Question 1

Adama Company reported a net loss of $6,000 for the year ended December 31, 2017.During the year, accounts receivable increased $15,000, merchandise inventory decreased $12,000, accounts payable decreased by $20,000, and depreciation expense of $12,000 was recorded.During 2017, operating activities

Accepted Answer

A) used net cash of $17,000. 
B) used net cash of $29,000. 
C) provided net cash of $24,000. 
D) provided net cash of $21,000.

Question 2

Each of the following would be reported under operating activities except cash receipts

Accepted Answer

A) from sales of goods. 
B) from sales of investments. 
C) of interest on loans. 
D) of dividends from investments.

Question 3

Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations.

Accepted Answer

A) True 
 B)False

Question 4

The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities.

Accepted Answer

A) True 
 B)False

Question 5

If a gain of $12,000 is incurred in selling (for cash) office equipment having a book value of $110,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

A) $98,000. 
B) $122,000. 
C) $110,000. 
D) $12,000.

Question 6

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

Accepted Answer

A) deducted from net income. 
B) added to net income. 
C) ignored because it does not affect income. 
D) ignored because it does not affect expenses.

Question 7

LRRP Company had credit sales of $650,000.The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance was $140,000.What were the cash collections from customers during the period?

Accepted Answer

A) $775,000 
B) $650,000 
C) $525,000 
D) $665,000

Question 8

The cash effects of transactions that create revenues and expenses are

Accepted Answer

A) financing activities. 
B) investing activities. 
C) operating activities. 
D) processing activities.

Question 9

The net income reported on the income statement for the current year was $245,000.Depreciation was $40,000.Account receivable and inventories decreased by $12,000 and $35,000, respectively.Prepaid expenses and accounts payable increased, respectively, by $1,000 and $8,000.How much cash was provided by operating activities?

Accepted Answer

A) $296,000 
B) $339,000 
C) $323,000 
D) $311,000

Question 10

Cash provided by operations is generally equal to operating income.

Accepted Answer

A) True 
 B)False

Question 11

Tomas Pest Control Products has the following information available: $$\begin{array} { l r } 
\text { Net Income } & \$ 25,000 \
\text { Cash Provided by Operations } & 33,000 \
\text { Cash Sales } & 65,000 \
\text { Capital Expenditures } & 10,000 \
\text { Dividends Paid } & 2,000
\end{array}$$ What is Tomas' free cash flow?

Accepted Answer

A) $27,000 
B) $23,000 
C) $21,000 
D) $10,000

Question 12

Which of the following would be subtracted from net income using the indirect method?

Accepted Answer

A) Depreciation expense 
B) An increase in accounts receivable 
C) An increase in accounts payable 
D) A decrease in prepaid expenses

Question 13

In Lynne Company, there was an increase in the land account during the year of $43,000.Analysis reveals that the change resulted from a cash sale of land at cost $115,000, and a cash purchase of land for $158,000.In the statement of cash flows, the change in the land account should be reported in the investment section:

Accepted Answer

A) as a net purchase of land, $43,000. 
B) only as a purchase of land $158,000. 
C) as a purchase of land $158,000 and a sale of land $115,000. 
D) only as a sale of land $115,000.

Question 14

If a company reports a net loss, it

Accepted Answer

A) may still have a net increase in cash. 
B) will not be able to pay cash dividends. 
C) will not be able to get a loan. 
D) will not be able to make capital expenditures.

Question 15

Under the direct method, the formula for computing cash collections from customers is sales revenues plus the increase in accounts receivable or minus the decrease in accounts receivable.

Accepted Answer

A) True 
 B)False

Question 16

Rubble Company reported net income of $70,000 for the year.During the year, accounts receivable increased by $6,000, accounts payable decreased by $5,000 and depreciation expense of $8,000 was recorded.Net cash provided by operating activities for the year is

Accepted Answer

A) $67,000. 
B) $89,000. 
C) $63,000. 
D) $70,000.

Question 17

Ale Company has other operating expenses of $80,000.There has been a decrease in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger than in the prior period.What were Ale's cash payments for operating expenses?

Accepted Answer

A) $81,000 
B) $82,000 
C) $69,000 
D) $80,000

Question 18

Generally, the most important category on the statement of cash flows is cash flows from

Accepted Answer

A) operating activities. 
B) investing activities. 
C) financing activities. 
D) significant noncash activities.

Question 19

In the Buans Company, land decreased $80,000 because of a cash sale for $80,000, the equipment account increased $35,000 as a result of a cash purchase, and Bonds Payable increased $60,000 from an issuance for cash at face value.The net cash provided by investing activities is

Accepted Answer

A) $80,000. 
B) $165,000. 
C) $45,000. 
D) $25,000.

Question 20

Each of the following is added to net income in computing net cash provided by operating activities except

Accepted Answer

A) amortization expense. 
B) an increase in accrued expenses payable. 
C) a gain on sale of equipment. 
D) a decrease in inventory.

Exam 13: Financial Analysis: the Big Picture

Adama Company reported a net loss of $6,000 for the year ended December 31, 2017.During the year, accounts receivable increased $15,000, merchandise inventory decreased $12,000, accounts payable decreased by $20,000, and depreciation expense of $12,000 was recorded.During 2017, operating activities

Each of the following would be reported under operating activities except cash receipts

Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations.

The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities.

If a gain of $12,000 is incurred in selling (for cash) office equipment having a book value of $110,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

In calculating net cash provided by operating activities using the indirect method, an increase in prepaid expenses during a period is

LRRP Company had credit sales of $650,000.The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance was $140,000.What were the cash collections from customers during the period?

The cash effects of transactions that create revenues and expenses are

Cash provided by operations is generally equal to operating income.

Which of the following would be subtracted from net income using the indirect method?

If a company reports a net loss, it

Under the direct method, the formula for computing cash collections from customers is sales revenues plus the increase in accounts receivable or minus the decrease in accounts receivable.

Rubble Company reported net income of $70,000 for the year.During the year, accounts receivable increased by $6,000, accounts payable decreased by $5,000 and depreciation expense of $8,000 was recorded.Net cash provided by operating activities for the year is

Ale Company has other operating expenses of $80,000.There has been a decrease in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger than in the prior period.What were Ale's cash payments for operating expenses?

Generally, the most important category on the statement of cash flows is cash flows from

In the Buans Company, land decreased $80,000 because of a cash sale for $80,000, the equipment account increased $35,000 as a result of a cash purchase, and Bonds Payable increased $60,000 from an issuance for cash at face value.The net cash provided by investing activities is

Each of the following is added to net income in computing net cash provided by operating activities except