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Exam 14: Statement of Cash Flows

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Question 21

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If accounts payable have increased during a period,

A) revenues on an accrual basis are less than revenues on a cash basis
B) expenses on an accrual basis are less than expenses on a cash basis
C) expenses on an accrual basis are the same as expenses on a cash basis
D) expenses on an accrual basis are greater than expenses on a cash basis

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

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Question 22

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Net income was $51,000 for the year.The accumulated depreciation balance increased by $14,000 over the year.There were no sales of fixed assets or changes in noncash current assets or liabilities.Under the indirect method,the cash flow from operations is $37,000.

A) True
B) False

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Question 23

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The following two scenarios are independent of one another. 1- An analysis of the general ledger accounts indicates that office equipment was sold for $39,600 during the year. The equipment originally cost $68,000 and had accumulated depreciation of $22,500 on the date of sale. Indicate how the elements of this transaction would be reported on the statement of cash flows using the indirect method. 2- An analysis of the general ledger accounts indicates that delivery equipment, which cost $97,000 and on which accumulated depreciation totaled $42,100 on the date of sale, was sold for $57,500 during the year. Using this information, indicate the items to be reported on the statement of cash flows.

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

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows: $\begin{array}{|l|r|r|}\hline &\text { Dec. 31, Year 2} & \text { Dec. 31, Year 1}\\\hline\text { Accounts receivable } & \$ 7,500 & \$ 5,200 \\\hline \text { Inventory } & 11,500 & 16,000 \\\hline \text { Accounts payable } & 4,300 & 5,200 \\\hline \text { Dividends payable } & 4,000 & 3,000\\\hline\end{array}$ 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.

Cash flows from investing activities,as part of the statement of cash flows,would include any receipts from the sale of land.

To determine cash payments for operating expenses for the statement of cash flows using the direct method,a decrease in prepaid expenses is added to operating expenses other than depreciation.

Rarely will the cash flows from operating activities,as reported on the statement of cash flows,be the same as the net income reported on the income statement.

On the statement of cash flows,the cash flows from financing activities section would include

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method,the net decrease in inventories from the beginning to the end of the period is added to net income for the period.

An analysis of the general ledger accounts indicates that equipment, with an original cost of $200,000 and accumulated depreciation of $170,000 on the date of sale, was sold for $20,000 during the year. Using this information, indicate the items to be reported on the statement of cash flows using the indirect method.

Baxter Company reported a net loss of $13,000 for the year ended December 31.During the year,accounts receivable decreased by $5,000,merchandise inventory increased by $8,000,accounts payable increased by $10,000,and depreciation expense of $4,000 was recorded.During the year,operating activities

The board of directors of Kendall Co.declared cash dividends totaling $390,000 during the current year.The comparative balance sheet indicates dividends payable of $58,000 at the beginning of the year and $73,000 at the end of the year.What was the amount of cash payments Kendall Co.made to stockholders during the year?

The statement of cash flows shows the effects on cash of a company's operating,investing,and financing activities.

Indicate the section operating activities,investing activities,financing activities,or none in which each of the following would be reported on the statement of cash flows prepared by the indirect method: a. gain on sale of fixed assets b. net income c. retirement of long-term debt d. sale of capital stock e. distribution of stock dividends f. payment of cash dividends g. purchase of fixed assets h. sale of fixed assets i. receipt of interest revenue j. Payment of interest expense

Free cash flow is

Rogers Company reported net income of $35,000 for the year.During the year,accounts receivable increased by $7,000,accounts payable decreased by $3,000 and depreciation expense of $8,000 was recorded.Net cash provided by operating activities for the year is

Changes in current assets and current liabilities are reported on the statement of cash flows,indirect method,in the

Cash flows from operating activities,as part of the statement of cash flows,include cash transactions that enter into the determination of net income.

There are two alternatives to reporting cash flows from operating activities in the statement of cash flows: 1 the direct method and 2 the indirect method.