2018 } & 12,250 \end{array}$ How much cash was paid for interest during 2018?

A) $11,750 B) $12,250 C) $12,500 D) $12,750 A) $11,750 B) $12,250 C) $12,500 D) $12,750

Use the equation presented below to answer the question that follows: Cash = CL + LTL + CS + RE - NCCA - LTA where:$\begin{array}{l} \text { CL = Current li abilities } \\ \text { LTL = Long-term liabilities } \\ \text { CS = Common stock } \\ \text { RE = Retained earnings } \\ \text { NCCA = Noncash current assets } \\ \text { LTA = Long-term assets } \end{array}$ - Which of the following activities results in a cash outflow?

A) Decreases in noncash current assets (NCC A) B) Decreases in long-term assets (LT A) C) Increases in long-term liabilities (LTL) D) Decreases in retained earnings (R E) A) Decreases in noncash current assets (NCC A) B) Decreases in long-term assets (LT A) C) Increases in long-term liabilities (LTL) D) Decreases in retained earnings (R E)

Exam 12: The Statement of Cash Flows

Iowa Industries Inc. Selected data from the financial statements of Iowa Industries Inc.for the years ended December 31,2018 and 2017,are presented below.Also,certain assumptions are presented.Use these data and assumptions to answer the questions that follow. Assumptions: (In millions) Property, pl ant and equipment \ 11,142.3 \ 10,868.4 Accumulated depreciation 3,519.0 3,461.0 Investments 375.1 394.4 Long-term debt 1,440.2 1,242.6 Short-term debt 44.0 45.2 Common stock 594.5 567.2 Treasury - common stock (20.6) (20.6) Reinvested income (retained earnings) 3,522.9 3,425.9 Net income 770.4 712.7 ? (1) Cash additions to property, plant, and equipment during 2018 were $\$ 550.0$ . An additional $\$ 86.2$ of plant assets were acquired through debt in a noncash transaction. Depreciation expense for 2018 was $\$ 343.3$ . Gains on disposals of property, plant, and equipment during 2019 were $\$ 27.7$ . (2) The cash proceeds from the sale of investments in 2018 were $\$ 82.7$ . There was a $\$ 17.8$ gain on the sale of the investments. (3) Proceeds from long-term debt issued during 2018 were $\$ 167.7$ . (4) The issuance of common stock totaled $\$ 28.6$ in 2018 . (5) During $2018 , \$ 389.4$ in cash was used to purchase and retire common stock. A total of $\$ 365.4$ of the cost was recorded as an increase to Reinvested Income. (6) Net income, dividends declared/paid, and the $\$ 365.4$ amount in (5) were the only items that affected reinvested income during 2018. ? -Review the data and assumptions for Iowa Industries Inc. ? Required (A)What was the cost of the investments purchased during 2018? (B)What was the amount paid to retire long-term debt during 2018?

(Essay)

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Question 61

The following items were reported on the balance sheets and income statement for Flying Mullet Company: Accounts receivable, December 31,2017 \ 85,000 Accounts receivable, December 31,2018 98,000 Sales-2018 750,000 How would the change in accounts receivable be reported in the Operating Activities section of the statement of cash flows under the indirect method?

(Multiple Choice)

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Question 62

Why do accounting standards require a company to separately disclose income taxes paid and interest paid if it uses the indirect method?

(Essay)

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Question 63

Companies can use two different methods to report the amount of cash flow from their investing and financing activities.

(True/False)

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Question 64

Which of the following is not an operating activity?

(Multiple Choice)

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Question 65

A review of Jan's Lakeside Resort's statement of cash flows showed the following: Cash flows from operating activities 35,000 Cash flows from investing activities 75,000 Cash flows from financing activities (125,000) From this information,the most likely explanation is that Jan's is

(Multiple Choice)

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Question 66

Use the selected information from the statement of cash flows for three actual companies for the last three years to answer the questions that follow. - Required Ignoring the differences in magnitude,comment on the similarities and differences in the cash flows of the three companies.

(Essay)

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Question 67

The following items were reported on the balance sheets and income statement for Carlton Co.: Accounts receivable, December 31,2017 \ 185,000 Accounts receivable, December 31,2018 178,000 Sales-2018 850,000 What amount would be reported in the Operating Activities section of the statement of cash flows for collections from customers under the direct method assuming that all sales are on credit?

(Multiple Choice)

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Question 68

Below is information for Dakota Corp.for 2017 and 2018: Bonds payable, December 31,2017 \ 500,000 Bonds payable, December 31,2018 800,000 Loss on bond retirement-2018 15,000 Interest expense on bonds-2018 45,000 At the end of 2018,Dakota issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2018 (before their maturity date).All interest expense was paid in cash during 2018. The following statements describe how Dakota reported the cash flow effects of the items described above on its 2018 statement of cash flows.The indirect method is used to prepare the Operating Activities section.Which of the following has been reported incorrectly by Dakota?

(Multiple Choice)

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Question 69

Tulsa Corp.reported the following information for 2017 and 2018: Interest payable, December 31,2017 \ 5,700 Interest payable, December 31,2018 6,200 Interest expense-2018 12,250 How much cash was paid for interest during 2018?

(Multiple Choice)

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Question 70

Is it logical that interest paid is classified as a cash outflow in the Operating Activities section of the statement of cash flows but that dividends paid are included in the Financing Activities section? Explain.

(Essay)

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Question 71

Pound Co.reported the following information at the end of 2017 and 2018: 2017 2018 Land \ 35,000 \ 100,000 Common stock 200,000 265,000 An analysis of Pound's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above.How should Pound report the changes in these accounts on a statement of cash flows?

(Multiple Choice)

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Question 72

A decrease in retained earnings indicates that a cash dividend has been paid.

(True/False)

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Question 73

When using the direct method,how is the purchase of equipment for cash shown on the statement of cash flows?

(Multiple Choice)

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Question 74

Grasso Corp.reported accounts receivable of $38,000 on its December 31,2017,balance sheet.On December 31,2018,accounts receivable had decreased to $29,000.Sales for the year amounted to $57,000.What is the amount of cash collections that Grasso will report in the Operating Activities section of its 2018 statement of cash flows assuming that the direct method is used?

(Essay)

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Question 75

Planet & Co.reported net income for the current year.Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income?

(Multiple Choice)

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Question 76

Use the equation presented below to answer the question that follows: Cash = CL + LTL + CS + RE - NCCA - LTA where: CL = Current li abilities LTL = Long-term liabilities CS = Common stock RE = Retained earnings NCCA = Noncash current assets LTA = Long-term assets - Which of the following activities results in a cash outflow?

(Multiple Choice)

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Question 77

When using the direct method,how are salaries paid to employees reported on the statement of cash flows?

(Multiple Choice)

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Question 78

The Financial Accounting Standards Board (FASB)has expressed a strong preference for the indirect method,but allows companies to use the direct method in calculating the cash flow from operating activities.

(True/False)

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Question 79

It is not possible for Cash to decrease from Year 1 to Year 2 if income rises over this period.

(True/False)

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Question 80

Why do accounting standards require a company to separately disclose income taxes paid and interest paid if it uses the indirect method?

Companies can use two different methods to report the amount of cash flow from their investing and financing activities.

Which of the following is not an operating activity?

A review of Jan's Lakeside Resort's statement of cash flows showed the following: Cash flows from operating activities 35,000 Cash flows from investing activities 75,000 Cash flows from financing activities (125,000) From this information,the most likely explanation is that Jan's is

Use the selected information from the statement of cash flows for three actual companies for the last three years to answer the questions that follow. - Required Ignoring the differences in magnitude,comment on the similarities and differences in the cash flows of the three companies.

Tulsa Corp.reported the following information for 2017 and 2018: Interest payable, December 31,2017 \ 5,700 Interest payable, December 31,2018 6,200 Interest expense-2018 12,250 How much cash was paid for interest during 2018?

Is it logical that interest paid is classified as a cash outflow in the Operating Activities section of the statement of cash flows but that dividends paid are included in the Financing Activities section? Explain.

A decrease in retained earnings indicates that a cash dividend has been paid.

When using the direct method,how is the purchase of equipment for cash shown on the statement of cash flows?

Planet & Co.reported net income for the current year.Which of the following business transactions would cause cash from operating activities to be higher than the amount of net income?

When using the direct method,how are salaries paid to employees reported on the statement of cash flows?

The Financial Accounting Standards Board (FASB)has expressed a strong preference for the indirect method,but allows companies to use the direct method in calculating the cash flow from operating activities.

It is not possible for Cash to decrease from Year 1 to Year 2 if income rises over this period.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

Financial Statement Analysis

International Financial Reporting Standards

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