Question 1

When the direct method is used to prepare the operating activities section of the statement of cash flows,cash inflows from customers and cash outflows for depreciation are among the categories of cash flows likely to be reported.

Accepted Answer

A) True 
 B)False

Question 2

The Manhattan Corporation provided the following partial list of accounts,balances and activities for 2016:
Manhattan's income statement reported an $8,000 gain on sale of land that occurred when land that had cost $16,000 was sold for $24,000.The company also recorded a $10,000 loss on the sale of marketable securities.No additional marketable securities were purchased during the year.The company also sold equipment originally costing $6,000 with accumulated depreciation of $4,000 for $3,600.Purchases of additional land and equipment were cash transactions.
Required: Prepare the investing activities section of the statement of cash flows.

Accepted Answer

The answer of The Manhattan Corporation provided the following partial...

Question 3

If a company sells equipment at a loss,the loss from selling the equipment is reported in the investing activities section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 4

The Clarion Corporation provided the following partial list of accounts,balances and additional information for 2016:
Net income for 2016 was reported as $100,000.
Required: Prepare the financing activities section of the statement of cash flows.

Accepted Answer

The answer of The Clarion Corporation provided the following partial...

Question 5

How is depreciation expense classified on the statement of cash flows?

Accepted Answer

The answer of How is depreciation expense classified on the...

Question 6

For many companies,cash flow from operating activities exceeds income from operations,due to the effect of depreciation,which decreases income from operations but does not decrease cash.

Accepted Answer

A) True 
 B)False

Question 7

Cash flow from operating activities is often less stable from year to year than is the amount of net income reported on the income statement.

Accepted Answer

A) True 
 B)False

Question 8

In preparing the operating activities section of the statement of cash flows by the indirect method,decreases in current liabilities are added to net income.

Accepted Answer

A) True 
 B)False

Question 9

When the indirect method is used to prepare the operating activities section of the statement of cash flows,what is the starting point of that section?

Accepted Answer

The answer of When the indirect method is used to...

Question 10

The direct method of preparing the operating activities section of the statement of cash flows shows increases and decreases in noncash current assets and current liabilities to arrive at cash flows from operating activities.

Accepted Answer

A) True 
 B)False

Question 11

Jones Company requires prepayment from all customers.Jones Company reported revenue of $258,000 on its 2016 income statement.The balance in its Unearned Revenue account was $12,000 at the start of 2016 and $4,000 at the end of the year.Based on this information alone,the amount of cash that Jones collected from customers for 2016 was $250,000.

Accepted Answer

A) True 
 B)False

Question 12

Give an example of a noncash financing and investing activity.

Accepted Answer

The answer of Give an example of a noncash financing...

Question 13

On January 1,2016,Mayer Corporation signed a contract to perform $25,000 worth of services for the Phibbs Company over the next three years.Which of the following indicates the effects of this event on the income statement and statement of cash flows of Mayer Corporation?
    
D)

Accepted Answer

The answer of On January 1,2016,Mayer Corporation signed a contract...

Question 14

The investing activities section of the statement of cash flows distinguishes between acquisitions of long-term assets that expand operating capacity and those that replace old,worn-out assets.

Accepted Answer

A) True 
 B)False

Question 15

On July 6,2016,Howard Corporation received an interest check on a note receivable.No principal was received at this time.Show the effects of this transaction on Howard's income statement and statement of cash flows.

Accepted Answer

The answer of On July 6,2016,Howard Corporation received an interest...

Question 16

On the statement of cash flows,the sum of the three major components (operating activities,investing activities,financing activities)adds up to

Accepted Answer

A) net income for the period. 
B) the change in the cash account balance between the beginning and ending of the period. 
C) the ending cash balance. 
D) the amount of cash inflow for the period.

Question 17

Pittsburgh Company pays cash for all inventory purchases.The company had a beginning inventory of $18,500 and an ending inventory of $16,900.Their cost of goods sold amounted to $75,000.Based on this information,the amount of cash paid for inventory purchases was:

Accepted Answer

A) $76,600 
B) $73,400 
C) $75,000 
D) $81,800

Question 18

In preparing the operating activities section of the statement of cash flows by the indirect method,noncash revenues and gains are added to net income.

Accepted Answer

A) True 
 B)False

Question 19

The Oglethorpe Corporation reported a beginning balance of $12,400 in its Prepaid Insurance account for 2016.During the year,Oglethorpe paid a total of $42,000 to purchase insurance,and the Prepaid Insurance account had an ending balance of $13,100.What was the amount of insurance expense that Oglethorpe reported for 2016?

Accepted Answer

A) $42,000 
B) $42,300 
C) $42,700 
D) $41,300

Question 20

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

Accepted Answer

A) Subtract depreciation from net income. 
B) Add depreciation to net income. 
C) Disregard depreciation because it relates to an investing activity. 
D) Disregard depreciation because it is a noncash expense.

Exam 12: Statement of Cash Flows

When the direct method is used to prepare the operating activities section of the statement of cash flows,cash inflows from customers and cash outflows for depreciation are among the categories of cash flows likely to be reported.

If a company sells equipment at a loss,the loss from selling the equipment is reported in the investing activities section of the statement of cash flows.

The Clarion Corporation provided the following partial list of accounts,balances and additional information for 2016: Net income for 2016 was reported as $100,000. Required: Prepare the financing activities section of the statement of cash flows.

How is depreciation expense classified on the statement of cash flows?

For many companies,cash flow from operating activities exceeds income from operations,due to the effect of depreciation,which decreases income from operations but does not decrease cash.

Cash flow from operating activities is often less stable from year to year than is the amount of net income reported on the income statement.

In preparing the operating activities section of the statement of cash flows by the indirect method,decreases in current liabilities are added to net income.

When the indirect method is used to prepare the operating activities section of the statement of cash flows,what is the starting point of that section?

The direct method of preparing the operating activities section of the statement of cash flows shows increases and decreases in noncash current assets and current liabilities to arrive at cash flows from operating activities.

Give an example of a noncash financing and investing activity.

On January 1,2016,Mayer Corporation signed a contract to perform $25,000 worth of services for the Phibbs Company over the next three years.Which of the following indicates the effects of this event on the income statement and statement of cash flows of Mayer Corporation? D)

The investing activities section of the statement of cash flows distinguishes between acquisitions of long-term assets that expand operating capacity and those that replace old,worn-out assets.

On July 6,2016,Howard Corporation received an interest check on a note receivable.No principal was received at this time.Show the effects of this transaction on Howard's income statement and statement of cash flows.

On the statement of cash flows,the sum of the three major components (operating activities,investing activities,financing activities) adds up to

Pittsburgh Company pays cash for all inventory purchases.The company had a beginning inventory of $18,500 and an ending inventory of $16,900.Their cost of goods sold amounted to $75,000.Based on this information,the amount of cash paid for inventory purchases was:

In preparing the operating activities section of the statement of cash flows by the indirect method,noncash revenues and gains are added to net income.

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