Exam 14: Statement of Cash Flows

The following is a partial list of accounts and balances for the Spencer Corporation. Beginning Ending Land \ 48,000 \ 131,800 Accounts receivable 20,800 20,000 Prepaid rent 4,200 2,800 Prepaid insurance 1,800 5,600 Equipment 24,000 29,000 Accounts payable 3,600 2,800 Dividends payable 2,000 2,400 Utilities payable 1,00 1,600 Cash 16,00 14,400 Buildings 188,00 224,000 Salaries payable 5,800 4,400 Unearned revenue 1,60 1,800 Additional Information: Net income for the current year was $78,800,depreciation expense was $53,400,and equipment with a book value of $40,000 was sold for $36,000 cash. Prepare the operating activities section of the statement of cash flows for the current year using the indirect method.

All of the following are additions to net income when preparing the statement of cash flows under the indirect method except:

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 Which of the following cash flows would be included under the operating activities section of the cash flow statement? (Assume the direct method is used.)

The Duke Company rents out a portion of its office space to another company.At the beginning of the year,the balance in the unearned rent revenue account was $1,200.During the year,Duke recognized $6,800 of rent revenue.If the ending balance of unearned rent revenue is $700,how much cash was received from the tenant for rent during the year?

Bertram,Inc.had beginning and ending accounts payable balances of $400 and $450,respectively.Inventory had beginning and ending balances of $450 and $425,respectively.All inventory purchases are made on account.If cost of goods sold equaled $350,how much cash was spent to purchase inventory?

Under the direct method,depreciation expense is added back to net income when computing net cash flow from operating activities.

Under the indirect method,which of the following items would be subtracted from net income to determine the cash flow from operating activities?

Diaz Company had the following comparative balance sheet information at the end of Year 2 and Year 1: Diaz Company Comparative Balance Sheets Year 2 Cash \ 30,000 Accounts receivable 48,000 Inventory 158,000 Prepaid insurance 10,000 Property, plant and equipment 70,000 Accumulated depreciation (14,000) Total \ 302,000 Acounts payable \ 14,000 Bonds payable 90,000 Common stock 140,000 Retained earnings 58,000 \ 302,000 Year 1 \ 28,000 50,000 156,000 8,000 60,000 (10,000) 292,000 \ 18,000 120,000 120,000 34,000 292,000 Diaz reported net income for Year 2 of $40,000.No property,plant,and equipment were disposed of during the year.Diaz uses the indirect method to prepare the statement of cash flows. Using the indirect method,calculate Diaz's cash flow from operating activities for Year 2.

What are the two methods used to prepare the statement of cash flows?