Exam 12: The Statement of Cash Flows

Which of the following statements is true?

In 2017,Valencia Company purchased equipment for $363,000 and also sold some special purpose machinery with a book value of $155,000 for $182,000.In its statement of cash flows for 2017,Valencia should report the following with respect to the above transactions:

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

If the balance of prepaid insurance was the same on January 1,2017,and December 31,2017,then the insurance expense would __________ the cash payments made for insurance during the year.

The direct method of reporting cash flows from operating activities involves reconciling net income and cash flow from operations.

Which of the following statements regarding the statement of cash flows is true?

When using the indirect method,how would the declaration and payment of cash dividends be shown on the statement of cash flows?

Craft Corp.began operations on January 1,2017.The statement of cash flows for the first year reported dividends paid of $160,000.The balance sheet at the end of the first year reported $40,000 in dividends payable and $580,000 in ending retained earnings.Determine Craft's net income for its first year of operations.

Cash flows from issuing and repurchasing stock or issuing and repaying (retiring)debt are classified as

The decrease in accounts receivable over a period results in a(n)__________ to net income reported in the Operating Activities section of the statement of cash flows using the indirect method.

If a company reports a net loss for the year,is it still possible that cash could actually increase during the year? Explain your answer.

The cash flow adequacy ratio is defined as: $\frac{\text {Total Cash Flow - Capital Expenditures }}{\text { Average Debt Maturing over Next Five Years}}$

Use the information below for Shorter Inc.for 2017 and 2018 to answer the following question: Equipment, December 31,2017 \ 65,000 Equipment, December 31,2018 72,000 Accumulated depreciation, December 31,2017 39,000 Accumulated depreciation, December 31,2018 30,000 During 2018,Shorter Inc.sold equipment with a cost of $30,000 and accumulated depreciation of $25,000.A gain of $3,000 was recognized on the sale of the equipment.This was the only equipment sale during the year. Assume that all purchases of equipment were paid with cash.How much cash was paid by Shorter for the purchase of equipment during 2018?

The statement of cash flows summarizes the operating,investing,and financing activities of a business for a period of time.

A review of Young's Garden's Center statement of cash flows showed the following: Cash flows from operating activities \ 15,000 Cash flows from investing activities 80,000 Cash flows from financing activities (60,000) From this information,the most likely explanation is that Young's is

If the December 31,2017,balance of accounts receivable is higher than the January 1,2017,balance,then the amount of cash collections will be less than the sales on account for the year.

Presented below is the Operating Activities section of the statement of cash flows for Golden Consulting for 2017: $\text { Operating activities: }$ Net income \ 92,000 Add: Depreciation 20,000 Decrease in accounts receivable 8,000 \1 20,000 Deduct: Decrease in accounts payable (6,000) Net cash inflow from operating activities \1 14,000 Which method of preparing the Operating Activities section has Golden Consulting used?

Dallas Corp.reported the following information for 2017 and 2018: Interest receivable, December 31,2017 \ 1,100 Interest receivable, December 31,2018 1,400 Interest income-2018 3,200 How much cash was received for interest during 2018?

Eastern Corp. Use the following selected data and additional information from the records of Eastern Corp.to answer the questions that follow. ​ ​ Bal ance Sheet Data Accounts receivable \ 36,000 \ 42,000 Inventories 28,000 25,000 Accounts payable 31,000 35,000 Salaries payable 2,000 1,000 Equipment 60,000 40,000 Accumulated depreciation 12,000 16,000 Bonds payable 50,000 100,000 Common stock 150,000 100,000 Retained eamings 38,000 20,000 ​ Additional information: Income Statement Data Net sales \ 420,000 Cost of goods sold 300,000 Operating expenses (excluding depreciation expense) 84,000 Net income 30,000 Gain on sale of equipment (included in net income above) 2,000 ​ (1) Equipment with a cost of $\$ 15,000$ and a book value of $\$ 3,000$ was sold for $\$ 5,000$ during 2018 . (2) Common stock was issued to retire bonds payable during 2018 . (3) The only items affecting retained eamings in 2018 were net income and dividends declared and paid. ​ -Review the data for Eastern Corp. ​ Required ​Prepare the Operating Activities section of statement of cash flows for Eastern Corp.for 2018 if the direct method is used to determine net cash flow from operating activities.

Goldman Corp.reported the following information for 2017 and 2018. Accounts payable, December 31,2017 \ 51,000 Accounts payable, December 31,2018 46,000 Purchases-2018 467,000 Assuming all purchases are on credit,how much cash was paid for merchandise during 2018?