Question 1

Each of the following would be reported under operating activities except cash receipts
A) from sales of goods.
B) from sales of investments.
C) of interest on loans.
D) of dividends from investments.

Accepted Answer

Cash receipts from sales of investments would be reported under investing activities, not operating activities. The other options would be reported under operating activities.

Question 2

All of the following statements about free cash flow are false except:
A) Significant free cash flow indicates less potential to finance new investments.
B) Free cash flow is most commonly calculated by subtracting capital expenditures from cash provided by operations and then adding cash dividends.
C) Free cash flow is not reported on the statement of cash flows.
D) Significant free cash flow indicates less potential to pay additional dividends.

Accepted Answer

Free cash flow is reported on the statement of cash flows. Choices A, B, and D are all false statements.

Question 3

Which of the following statements concerning the statement of cash flows is true?
A) The statement of cash flows is usually more accurate when using the indirect method.
B) If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided.
C) The statement of cash flows reflects both earnings per share and cash per share.
D) The statement of cash flows is an optional financial statement for external reporting purposes.

Accepted Answer

If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating activities must still be provided. This is a requirement under accounting standards. The other statements are false.

Question 4

During 2017, Harvey Industries reported cash provided by operations of $670,000, cash used in investing of $1,039,000, and cash used in financing of $145,000. In addition, cash spent for fixed assets during the period was $404,000. No dividends were paid. Based on this information, what was Harvey's free cash flow?
A) ($369,000)
B) $1,450,000
C) $266,000
D) ($918,000)

Accepted Answer

Free cash flow (FCF) is calculated as cash from operations minus capital expenditures (capex).

FCF = Cash from operations - Capex 
FCF = $670,000 - $404,000 
FCF = $266,000

Therefore, the answer is C) $266,000.

Question 5

LRRP Company had credit sales of $650,000. The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance was $140,000. What were the cash collections from customers during the period?
A) $775,000
B) $650,000
C) $525,000
D) $665,000

Accepted Answer

Cash collections from customers can be calculated using the formula: Cash Collections = Beginning Accounts Receivable + Credit Sales - Ending Accounts Receivable. Plugging in the given values: Cash Collections = $15,000 + $650,000 - $140,000 = $525,000.

Question 6

Gonzo Company reports a $25,000 increase in inventory and a $12,000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $185,000. Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were
A) $185,000.
B) $197,000.
C) $222,000.
D) $148,000.

Accepted Answer

To calculate cash payments made to suppliers using the direct method, we need to adjust the change in inventory and accounts payable from the Cost of Goods Sold.

Change in inventory = $25,000 increase 
Cost of Goods Sold = $185,000 
Adjusted Cost of Goods Sold = $185,000 - $25,000 = $160,000

Change in accounts payable = $12,000 decrease 
Cash payments made to suppliers = Adjusted Cost of Goods Sold + Change in accounts payable = $160,000 - $12,000 = $148,000

Therefore, the cash payments made to suppliers were $222,000.

Question 7

During the year, Salaries and Wages Payable decreased by $5,000. If Salaries and Wages Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is
A) $179,000.
B) $174,000.
C) $169,000.
D) $184,000.

Accepted Answer

The answer of During the year, Salaries and Wages Payable...

Question 8

Beane Corporation shows income tax expense of $82,000. There has been a $6,000 decrease in federal income taxes payable and a $7,000 increase in state income taxes payable during the year. What was Beane's cash payment for income taxes?
A) $82,000
B) $81,000
C) $76,000
D) $95,000

Accepted Answer

Beane Corporation's cash payment for income taxes can be determined using the formula:
Income tax expense = Taxes payable at the beginning of the year + Current year tax expense - Taxes payable at the end of the year
Here, Beane Corporation has shown income tax expense of $82000, and there has been a $6000 decrease in federal income taxes payable and a $7000 increase in state income taxes payable during the year. Using the above formula, we can calculate:
$82000 = Taxes payable at the beginning of the year + (Current year tax expense) - (Taxes payable at the end of the year)
$82000 = X + (X-($6000+$7000)) - X
$82000 = X - $13000
X = $95000
Therefore, Beane Corporation's cash payment for income taxes was $95000. The closest option is B, $81000, which is incorrect. The correct answer is $95000.

Question 9

Which of the following items does not appear in the statement of cash flows under the direct method?
A) Cash payments to suppliers
B) Cash collections from customers
C) Depreciation Expense
D) Cash from the sale of equipment

Accepted Answer

Depreciation expense is a non-cash expense and therefore does not appear in the statement of cash flows under the direct method.

Question 10

During 2017, Zuma Company had $150,000 in cash sales and $1,240,000 in credit sales. The accounts receivable balances were $180,000 and $215,000 at December 31, 2016 and 2017, respectively. Using the direct method of reporting cash flows from operating activities, what was the total cash collected from all customers during 2017?
A) $1,205,000
B) $1,425,000
C) $1,390,000
D) $1,355,000

Accepted Answer

The answer of During 2017, Zuma Company had $150,000 in...

Question 11

In the Papyrus Corporation, cash receipts from customers were $136,000, cash payments for operating expenses were $102,000, and one-third of the company's $9,300 income taxes were paid during the year. Net cash provided by operating activities is:
A) $34,000.
B) $24,700.
C) $30,900.
D) $27,800.

Accepted Answer

Net cash provided by operating activities can be calculated by subtracting cash payments from cash receipts and adding any adjustments. 
$136,000 - $102,000 = $34,000 
Adjustment for income taxes paid: $9,300/3 = $3,100 
Net cash provided by operating activities: $34,000 - $3,100 = $30,900.

Question 12

Ale Company has other operating expenses of $80,000. There has been a decrease in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger than in the prior period. What were Ale's cash payments for operating expenses?
A) $81,000
B) $82,000
C) $69,000
D) $80,000

Accepted Answer

The answer of Ale Company has other operating expenses of...

Question 13

Ware Company had purchases of $260,000. The comparative balance sheet analysis revealed a $15,000 decrease in inventory and a $25,000 increase in accounts payable. What were Ware's cash payments to suppliers?
A) $235,000
B) $220,000
C) $275,000
D) $300,000

Accepted Answer

The answer of Ware Company had purchases of $260,000. The...

Question 14

Lager Company has other operating expenses of $260,000. There has been an increase in prepaid expenses of $20,000 during the year, and accrued liabilities are $15,000 lower than in the prior period. Using the direct method of reporting cash flows from operating activities, what were Lager's cash payments for operating expenses?
A) $255,000
B) $265,000
C) $225,000
D) $295,000

Accepted Answer

The answer of Lager Company has other operating expenses of...

Question 15

Ale Company reports a $16,000 increase in inventory and a $8,000 increase in accounts payable during the year. Cost of Goods Sold for the year was $150,000. The cash payments made to suppliers were
A) $150,000.
B) $158,000.
C) $126,000.
D) $174,000.

Accepted Answer

The increase in inventory of $16,000 would mean that inventory was purchased during the year, while the increase in accounts payable of $8,000 would mean that some of the inventory was purchased on credit. To determine the cash payments made to suppliers, we need to adjust Cost of Goods Sold for the change in inventory and then add any increase in accounts payable.

Adjusted COGS = COGS + Increase in Inventory 
Adjusted COGS = $150,000 + $16,000 
Adjusted COGS = $166,000

Cash Payments Made to Suppliers = Adjusted COGS + Increase in Accounts Payable 
Cash Payments Made to Suppliers = $166,000 + $8,000 
Cash Payments Made to Suppliers = $174,000

Therefore, the correct answer is B) $158,000.

Question 16

Squeeze Company reports the following: End of Year Beginning of Year
Inventory $25,000 $42,000
Accounts Payable 22,000 12,000
If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is
A) $227,000.
B) $205,000.
C) $193,000.
D) $247,000.

Accepted Answer

The answer of Squeeze Company reports the following: End of...

Question 17

Marke Inc. had cash sales of $400,000 and credit sales of $1,150,000. The accounts receivable balance increased $30,000 during the year. How much cash did Hark receive from its customers during the year?
A) $1,520,000
B) $1,120,000
C) $1,550,000
D) $780,000

Accepted Answer

The answer of Marke Inc. had cash sales of $400,000...

Question 18

Christine Company had an increase in inventory of $55,000. The cost of goods sold was $95,000. There was a $6,000 decrease in accounts payable from the prior period. What were Thomas' cash payments to suppliers?
A) $156,000
B) $61,000
C) $144,000
D) $101,000

Accepted Answer

The answer of Christine Company had an increase in inventory...

Question 19

The cost of goods sold during the year was $183,000. Inventory decreased by $8,000 during the year and accounts payable decreased by $4,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
A) $187,000.
B) $179,000.
C) $171,000.
D) $195,000.

Accepted Answer

The formula for calculating cash payments for merchandise using the direct method is:

Cost of Goods Sold + Beginning Inventory - Ending Inventory + Decrease in Accounts Payable = Cash Payments for Merchandise

Plugging in the given values, we get:

$183,000 + $8,000 - $0 - (-$4,000) = $179,000

Therefore, the answer is B.

Question 20

Tomas Pest Control Products has the following information available: $$\begin{array} { l r } 
\text { Net Income } & \$ 25,000 \
\text { Cash Provided by Operations } & 33,000 \
\text { Cash Sales } & 65,000 \
\text { Capital Expenditures } & 10,000 \
\text { Dividends Paid } & 2,000
\end{array}$$ What is Tomas' free cash flow?
A) $27,000
B) $23,000
C) $21,000
D) $10,000

Accepted Answer

The answer of Tomas Pest Control Products has the following...

Quiz 13: Statement of Cash Flows

Each of the following would be reported under operating activities except cash receipts

All of the following statements about free cash flow are false except:

Which of the following statements concerning the statement of cash flows is true?

LRRP Company had credit sales of $650,000. The beginning accounts receivable balance was $15,000 and the ending accounts receivable balance was $140,000. What were the cash collections from customers during the period?

Gonzo Company reports a $25,000 increase in inventory and a $12,000 decrease in accounts payable during the year. Cost of Goods Sold for the year was $185,000. Using the direct method of reporting cash flows from operating activities, cash payments made to suppliers were

During the year, Salaries and Wages Payable decreased by $5,000. If Salaries and Wages Expense amounted to $174,000 for the year, the cash paid to employees (including deductions from gross pay) is

Beane Corporation shows income tax expense of $82,000. There has been a $6,000 decrease in federal income taxes payable and a $7,000 increase in state income taxes payable during the year. What was Beane's cash payment for income taxes?

Which of the following items does not appear in the statement of cash flows under the direct method?

In the Papyrus Corporation, cash receipts from customers were $136,000, cash payments for operating expenses were $102,000, and one-third of the company's $9,300 income taxes were paid during the year. Net cash provided by operating activities is:

Ale Company has other operating expenses of $80,000. There has been a decrease in prepaid expenses of $6,000 during the year, and accrued liabilities are $5,000 larger than in the prior period. What were Ale's cash payments for operating expenses?

Ware Company had purchases of $260,000. The comparative balance sheet analysis revealed a $15,000 decrease in inventory and a $25,000 increase in accounts payable. What were Ware's cash payments to suppliers?

Ale Company reports a $16,000 increase in inventory and a $8,000 increase in accounts payable during the year. Cost of Goods Sold for the year was $150,000. The cash payments made to suppliers were

Squeeze Company reports the following: End of Year Beginning of Year Inventory $25,000 $42,000 Accounts Payable 22,000 12,000 If cost of goods sold for the year is $220,000, the amount of cash paid to suppliers is

Marke Inc. had cash sales of $400,000 and credit sales of $1,150,000. The accounts receivable balance increased $30,000 during the year. How much cash did Hark receive from its customers during the year?

Christine Company had an increase in inventory of $55,000. The cost of goods sold was $95,000. There was a $6,000 decrease in accounts payable from the prior period. What were Thomas' cash payments to suppliers?

The cost of goods sold during the year was $183,000. Inventory decreased by $8,000 during the year and accounts payable decreased by $4,000 during the year. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total