Exam 14: Statement of Cash Flows

The income statement of Collins Co.reported total sales revenue of $115,000 during the current year.Assume that all sales are credit sales.The company's comparative balance sheets reported a balance in accounts receivable of $17,500 at the beginning of the year and $25,000 at the end of the year.The cash inflow from customers during the current year equals:

Dividends received from investments in marketable securities are reported as investing activities in the statement of cash flows.

Wade Company reported wages expense of $32,000 during the year.The beginning balance in wages payable was $1,200,and at the end of the year,the balance in wages payable was $1,700.What was the amount of cash paid for employee wages during the year?

The following data is supplied from the comparative balance sheets and income statement information from Webber,Inc.Webber uses the indirect method to prepare its statement of cash flows. Webber, Inc. Comparative Balance Sheets 12/31/ Year 2 12/31/ Year 1 Cash \ 22,000 \ 16,000 Accounts receivable 12,000 8,000 Prepaid insurance 8,000 10,000 Inventory 14,000 16,000 Property, plant, and equipment 22,000 16,000 Accumulated depreciation Total Accounts payable \ 20,000 \ 16,000 Operating expenses payable 14,000 16,000 Long term notes payable 10,000 12,000 Common stock 18,000 12,000 tained earnings Income Statement Year 2 Revenue \ 70,000 Cost of goods sold Gross margin Depreciation expense 2,000 Other operating expense Net income Required: a)Calculate the cash flow from operating activities (using the indirect method). b)Calculate the cash flow from investing activities. c)Calculate the cash flow from financing activities.

In preparing the statement of cash flows by the indirect method,which of the following is a correct statement of one of the general rules to convert net income to a cash-basis equivalent?

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 The amount of cash collected from customers during Year 2 was:

When using the indirect method to complete the cash flows from operating activities section,what is the proper treatment of depreciation expense?

On January 1,the balance of Fink Corporation's accounts receivable was $10,000.Sales on account amounted to $80,000 during the Year.The ending balance of accounts receivable was $16,000.What is the amount of cash collected from customers?

The investing section of the statement of cash flows is the same regardless of whether the direct or indirect method is used.

Which of the following statements is incorrect regarding the use of the indirect method when preparing the operating activities of the statement of cash flows?

Under the indirect method,which of the following is not an item that is added back to net income in determining net cash flow from operating activities?

Painter Corporation had the following beginning and ending balances for the current year: Beginning Ending Equipment \ 850,000 \ 870,000 Accurmulated depreciation 300,000 280,000 During the year,Painter sold equipment that had originally been purchased for $160,000 for cash of $60,000.The old equipment had accumulated depreciation of $120,000 at the time of sale.Painter purchased new equipment by making a $20,000 down payment and signing a two-year note for the balance. Required: 1)Calculate the cost of the new equipment. 2)What was the amount of the gain or loss on the sale of the old equipment? If Painter uses the indirect approach to calculate cash flow from operating activities,how will the gain or loss be reported on the statement of cash flows? 3)What was the amount of depreciation expense for the year? How will the depreciation expense affect the statement of cash flows prepared by the indirect method?

The only difference between the cash flow statement prepared under the indirect method as opposed to the direct method is the manner in which the:

Would issuing a mortgage to purchase a building be reported on the statement of cash flows? If so,where would it be reported? If not,why not?

During the year,the Abbot Company had cash flow from operating activities of $133,000 and the following changes in account balances: 1)The Accumulated Depreciation account had a beginning balance of $25,000 and an ending balance of $35,000.The increase was due to depreciation expense. 2)The long-term Notes Payable account had a beginning balance of $40,000 and an ending balance of $15,000.The decrease was due to repayment of debt. 3)The Accounts Receivable account had a beginning balance of $60,000 and an ending balance of $50,000. 4)The Equipment account had a beginning balance of $25,000 and an ending balance of $92,500.The increase was due to the purchase of equipment for cash. 5)The Long-Term Investments account (marketable securities)had a beginning balance of $18,000 and an ending balance of $12,500.The decrease was due to the sale of investments at cost. 6)The amount of cash dividends declared and paid during the year was $22,000. 7)The Interest Payable account had a beginning balance of $2,250 and an ending balance of $1,250. What was the net change in cash?

The following account balances are for Curran Company: 12/31/ Year 1 12/31/ Year 2 Accounts receivable \ 84,000 \ 60,000 Prepaid rent 8,000 4,000 Long-tem marketable securities 80,000 70,000 Dividends payable 6,000 2,000 Salaries payable 8,000 \ 2,000 Notes payable 44,000 34,000 Additional data for Year 2: (1)Sales on account for the period totaled $100,000. (2)Salary expense was $14,000. (3)Rent expense was $12,000. Based on this information,what was the net cash inflow from operating activities for Year 2?

Increases in long-term asset balances indicate cash outflows to purchase assets.

Frost Company reported a $4,000 increase in dividends payable,a $60,000 increase in retained earnings,and $64,000 in net income during the year.Based on this information,the company must have paid dividends equal to $4,000 during the year.

The income statement for Year 2 of Winter Co.reported wages expense of $160,000.At December 31,Year 1,the balance sheet showed a balance in wages payable of $16,000.At December 31,Year 2,the balance sheet showed a balance in wages payable of $22,000.What amount of cash was paid for wages during the year?

Which of the following statements is incorrect regarding preparing a statement of cash flows using the direct method?