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Exam 14: Statement of Cash Flows

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Question 41

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Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of the year,respectively.Income reported on the income statement for the year was $120,000.Exclusive of the effect of other adjustments,the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is

A) $120,000
B) $129,000
C) $151,000
D) $111,000

E) A) and C)
F) B) and D)

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Question 42

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The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current productive capacity is called the

A) free cash flow
B) modified cash flow
C) PPE cash flow
D) restricted cash flow

E) None of the above
F) B) and D)

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Question 43

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Net income for the year was $45,500.Accounts receivable increased $5,500,and account payable increased by $11,200.Under the indirect method,the cash flow from operations is

Cash flows from investing activities,as part of the statement of cash flows,would include any payments for the purchase of treasury stock.

There is no difference in the investing and financing sections of the statement of cash flows using the indirect and direct method.

The comparative balance sheet of ConnieJo Company,for December 31,Years 1 and 2 ended December 31 appears below in condensed form: $\begin{array}{lrr}&\underline {\text { Year 2 }}&\underline {\text { Year 1 }}\\\\\text { Cash } & \$ 45,000 & \$ 53,500 \\\text { Accounts receivable net } & 51,300 & 58,000 \\\text { Inventories } & 147,200 & 135,000 \\\text { Investments } & 0 & 60,000 \\\text { Equipment } & 493,000 & 375,000 \\\text { Accumulated depreciation -equipment } & \underline {113,700} & \underline {128,000}\\& \underline {\$ 622.800 } & \underline {\$ 553.500 }\\\\ \text { Accounts payable }& \$ 61,500 & \$ 42,600 \\ \text { Bonds payable, due Year 4 }& 0 & 100,000\end{array}$ $\begin{array}{lrrr}\text { Common stack, \$10 par } & 250,000 & 200,000 \\\text { Paid-in capital in excess of par-common stock } & 75,000 & 50,000 \\\text { Retained earnings } & 236,300 & 160,900 \\& \underline {\$ 622,800}&\underline {\$ 553,500} \\\\\text { The income statement for the current year is as follows: }\\\\\text { Sales }&&\$ 623,000 \\\text { Cost of merchandise sold }&&348,500\\\text { Gross profit }&&\underline { \$ 274,500}\\\text { Operating expenses: }\\\text { Depreciation expense }&\$ 24,700\\ \text { Other operating expenses }&\underline{75,300} & \underline{100,000}\\\text { Income from operations}&&{\$ 174,500}\\\text { Other income }\\\text { Gain on sale of investment }& \$5000\\\text { Other expense: }\\\text { Interest expense } & \underline{12,000} & \underline{7,000}\\ \text { Income before income tax } & & {\$ 167,500} \\\text { Income tax } & & \underline{64,100} \\\text {Net Income } & &\$ 103,400\end{array}$ Additional data for the current year are as follows: a. Fully depreciated equipment costing $39,000 was scrapped,no salvage,and equipment was purchased for $157,000. b. Bonds payable for $100,000 were retired by payment at their face amount. c. 5,000 shares of common stock were issued at $15 for cash. d. Cash dividends declared were paid $28,000. e. All sales are on account. Prepare a statement of cash flows,using the direct method of reporting cash flows from operating activities.

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: $\begin{array}{l}\begin{array}{lll}\\\text { Cash}\\\text { Accounts receivable}\\\text { Inventories}\\\text { Accounts payable }\\\end{array}\begin{array}{c}\underline { \text { End of Year}}\\\$ 20,000 \\19,000 \\50,000 \\12,000\end{array}\begin{array}{c}\underline { \text { Beginning of Year}}\\\$ 15,000 \\32,000 \\65,000 \\18,000\end{array}\end{array}$ Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method,the amortization of bond discount for the period is deducted from the net income for the period.

The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data are often costly to accumulate.

The order of presentation of activities on the statement of cash flows is

If 800 shares of $40 par common stock are sold for $43,000,the $43,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

On the statement of cash flows prepared by the indirect method,the cash flows from operating activities section would include

Under the direct method of preparing a statement of cash flows,the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

In calculating cash flows from operating activities using the indirect method,a gain on the sale of equipment is

The current period statement of cash flows includes the following: The cash balance at the end of the period is

Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method: a. Increase in prepaid expenses b. Amortization of patents c. Increase in salaries payable d. Gain on sale of fixed assets e. Decrease in accounts receivable f. Increase in notes receivable due in 60 days g. Amortization of discount on bonds payable h. Decrease in merchandise inventory i. Depreciation of fixed assets j. Loss on retirement of long-term debt k. Decrease in accounts payable l. Increase in notes payable due in 30 days m. Increase in income taxes payable

Financing activities include

Cost of merchandise sold reported on the income statement was $155,000.The accounts payable balance increased $8,000,and the inventory balance increased by $21,000 over the year.Determine the amount of cash paid for merchandise.

On the basis of the details of the common stock account presented below, calculate the total amount to be recorded in financing section of the statement of cash flows. Assume any stock issues were at par. Indicate whether the amount results in an increase or decrease in cash.