Exam 14: Statement of Cash Flows

Which of the following would be shown as a deduction from net income when calculating net cash flow from operating activities using the indirect method?

The Valz Corporation had a balance in its Equipment account at the beginning of the year of $650,000.During the year,equipment that originally cost $170,000 and had accumulated depreciation of $40,000 was sold for $134,000.The ending balance of the Equipment account was $550,000.What was the cost of the additional equipment purchased during the year?

Which of the following would not be reported as a financing activity on the statement of cash flows?

Use the reconciliation approach to determine cash paid for inventory for the Ji Company.Assume all inventory is bought on account and the Accounts Payable account is used only for inventory.Beginning and ending balances of merchandise inventory were $12,400 and $18,800,respectively.Beginning and ending balances of accounts payable were $4,000 and $2,800,respectively.Sales revenue amounted to $137,024 and cost of goods sold equaled $83,808.

A net decrease in the Equipment account indicates that equipment must have been sold at a loss during the year.

Baltimore Company reported revenue of $124,000 on its income statement.The balance in its Unearned Revenue account was $6,000 at the beginning of the year and $2,000 at the end of the year.Based on this information alone,the amount of cash that Baltimore collected from customers was $120,000 during the year.

Pace Associates,a small consulting firm,charges all of its expenses on accounts payable.Pace's accounts payable balance was $1,500 at the beginning of the year.During the year,expenses were incurred on account in the amount of $13,500.The ending accounts payable balance was $3,500.What is the amount of cash paid for expenses during the year?

Can a company have a negative cash flow from operating activities for the year on the statement of cash flows but still have a net income on the income statement? Explain.

Under the direct method,there is no adjustment for noncash items or gains or losses.

Under the indirect method,an increase in wages payable would be added back to net income when calculating net cash flow from operating activities.

The direct method shows the specific sources and uses of cash that are associated with operating activities.

In preparing the statement of cash flows by the indirect method,an increase in accounts payable would be subtracted from net income.

Depreciation for the year was $80,000 and net income was $323,000.Assume the rest of the company's transactions were cash transactions.How much was net cash from operating activities?

Which section of the statement of cash flows may be prepared using either the direct method or the indirect method?

What kinds of cash flows are reported as investing activities on the statement of cash flows?

Arch Associates reports the following comparative balance sheets and income statement information. Arch Associates Comparative Balance Sheets 12/31/ Year 1 12/31/ Year 2 Cash \ 12,000 \2 2,000 Accounts receivable 4,000 8,000 Prepaid insurance 10,000 8,000 Inventory 6,000 2,000 Property, plant and equipment Total assets Accounts payable \8 ,000 \1 2,000 Salaries payable 10,000 4,000 Long term notes payable 8,000 6,000 Stockholders' equity Total liabilities and equity Income Statement Year Ended 12/31/Year 2 Revenue 70,000 Cost of goods sold Gross margin 30,000 Operating expense Net income All inventory purchases are made on account.The amount of cash paid for inventory purchases during Year 2 was:

During the year,Burton Company had cash collections from customers of $100,000,cash paid to employees of $16,000,cash paid to suppliers of $50,000,cash used to retire long-term bonds of $16,000,and cash payments for dividends of $10,000.The net cash flow from operating activities during the year was:

What is the proper treatment of a loss on disposal of equipment when using the indirect method to complete the cash flows from operating activities section?

Under the indirect method,the net cash flow from financing activities would be the same as if the direct method had been used.

Only the principal portion of a mortgage payment is considered to be a cash outflow for financing activities.