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Exam 13: Statement of Cash Flows

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Question 61

Multiple Choice

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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

A) $53,000
B) $47,000
C) $33,000
D) $37,000

E) None of the above
F) All of the above

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Question 62

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Identify where each of the following items would be reported in the section of the statement of cash flows.

Premises

Responses

Increase in income taxes payable

Operating activities

Dividends received on investment

Financing activities

Sale of machinery held for use by the company

Investing activities

Issuance of bond payable

Schedule of noncash financing and investing

Purchase of the stock of another company as investment

Decrease in inventory

Exchange of land for note payable

Payment of dividends to stockholders

Increase in accounts receivable

Loss on sale of equipment

Premises

Increase in income taxes payable

Dividends received on investment

Sale of machinery held for use by the company

Issuance of bond payable

Purchase of the stock of another company as investment

Decrease in inventory

Exchange of land for note payable

Payment of dividends to stockholders

Increase in accounts receivable

Loss on sale of equipment

Responses

Operating activities

Financing activities

Investing activities

Schedule of noncash financing and investing

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Correct Answer

Premises

Responses

Increase in income taxes payable

Dividends received on investment

Sale of machinery held for use by the company

Issuance of bond payable

Purchase of the stock of another company as investment

Decrease in inventory

Exchange of land for note payable

Payment of dividends to stockholders

Increase in accounts receivable

Loss on sale of equipment

Premises

Increase in income taxes payable

Dividends received on investment

Sale of machinery held for use by the company

Issuance of bond payable

Purchase of the stock of another company as investment

Decrease in inventory

Exchange of land for note payable

Payment of dividends to stockholders

Increase in accounts receivable

Loss on sale of equipment

Responses

Question 63

Multiple Choice

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

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

On the basis of the following data for Breach Co. for the current and preceding years ended December 31, prepare a statement of cash flows for the current year using the indirect method. Assume that equipment costing $25,000 was purchased for cash and no long term assets were sold during the period. Stock was issued for cash-3,200 shares at par. Net income for the current year was $76,000. Cash dividends declared and paid were $13,000.

Selected data taken from the accounting records of Laser Inc. for the current year ended December 31 are as follows: $\begin{array}{|l|r|r|}\hline& \begin{array}{c}\text { Balance, } \\\text { December } 31\end{array} & \begin{array}{c}\text { Balance, } \\\text { January } 1\end{array} \\\hline \text { Accrued operating expenses } & \$ 5,590 & \$ 6,110 \\\hline \text { Accounts payable (merchandise creditors) } & 41,730 & 46,020 \\\hline \text { Inventories } & 77,350 & 84,110 \\\hline \text { Prepaid expenses } & 3,250 & 3,900 \\\hline\end{array}$ ​ During the current year, the cost of goods sold was $448,500, and the operating expenses other than depreciation were $78,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows. ​ Required: Determine the amount reported on the statement of cash flows for: (a) Cash payments for merchandise (b) Cash payments for operating expenses

Which of the following is a noncash investing and financing activity?

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of cash receipts and cash payments related to the day-to-day operations of the business.

The comparative balance sheet of Barry Company for Years 1 and 2 ended December 31 appears below in condensed form: ​ Additional data for the current year are as follows: (a) Net income, $\$ 75,800$ . (b) Depreciation reported on income statement, $\$ 38,000$ . (c) Fully depreciated equipment costing $\$ 60,000$ was scrapped, no salvage, and equipment was purchased for $\$ 150,000$ . (d) Bonds payable for $\$ 75,000$ were retired by payment at their face amount. (e) 2,500 shares of common stock were issued at $\$ 30$ for cash. (f) Cash dividends declared and paid, $\$ 40,000$ . (g) Investments of $\$ 100,000$ were sold for $\$ 125,000$ . ​ Prepare a statement of cash flows using the indirect method.

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.

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

Cash flows from investing activities, as part of the statement of cash flows, include payments for the acquisition of fixed assets.

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

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

Selected data for the current year ended December 31 are as follows: $\begin{array}{lrr}&\text { Balance } & \text { Balance } \\&\text { December 31 } & \text { January 1 }\\\text { Accrued expenses (operating expenses) } & \$ 29,500 & \$ 22,000 \\\text { Accounts payable (merchandise creditors) } & 90,000 & 135,000 \\\text { Inventories } & 42,500 & 68,000 \\\text { Prepaid expenses } & 23,000 & 20,000\end{array}$ ​ During the current year, the cost of goods sold was $620,000 and the operating expenses other than depreciation were $142,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows. Determine the amount reported on the statement of cash flows for (a) cash payments for merchandise and (b) cash payments for operating expenses.

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

The comparative balance sheet of Barry Company for Years 1 and 2 ended December 31 appears below in condensed form: Additional data for the current year are as follows: (a) Net income, $\$ 75,800$ . (b) Depreciation reported on income statement, $\$ 38,000$ . (c) Fully depreciated equipment costing $\$ 60,000$ was scrapped, no salvage, and equipment was purchased for $\$ 150,000$ . (d) Bonds payable for $\$ 75,000$ were retired by payment at their face amount. (e) 2,500 shares of common stock were issued at $\$ 30$ for cash. (f) Cash dividends declared and paid, $\$ 40,000$ . (g) Investments of $\$ 100,000$ were sold for $\$ 125,000$ . What are the net cash flows from operating, investing, and financing activities for Year 2?

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Issuance of bond payable

Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section.