Exam 14: Statement of Cash Flows

Phibbs Company prepared the following data for the year. Outflow to purchase treasury stock 30,000 Inflow from sale of machinery 7,500 Inflow from sale of marketable securities 3,750 Outflow to purchase building 87,500 Outflow to purchase land 12,500 Outflow to pay dividends 7,500 Outflow to pay interest 37,500 What is the net cash flow from investing activities?

Under the direct method,cash payments to suppliers would be reported in the operating section of a cash flow statement.

The following information was drawn from the year-end balance sheets of White,Inc. Year 2 Year 1 Bonds payable \ 200,000 \2 75,000 Common stock 112,500 87,500 Treasury stock 17,500 12,500 Retained earnings 35,000 27,500 White,Inc.,issued $30,000 in bonds during Year 2.The bonds were issued at face value.All bonds were retired at face value.What is the amount of cash outflow for the payment of bond liabilities?

The indirect method for preparing the statement of cash flows begins with the amount of sales revenue reported on the income statement.

Assuming the use of the indirect method to prepare the statement of cash flows,indicate whether each of the following items would be added to net income,subtracted from net income,or not included in the operating activities section.Use the letters "A" for added,"S" for subtracted,or "N" for not included in the operating activities section. Answers a. Increase in Treasury Stock b. Decrease in Interest Payable c. Increase in Unearned Revenue d. Increase in Bonds Payable e. Decrease in Treasury Stock f. Increase in Inventory g. Decrease in Marketable Securities (Available for sale securities) h. Gain on Sale of Land i. Increase in Buildings j. Decrease in Supplies

When using the indirect method,an increase in current liabilities is:

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

Under the indirect method,depreciation expense would be subtracted from net income when determining the net cash flow from operating activities.

Noncash investing and financing activities are not reported on the statement of cash flows.

In preparing the statement of cash flows by the indirect method,an increase in inventory would be added to net income.

Blair Corporation reported the following for Year 2: Beginning Ending Accounts receivable \ 40,000 \ 38,000 Merchandise inventory 32,000 36,000 Prepaid insurance 200 140 Interest receivable 1,800 600 Accounts payable 2,500 4,200 Salaries payable 4,000 3,600 Other information: Sales (all on account) \ 280,000 Interest revenue 10,000 Cost of goods sold 160,000 Salaries expense 24,000 Insurance expense 2,200 Required: a)Use the reconciliation approach to compute the appropriate figures for cash flows from operating activities. b)Using the direct method,present in good form the cash flows from the operating activities section of a statement of cash flows.

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

The following information was drawn from Eckerd Company's balance sheets at the end of Year 2 and Year 1. Year 2 Year 1 Bonds payable \1 70,000 \1 50,000 New bonds in the amount of $50,000 were issued at par during Year 2.What is the amount of cash flow associated with the repayment of bond liabilities?

The Good Corporation provided the following for the current year: Begirning Ending Land \ 48,000 \ 100,000 Equipment 36,800 44,000 Marketable securities 200,000 160,000 Good's income statement reported an $8,000 gain on sale of land as well as a $10,000 loss on the sale of marketable securities.A parcel of land costing $16,000 was sold for a gain of $8,000.No additional securities were purchased during the year.The company also sold equipment originally costing $6,000 with accumulated depreciation of $4,000 for a gain of $1,600.Purchases of additional land and equipment were cash transactions. Required: Prepare the investing activities section of the statement of cash flows.Use the reconciliation approach.

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

Income tax expense was $137,500 for the year.The balance of the Income Tax Payable account was $7,500 at the beginning of the year and $10,000 at the end of the year.Cash payments for income tax reported on the cash flow statement using the direct method equal:

Vinton Corp.had beginning accounts receivable of $36,000 and ending accounts 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?

The Penn Corporation provided the following for the current year: Beginning Ending Mortgage payable \ 200,000 \ 140,000 Common stock 152,000 280,000 Paid-in Excess-Common 170,000 380,000 Dividends payable 8,000 5,000 Retained earnings 580,000 740,000 Net income for the current year was reported as $200,000. Required: Use the reconciliation approach to obtain the information required to prepare the financing activities section of the statement of cash flows.(Note that you do not actually have to prepare that section of the statement.)

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,which of the following statements is correct?

The Ling Corporation reported a beginning balance of $1,200 in its Prepaid Insurance account.During the year,a total of $16,000 was recognized as insurance expense and the Prepaid Insurance account had an ending balance of $1,600.How much cash did Ling pay for insurance during the year?