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Exam 14: Statement of Cash Flows

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Question 51

Multiple Choice

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Identify the section of the statement of cash flows a-d) where each of the following items would be reported. -Loss on sale of equipment

A) Operating activities
B) Financing activities
C) Investing activities
D) Schedule of noncash financing and investing

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

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Question 52

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Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As a result of this transaction, cash would

A) increase by $48,000
B) decrease by $7,000
C) increase by $55,000
D) decrease by $27,000

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

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Question 53

Multiple Choice

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Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is

State the sections) of the statement of cash flows prepared by the indirect method operating activities, investing activities, financing activities, or not reported) and the amount that would be reported for each of the following transactions: a) Received $120,000 from the sale of land costing $70,000. b) Purchased investments for $75,000. c) Declared $35,000 cash dividends on stock. $5,000 dividends were payable at the beginning of the year, and $6,000 were payable at the end of the year. d) Acquired equipment for $64,000 cash. e) Declared and issued 100 shares of $20 par common stock as a stock dividend, when the market price of the stock was $32 a share. f) Recognized depreciation for the year, $37,000. g) Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash. h) Issued $500,000 of 20-year, 10% bonds payable at 99. i) Borrowed $43,000 from Regional Bank, issuing a 5-year, 8% note for that amount.

Identify the section of the statement of cash flows a-d) where each of the following items would be reported. -Payment of dividends to stockholders

For each of the following activities that may take place during the accounting period, indicate the effect a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -acquisition of treasury stock

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

In preparing the statement of cash flows, the correct order of reporting cash activities is financing, operating, and investing.

On the basis of the following data for Garrett Co. for Years 1 and 2 ended December 31, prepare a statement of cash flows using the indirect method of reporting cash flows from operating activities. Assume that equipment costing $125,000 was purchased for cash and equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in the retained earnings account were for net income of $56,000 and cash dividends declared of $18,000.

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

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 building with a cost of $153,000 and accumulated depreciation of $42,000 was sold for a $11,000 gain. When using the indirect method, the cash generated from this investing activity was $121,000.

If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in the operating activities section of the statement of cash flows prepared by the indirect method).

Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the issuance of bonds payable.

The current period statement of cash flows includes the following: Cash balance at the beginning of the period $310,000 Net cash flow from operating activities 185,000 Net cash flow used for investing activities 43,000 Net cash flow used for financing activities 97,000 The cash balance at the end of the period is

For each of the following activities that may take place during the accounting period, indicate the effect a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -gain on sale of investments

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

In determining the cash flows from operating activities for the statement of cash flows by the indirect method, the depreciation expense for the period is added to the net income for the period.

Samuel Company's accumulated depreciation-equipment increased by $6,000, while patents decreased by $2,200 between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $3,200 from the sale of investments. Assume no changes in noncash current assets and liabilities. Reconcile a net income of $92,000 to net cash flow from operating activities. Net income $ 92,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 6,000 Amortization 2,200 Loss from sale of investments 3,200