Question 1

The net income reported on the income statement for the current year was $210,000.  Depreciation recorded on equipment and a building amount to $62,500 for the year.  Balances of the current asset and current liabilities accounts at the beginning and end of the year are as follows:  
(a) Prepare the cash flows from operating activities section of the statement of cash flows, using the indirect method. 
(b) If the direct method had been used, would the net cash flow from operating activities have been the same?  Explain.

Accepted Answer

The answer of The net income reported on the income...

Question 2

Which of the following should be shown on a statement of cash flows under the financing activities section?

Accepted Answer

A)  the purchase of a long-term investment in the common stock of another company 
B)  the payment of cash to retire a long-term note 
C)  the proceeds from the sale of a building 
D)  the issuance of a long-term note to acquire land

Question 3

Connor Designs Company has cash flows for operating activities of $425,000.  Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity. 
What is the free cash flow for Connor Designs?

Accepted Answer

The answer of Connor Designs Company has cash flows for...

Question 4

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:  
Adjust Year 2 net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

Accepted Answer

The answer of Fortune Corporation's comparative balance sheet for current...

Question 5

Net income for the year was $29,500.  Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400.

Accepted Answer

A) True 
 B)False

Question 6

The income statement disclosed the following items for the current year:   
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Accepted Answer

The answer of The income statement disclosed the following items...

Question 7

The net income reported on the income statement for the current year was $275,000.  Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively.  Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:  What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Accepted Answer

A)  $198,000 
B)  $324,000 
C)  $352,000 
D)  $296,000

Question 8

To determine cash payments for merchandise for the statement of cash flows using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.

Accepted Answer

A) True 
 B)False

Question 9

Kennedy, Inc. reported the following data:  
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Accepted Answer

The answer of Kennedy, Inc. reported the following data: ...

Question 10

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following would not be classified as an operating activity?

Accepted Answer

A)  interest expense 
B)  income taxes 
C)  payment of dividends 
D)  selling expenses

Question 12

The net income reported on the income statement for the current year was $58,000.  Depreciation recorded on fixed assets for the year was $24,000.  In addition, equipment with an original cost of $130,000 and accumulated depreciation of $115,000 on the date of the sale, was sold for $20,000.  Balances of the current asset and current liability accounts at the end and beginning of the year are listed below.  Prepare the cash flows from operating activities section of a statement of cash flows using the indirect method.

Accepted Answer

The answer of The net income reported on the income...

Question 13

The following information is available from the current period financial statements:  The net cash flow from operating activities using the indirect method is

Accepted Answer

A)  $166,000 
B)  $184,000 
C)  $110,000 
D)  $240,000

Question 14

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Accepted Answer

A)  a gain on the sale of land 
B)  a decrease in accounts payable 
C)  an increase in accrued liabilities 
D)  dividends paid on common stock

Question 15

If a business issued bonds payable in exchange for land, the transaction would be reported in a separate schedule on the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 16

Cash dividends of $50,000 were declared during the year.  Cash dividends payable were $10,000 and $5,000 at the beginning and end of the year, respectively.  The amount of cash for the payment of dividends during the year is

Accepted Answer

A)  $55,000 
B)  $50,000 
C)  $65,000 
D)  $60,000

Question 17

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Accepted Answer

A) True 
 B)False

Question 18

The Dickinson Company reported net income of $155,000 for the current year. Depreciation recorded on buildings and equipment amounted to $65,000 for the year.  In addition, a building with an original cost of $250,000 and accumulated depreciation of $190,000 on the date of the sale, was sold for $75,000.  Balances of the current asset and current liability accounts at the beginning and end of the year are as follows:  
Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

Accepted Answer

The answer of The Dickinson Company reported net income of...

Question 19

On the basis of the following data for Breach Co. for the current and preceding years ended December 31, prepare a statement of cash flows using the indirect method.   
Assume that equipment costing $25,000 was purchased for cash and no long term assets were sold during the period.   
Stock was issued for cash-3,200 shares at par. 
Net income for the current year was $76,000. 
Cash dividends declared and paid were $13,000.

Accepted Answer

The answer of On the basis of the following data...

Question 20

The cost of merchandise sold during the year was $45,000.  Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year, respectively.  Accounts payable were $7,000 and $5,000 at the beginning and end of the year, respectively.  Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

Accepted Answer

A)  $46,000 
B)  $44,000 
C)  $50,000 
D)  $40,000

Exam 13: Statement of Cash Flows

Which of the following should be shown on a statement of cash flows under the financing activities section?

Connor Designs Company has cash flows for operating activities of $425,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity. What is the free cash flow for Connor Designs?

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows: Adjust Year 2 net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400.

The income statement disclosed the following items for the current year: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

To determine cash payments for merchandise for the statement of cash flows using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.

Kennedy, Inc. reported the following data: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

Which of the following would not be classified as an operating activity?

The following information is available from the current period financial statements: The net cash flow from operating activities using the indirect method is

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

If a business issued bonds payable in exchange for land, the transaction would be reported in a separate schedule on the statement of cash flows.

Cash dividends of $50,000 were declared during the year. Cash dividends payable were $10,000 and $5,000 at the beginning and end of the year, respectively. The amount of cash for the payment of dividends during the year is

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.