The following income statement was drawn from the income statement of Gibbons Company for its first year of operations: \[\begin{array} { l r } \text { Cash revenue } & \$ 60,000 \\ \text { Depreciation expense } & 20,000 \\ \text { Accrued interest expense } & 6,000 \\ \text { Cash operating expense } & 24,000 \\ \text { Operating income } & 10,000 \\ \text { Gain on the sale of equipment } & 1,200 \\ \text { Net income } & \$ 11,200 \end{array}\] Using the direct method,the net cash flow from operating activities equals:

A) $37,200. B) $26,000. C) $36,000. D) $24,800. A) $37,200. B) $26,000. C) $36,000. D) $24,800.

The following information was prepared for Standard Corporation: \[\begin{array} { l r } \text { Net income } & \$ 650,000 \\ \text { Gain on sale of equipment } & 30,000 \\ \text { Dividends paid } & 80,000 \\ \text { Decrease in prepaid expenses } & 16,000 \\ \text { Increase in accounts receivable } & 8,000 \end{array}\] Net cash flow from operating activities equals:

A) $672,000 B) $628,000 C) $658,000 D) $548,000 A) $672,000 B) $628,000 C) $658,000 D) $548,000

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. \[\begin{array} { | l | l | c | } \hline & & \text { Answers } \\ \hline \text { a. } & \text { Example: Increase In Accounts Receivable } & \text { S } \\ \hline \text { b. } & \text { Decrease in Accounts Payable } & \\ \hline \text { c. } & \text { Decrease in Bond Payable } & \\ \hline \text { d. } & \text { Decrease in Inventory } & \\ \hline \text { e. } & \text { Increase in Common Stock } & \\ \hline \text { f. } & \text { Decrease in Accounts Receivable } & \\ \hline \text { g. } & \text { Depreciation Expense } & \\ \hline \text { h. } & \text { Decrease in Equipment } & \\ \hline \text { i. } & \text { Decrease in Prepaid Rent } & \\ \hline \end{array}\]

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

Leo Company reported sales of $200,000 during Year 2.Assume that all sales are credit sales.Leo's balance sheets for Year 2 and Year 1 showed the following: \[\begin{array} { l r r } & \text { Year 2 } & \text { Year 1 } \\ \text { Accounts receivable } & \$ 90,000 & \$ 80,000 \\ \text { Accounts payable } & 64,000 & 60,000 \end{array}\] Based on this information,how much cash did Leo collect from sales during Year 2?

A) $204,000 B) $210,000 C) $290,000 D) $190,000 A) $204,000 B) $210,000 C) $290,000 D) $190,000

Exam 14: Statement of Cash Flows

Use the reconciliation approach to compute cash paid for salaries for the Norton Corporation.The income statement reported salaries expense as $49,800.Beginning and ending salaries payable balances were $3,720 and $2,840,respectively.

(Essay)

4.8/5

(85)

Question 81

What is the major advantage of using the indirect method of preparing the statement of cash flows?

(Essay)

4.9/5

(92)

Question 82

The following income statement was drawn from the income statement of Gibbons Company for its first year of operations: Cash revenue \ 60,000 Depreciation expense 20,000 Accrued interest expense 6,000 Cash operating expense 24,000 Operating income 10,000 Gain on the sale of equipment 1,200 Net income \ 11,200 Using the direct method,the net cash flow from operating activities equals:

(Multiple Choice)

4.9/5

(69)

Question 83

The Upton Company reported a beginning balance of $1,600 and an ending balance of $2,200 in its Unearned Revenue account for Year 2.During the year,$8,000 of revenue was recognized.Based on this information,how much cash was received from customers?

(Multiple Choice)

5.0/5

(79)

Question 84

The indirect method adjusts for the differences between the accrual-based income statement and "cash flows from operating activities."

(True/False)

4.8/5

(83)

Question 85

In preparing the statement of cash flows by the indirect method,an increase in a current asset is subtracted from net income.

(True/False)

4.8/5

(84)

Question 86

Style Monthly magazine reported $650,000 of revenue for the month.At the beginning of the month,its Unearned Revenue account had a balance of $190,000.At the end of the month,the account had a balance at $156,000.Based on this information,what is the amount of cash received from customers?

(Multiple Choice)

4.9/5

(76)

Question 87

Cash payments for interest expense on a bond payable would be classified as a financing activity.

(True/False)

5.0/5

(77)

Question 88

The following information was prepared for Standard Corporation: Net income \ 650,000 Gain on sale of equipment 30,000 Dividends paid 80,000 Decrease in prepaid expenses 16,000 Increase in accounts receivable 8,000 Net cash flow from operating activities equals:

(Multiple Choice)

5.0/5

(83)

Question 89

Which of the following would be reported as an investing activity on the statement of cash flows?

(Multiple Choice)

4.8/5

(76)

Question 90

On January 1,Steigel Company had a balance of $720,000 in its Land account.During the year,Steigel sold land that had cost $240,000 for $440,000 cash.The balance in the Land account was $980,000 on December 31.What is the net cash outflow from investing activities?

(Multiple Choice)

4.8/5

(80)

Question 91

There are two methods,direct and indirect,for preparing and presenting the statement of cash flows.

(True/False)

4.9/5

(89)

Question 92

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?

(Essay)

4.8/5

(76)

Question 93

Equipment with an original cost of $20,000 and accumulated depreciation of $7,500 was sold at a loss of $2,500.As a result of this transaction,cash would:

(Multiple Choice)

4.9/5

(82)

Question 94

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. Example: Increase In Accounts Receivable S b. Decrease in Accounts Payable c. Decrease in Bond Payable d. Decrease in Inventory e. Increase in Common Stock f. Decrease in Accounts Receivable g. Depreciation Expense h. Decrease in Equipment i. Decrease in Prepaid Rent

(Essay)

4.8/5

(81)

Question 95

Gates Corporation reported utilities expense of $112,800 on its income statement.The beginning balance in utilities payable was $8,000 and the ending balance was $4,000.The amount of cash that Gates paid for utilities during the year was $116,800.

(True/False)

4.9/5

(92)

Question 96

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

(True/False)

4.8/5

(81)

Question 97

Which of the following is not an adjustment when arriving at net cash flow from operating activities under the indirect method?

(Multiple Choice)

4.7/5

(76)

Question 98

Leo Company reported sales of $200,000 during Year 2.Assume that all sales are credit sales.Leo's balance sheets for Year 2 and Year 1 showed the following: Year 2 Year 1 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 Year 2?

(Multiple Choice)

4.8/5

(76)

Question 99

How is the direct method of preparing the statement of cash flows different from the indirect method?

(Essay)

4.8/5

(77)

Question 100

Use the reconciliation approach to compute cash paid for salaries for the Norton Corporation.The income statement reported salaries expense as $49,800.Beginning and ending salaries payable balances were $3,720 and $2,840,respectively.

What is the major advantage of using the indirect method of preparing the statement of cash flows?

The Upton Company reported a beginning balance of $1,600 and an ending balance of $2,200 in its Unearned Revenue account for Year 2.During the year,$8,000 of revenue was recognized.Based on this information,how much cash was received from customers?

The indirect method adjusts for the differences between the accrual-based income statement and "cash flows from operating activities."

In preparing the statement of cash flows by the indirect method,an increase in a current asset is subtracted from net income.

Style Monthly magazine reported $650,000 of revenue for the month.At the beginning of the month,its Unearned Revenue account had a balance of $190,000.At the end of the month,the account had a balance at $156,000.Based on this information,what is the amount of cash received from customers?

Cash payments for interest expense on a bond payable would be classified as a financing activity.

The following information was prepared for Standard Corporation: Net income \ 650,000 Gain on sale of equipment 30,000 Dividends paid 80,000 Decrease in prepaid expenses 16,000 Increase in accounts receivable 8,000 Net cash flow from operating activities equals:

Which of the following would be reported as an investing activity on the statement of cash flows?

On January 1,Steigel Company had a balance of $720,000 in its Land account.During the year,Steigel sold land that had cost $240,000 for $440,000 cash.The balance in the Land account was $980,000 on December 31.What is the net cash outflow from investing activities?

There are two methods,direct and indirect,for preparing and presenting the statement of cash flows.

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?

Equipment with an original cost of $20,000 and accumulated depreciation of $7,500 was sold at a loss of $2,500.As a result of this transaction,cash would:

Gates Corporation reported utilities expense of $112,800 on its income statement.The beginning balance in utilities payable was $8,000 and the ending balance was $4,000.The amount of cash that Gates paid for utilities during the year was $116,800.

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

Which of the following is not an adjustment when arriving at net cash flow from operating activities under the indirect method?

How is the direct method of preparing the statement of cash flows different from the indirect method?

Management Accounting and Corporate Governance

Cost Behavior, operating Leverage, and Profitability Analysis

Analysis of Cost, volume, and Pricing to Increase Profitability

Cost Accumulation,tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, process, and Hybrid Costing Systems

Financial Statement Analysis

Filters