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Exam 12: Statement of Cash Flows

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Question 41

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When using the indirect method to prepare the operating activities section of the statement of cash flows,how is a decrease in current liabilities handled?

A) It is subtracted from net income in the cash flows from operating activities section.
B) It is subtracted from current assets in the cash flows from financing activities section.
C) It is added to net income in the cash flows from operating activities section.
D) It is added to inventory purchases in the cash flows from investing activities section.

E) A) and D)
F) All of the above

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Question 42

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On January 1,Year 2,the balance of Jacobs Corporation's Accounts Receivable was $40,000.Sales on account for Year 2 amounted to $320,000 and the ending balance of Accounts Receivable was $64,000.What is the amount of cash collected from customers?

A) $296,000
B) $256,000
C) $344,000
D) $360,000

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

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Question 43

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Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?

The amount of increase in accounts receivable is added to credit sales to calculate the amount of cash inflow from customers when using the direct method to prepare the operating activities section of the statement of cash flows.

Which of the following cash flows would be included in the operating activities section of the statement of cash flows if the direct method is used?

Ervin Company began the accounting period with $64,000 in accounts receivable.The ending balance in accounts receivable was $40,000.If the credit sales during the period were $588,000,what is the amount of cash received from customers?

Bristol Corporation reported a beginning balance of $6,200 in accounts receivable.During the year,sales on account totaled $49,600.If the ending balance of accounts receivable amounts to $25,000,what was the amount of cash received from customers?

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,what was the amount of cash paid for inventory purchases?

Oglethorpe Corporation reported a beginning balance of $12,400 in its Prepaid Insurance account.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 for the year?

Hilliard Company,a small consulting firm,charges all of its operating expenses on Accounts Payable.On January 1,Year 2,Hilliard's Accounts Payable balance was $24,000 and,during Year 2,an additional $216,000 of operating expenses were charged on account.On December 31,Year 2,the Accounts Payable balance was $72,000.What is the amount of cash paid for expenses during Year 2?

Which of the following cash transactions is not classified as an operating activity?

Investing activities on the statement of cash flows always involve long-term assets,including marketable securities.

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?

For the year ended December 31,Year 1,Carsem Company had cash collections from customers of $220,000,cash paid to employees of $32,000,cash paid to suppliers of $100,000,cash used to retire long-term bonds of $32,000,and cash payments for dividends of $20,000.Based on this information,what is the net cash provided from operating activities?

Warren Corporation's balance sheet reports equipment that originally cost $65,000.The accumulated depreciation for the equipment is $25,000.Warren sells the equipment for $37,000.What would the effect be on its income statement and statement of cash flows?

Valdez Co.sold land that had cost $48,000 for $60,000 cash.Which of the following statements is true about this transaction?

Mercury Company rents out a portion of its office space to another company.At the beginning of the year,the balance in the Unearned Rent Revenue account was $3,400.During the year,Mercury recognized $16,600 of rent revenue.If the ending balance of Unearned Rent Revenue is $2,600,how much cash was received from the tenant for rent during the year?

The FASB requires that companies report cash flow per share in their audited financial statements.

Middleton Corporation reported utilities expense of $18,200 on its income statement for Year 1.For the year,the beginning balance in Utilities Payable was $2,500 and the ending balance was $1,500.The amount of cash that Mayes paid for utilities in Year 1 was $19,200.

The direct method of preparing the operating activities section of the statement of cash flows is preferred by the Financial Accounting Standards Board.