Question 1

Atkins Corporation has provided the following information for the year ended December 31, 2016: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

A) A $30,000 cash inflow is reported from the equipment sale. 
B) Using the indirect method, net income is increased by the $65,000 depreciation expense. 
C) Using the indirect method, net income is decreased by the $10,000 gain on the sale of the equipment. 
D) A $60,000 cash inflow is reported from the equipment sale.

Question 2

The following information was available from the financial statements of Collateral, Inc. for the years 2016 and 2015 (in millions of dollars):  Required: 
A.Calculate the capital acquisitions ratio for each of the two years.Round your answers to two decimal places.
B.Calculate the free cash flow for each of the two years.
C.Comment on the sufficiency of the capital acquisitions ratio and free cash flow for the two years and implications for future corporate strategy.

Accepted Answer

The answer of The following information was available from the...

Question 3

During the year ended December 31, 2017, Blythe Company paid $2.2 million to purchase stock in another company, $1.0 million to purchase its common stock for treasury shares, $.5 million to buy short-term investments, sold used equipment for $.8 million when its book value was $.6 million, and purchased new equipment for $3.4 million.
Required:
A.Prepare the investing activities section of Blythe's cash flow statement for the year ended December 31, 2017.
B.Is the net cash flow for investing activities a net cash inflow, or a net cash outflow? Briefly describe the reason for your answer.

Accepted Answer

The answer of During the year ended December 31, 2017,...

Question 4

Which of the following is correct?

Accepted Answer

A) Repayments of principal and interest reduce financing activities cash flows. 
B) Purchase of common stock shares for treasury is a cash outflow connected to investing activities. 
C) If a company borrows $450 million in long-term notes and repays $380 million of long-term notes, these items must both be disclosed separately and not netted against each other in the financing section of the cash flow statement. 
D) Issuing common stock in exchange for the purchase of a building creates both a financing activity and investing activity cash flow.

Question 5

When a company purchases equipment using common stock, the equipment purchase is reported as a financing activity.

Accepted Answer

A) True 
 B)False

Question 6

The following information has been provided to you by RKJ Company:  Using the indirect method, what is the net cash provided by operating activities?

Accepted Answer

A) $231,000. 
B) $187,000. 
C) $206,000. 
D) $168,000.

Question 7

Bold Company's 2016 income statement reported total sales revenue of $250,000. During 2016, accounts receivable decreased by $20,000 and accounts payable increased $10,000. How much cash was collected from customers during 2016?

Accepted Answer

A) $230,000. 
B) $270,000. 
C) $250,000. 
D) $280,000.

Question 8

While preparing a statement of cash flows, you encountered the following transaction:
February 1, 2017: Battles Corporation acquired a small office building in exchange for 50,000 shares of its own common stock; par value $10 per share; market value $15 per share.
Required:
Should this transaction be shown on the statement of cash flows? Why or why not?

Accepted Answer

The answer of While preparing a statement of cash flows,...

Question 9

State the three cash flow classifications that are reported within a statement of cash flows and describe the primary activities included in each.

Accepted Answer

The answer of State the three cash flow classifications that...

Question 10

Which of the following transactions increases the quality of income ratio?

Accepted Answer

A) The accrual of revenue. 
B) The accrual of an expense. 
C) The cash payment of an account payable. 
D) The payment of a cash dividenD.The quality of income ratio is cash flow from operating activities divided by net income.Accrued expenses are incurred but not paid.They reduce net income but do not reduce cash flow.The decrease in net income (the denominator) therefore increases the quality of income ratio.

Question 11

Which of the following transactions does not result in either a cash inflow or a cash outflow?

Accepted Answer

A) A company purchased some of its own stock from a stockholder. 
B) Amortization of a patent. 
C) Payment of a cash dividend. 
D) Sale of equipment at book value.

Question 12

Darwin Company, a manufacturer, has provided the following information pertaining to its recent year of operation: • Net income, $200,000
• Accounts receivable increased $18,000
• Prepaid insurance increased $7,000
• Depreciation expense was $25,000
• Loss on sale of a building was $22,000
• Wages payable increased $14,000
• Unearned revenue decreased $21,000
Using the indirect method, how much was Darwin's net cash provided by operating activities?

Accepted Answer

A) $227,000. 
B) $215,000. 
C) $171,000. 
D) $257,000.

Question 13

During 2016, Eva's Enterprises cash paid for property, plant and equipment was $755 million and cash flow from operating activities was $5,968 million. The average property, plant, and equipment from the comparative balance sheets were $6,094 million. Eva's capital acquisitions ratio for 2016 is closest to:

Accepted Answer

A) 1.0 
B) 5.3 
C) 7.9 
D) 6.0

Question 14

The quality of income ratio increases when depreciation expense is recorded.

Accepted Answer

A) True 
 B)False

Question 15

Burich Co. reported short-term borrowings of $2.5 million, long-term borrowings of $6.8 million, repayments of long-term borrowings of $3.5 million, interest payments of $780,000, purchase of common stock shares for treasury of $.5 million, and cash dividends declared of $1.1 million. What is the cash flow from financing activities?

Accepted Answer

A) $5,300,000 net cash inflow. 
B) $4,200,000 net cash inflow. 
C) $1,700,000 net cash inflow. 
D) $2,800,000 net cash inflow.

Question 16

Brooks Company reported net income of $40,000, which included depreciation expense and amortization expense of $21,000 and $18,000, respectively. The following changes also occurred during the year ended December 31, 2016:  Required:
Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31, 2016.

Accepted Answer

The answer of Brooks Company reported net income of $40,000,...

Question 17

Hill Company reported net income of $10,000 for the year ended December 31, 2016. Additional 2016 information is as follows:  Required:
Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31, 2016.

Accepted Answer

The answer of Hill Company reported net income of $10,000...

Question 18

Which of the following would not be reported as a financing activities cash flow?

Accepted Answer

A) Issuing common stock for cash. 
B) Cash dividend payments. 
C) Purchasing treasury stock. 
D) Purchase of a building by signing a note payable.

Question 19

The statement of cash flows explains how the cash balance changed during a particular period of time.

Accepted Answer

A) True 
 B)False

Question 20

When a company sells equipment for cash at a loss, cash flows from investing activities decreases.

Accepted Answer

A) True 
 B)False

Exam 12: Statement of Cash Flows

Which of the following is correct?

When a company purchases equipment using common stock, the equipment purchase is reported as a financing activity.

The following information has been provided to you by RKJ Company: Using the indirect method, what is the net cash provided by operating activities?

Bold Company's 2016 income statement reported total sales revenue of $250,000. During 2016, accounts receivable decreased by $20,000 and accounts payable increased $10,000. How much cash was collected from customers during 2016?

State the three cash flow classifications that are reported within a statement of cash flows and describe the primary activities included in each.

Which of the following transactions increases the quality of income ratio?

Which of the following transactions does not result in either a cash inflow or a cash outflow?

The quality of income ratio increases when depreciation expense is recorded.

Hill Company reported net income of $10,000 for the year ended December 31, 2016. Additional 2016 information is as follows: Required: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31, 2016.

Which of the following would not be reported as a financing activities cash flow?

The statement of cash flows explains how the cash balance changed during a particular period of time.

When a company sells equipment for cash at a loss, cash flows from investing activities decreases.