Quiz 12: Statement of Cash Flows

The statement of cash flows explains how the cash balance changed during a particular period of time.

Only highly liquid investments with original maturities of less than six months at the date of purchase qualify as cash equivalents.

The payment of interest on a note payable is a cash flow from a financing activity.

Collection of principal on a note receivable is a cash flow from financing activities.

Most companies use the direct method for disclosing their cash flows from operating activities rather than the indirect method.

The difference between the direct and indirect methods of cash flow statement preparation only affects the determination of cash flows from investing activities.

Cash collected from customers is a cash flow from operating activities and is calculated when using the indirect method for preparing the statement of cash flows.

Cash flows associated with property,plant,and equipment acquisition and disposition are reported as cash flows from investing activities.

Cash flows associated with issuance and retirement of long-term debt and equity are reported as cash flows from investing activities.

When accrued liabilities increase from the beginning to the end of the year,it means accrued expenses were greater than cash payments of such expenses,and,under the indirect method,the increase in accrued liabilities would be added to net income to convert to cash flow from operating activities.

Under the indirect method,an increase in accounts receivable during the year will be added to net income.

If sales revenue was $1,800,000 and accounts receivable decreased $40,000 during the year,then cash collected from customers equals $1,840,000.

Under the indirect method,depreciation expense is added to net income because it decreases net income but does not affect cash flow.

Under the indirect method,a decrease in inventory is subtracted from net income because inventory purchases are less than cost of goods sold.

Under the indirect method,an increase in prepaid expenses is subtracted from net income,because the cash prepayments exceed the related expenses.

The quality of income ratio can only be interpreted based on knowledge of a company's business operations and strategies.

The quality of income ratio increases when depreciation expense is recorded.

The quality of income ratio decreases when cash is used to pay accounts payable.

A higher quality of income ratio implies that operations tend to be financed internally without having to rely on external financing sources.

The quality of income ratio measures the portion of net income that was generated by cash flow from operating activities.

When a company purchases equipment using common stock,the equipment purchase is reported as a financing activity.

When a company sells equipment for cash at a loss,cash flows from investing activities decreases.

Amortization of a patent reduces cash flows from investing activities.

Free cash flow measures the sufficiency of cash flow from operating activities to cover both capital expenditures for property,plant and equipment as well as the payment of dividends.

Canadian Beer had a capital acquisitions ratio of 7.49,which means its net income exceeded its cash investment in property,plant and equipment by almost 7.5 times.

The capital acquisitions ratio represents the portion of property,plant,and equipment purchases which could have been financed with cash flow from operating activities.

When a company borrows $150 million during the year and also repays $120 million of debt,the company reports the $30 million net amount as excess of borrowings over repayments in the financing activities section of the statement of cash flows.

Cash flows from financing activities include those cash flows with respect to issuing and retiring long-term debt and equity.

While repaying principal on long-term debt is reported as part of cash flows from financing activities,repaying principal on short-term debt (notes payable)is reported as part of cash flows from operating activities.

Wish Corporation acquired a computer for $15,000 and paid for it in full by issuing 1,000 shares of its own common stock,par $10 (current market price $15 share).This transaction should not be reported within the statement of cash flows because cash was neither received nor disbursed.

Which of the following transactions does not result in either a cash inflow or a cash outflow? A)A company purchased some of its own stock from a stockholder. B)Amortization of a patent. C)Payment of a cash dividend. D)Sale of equipment at book value.

Which of the following transactions would not create a cash flow from operating activities? A)Collecting cash from a customer. B)Paying cash to a supplier. C)Paying cash to stockholders for dividends. D)Paying cash for a utility bill.

Which of the following transactions would be reported in the cash flow statement as a cash flow from financing activities? A)The cash payment of interest expense. B)Acquiring land by signing a note payable. C)Paying cash to stockholders for dividends. D)Purchasing shares of stock of another company using cash.

Which of the following statements regarding use of the direct and indirect methods of determining cash flows from operating activities is incorrect? A)The indirect method starts with net income. B)The direct method calculates cash collected from customers. C)The majority of U.S.companies use the indirect method. D)The FASB recommends use of the indirect method.

Which of the following would not be a cash flow from investing activities? A)Purchase of long-term investments. B)Sale of a patent. C)Collection of principal on a long-term note receivable. D)Collection of interest revenue on a long-term note receivable.

Which of the following would not be a cash flow from financing activities? A)Issuance of common stock for cash. B)Borrowing cash on a long-term note payable. C)Collection of a cash dividend. D)Repayment of principal on a long-term note payable.

Which of the following would not be considered a cash equivalent? A)A 30-day certificate of deposit. B)A ten-year Treasury note purchased over nine years ago,which matures in two months. C)A three-month Treasury bill. D)A money market fund held at the local bank.

Which of the following statements about the statement of cash flows is correct? A)A company with a net loss on the income statement will always have a net cash outflow from operating activities. B)A purchase of equipment is classified as a cash inflow from investing activities. C)Cash dividends received on stock investments are classified as cash flows from operating activities. D)Cash dividends paid are classified as cash flows from operating activities.

Which of the following items about the statement of cash flows is correct? A)Noncash expenses such as depreciation are subtracted from net income when using the indirect method for computing cash flows from operating activities. B)Cash equivalents are highly liquid investments with original maturities of less than three months. C)Repurchasing stock from owners would be classified as an investing cash outflow. D)Cash paid for interest would be classified as a financing cash outflow.

Which of the following would be subtracted from net income when determining cash flows from operating activities under the indirect method? A)An increase in accounts payable. B)Depreciation expense. C)A decrease in prepaid insurance. D)A gain on the sale of a depreciable asset.

Which of the following would be added to net income when determining cash flows from operating activities under the indirect method? A)A decrease in accounts payable. B)Patent amortization expense. C)An increase in prepaid insurance. D)A gain on the sale of a depreciable asset.

Which of the following would be subtracted from net income when determining cash flows from operating activities under the indirect method? A)A decrease in utilities payable. B)Patent amortization expense. C)A decrease in prepaid rent. D)A loss on the sale of a depreciable asset.

Rice Company,a retailer,has provided the following information pertaining to its recent year of operation: • Net income,$100,000 • Accounts receivable increased $9,000 • Prepaid insurance decreased $3,000 • Depreciation expense was $15,000 • Gain on sale of land,$2,000 • Wages payable decreased $7,000 • Unearned revenue increased $11,000 Using the indirect method,how much was Rice's net cash provided by operating activities? A)$89,000. B)$115,000. C)$125,000. D)$111,000.

Darwin Company,a manufacturer,has provided the following information pertaining to its recent year of operation: • Net income,$200,000 • Accounts receivable increased $18,000 • Prepaid insurance increased $7,000 • Depreciation expense was $25,000 • Loss on sale of a building was $22,000 • Wages payable increased $14,000 • Unearned revenue decreased $21,000 Using the indirect method,how much was Darwin's net cash provided by operating activities? A)$227,000. B)$215,000. C)$171,000. D)$257,000.

RM Company,a manufacturer,has provided the following information pertaining to its recent year of operation: • Net income,$300,000 • Accounts payable increased $24,000 • Prepaid rent decreased $10,000 • Depreciation expense was $35,000 • Accounts receivable increased $34,000 • Gain on sale of a building was $11,000 • Wages payable decreased $21,000 • Unearned revenue increased $44,000 Using the indirect method,how much was RM's net cash provided by operating activities? A)$259,000. B)$327,000. C)$347,000. D)$358,000.

GJ Company,a manufacturer,has provided the following information pertaining to its recent year of operation: • Net income,$500,000 • Accounts payable decreased $42,000 • Prepaid assets increased $31,000 • Depreciation expense was $53,000 • Accounts receivable decreased $41,000 • Loss on sale of a depreciable asset was $31,000 • Wages payable increased $19,000 • Unearned revenue decreased $31,000 • Patent amortization expense was $5,000 Using the indirect method,how much was GJ's net cash provided by operating activities? A)$545,000. B)$607,000. C)$514,000. D)$463,000.

DJ Company,a manufacturer,uses the indirect method for preparing its statement of cash flows.The company has provided the following information pertaining to its recent year of operation: • Cash flow from operating activities,$272,000 • Accounts payable decreased $21,000 • Prepaid assets increased $15,000 • Depreciation expense was $27,000 • Accounts receivable decreased $21,000 • Loss on sale of a depreciable asset was $16,000 • Wages payable increased $10,000 • Unearned revenue decreased $16,000 • Patent amortization expense was $10,000 How much was DJ's net income? A)$256,000. B)$210,000. C)$198,000. D)$240,000.

KJ Company,a manufacturer,uses the indirect method for preparing its statement of cash flows.The company has provided the following information pertaining to its recent year of operation: • Cash flow from operating activities,$136,000 • Accounts payable increased $11,000 • Prepaid assets decreased $8,000 • Depreciation expense was $12,000 • Accounts receivable increased $23,000 • Loss on sale of a depreciable asset was $6,000 • Wages payable decreased $9,000 • Unearned revenue decreased $19,000 • Patent amortization expense was $3,000 How much was KJ's net income? A)$185,000. B)$135,000. C)$147,000. D)$131,000.

A company reported net income of $200,000 during 2019.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Using the indirect method,how much is the company's net cash flow from operating activities? A)$245,000. B)$250,000. C)$240,000. D)$235,000.

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method? A)An increase in accounts receivable will be subtracted from net income. B)A loss on the sale of a depreciable asset will be added to net income. C)An increase in accrued liabilities will be subtracted from net income. D)An increase in accounts payable will be added to net income.

The following information has been provided to you by RKJ Company: Using the indirect method,what is the net cash provided by operating activities? A)$231,000. B)$187,000. C)$206,000. D)$168,000.

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method? A)An increase in wages payable will be added to net income. B)A gain on the sale of a depreciable asset will be subtracted from net income. C)An increase in prepaid expenses will be subtracted from net income. D)An increase in income taxes payable will be subtracted from net income.

Reliance Corporation has provided the following information for the year ended December 31,2019: • The equipment account balance increased $200,000. • The equipment accumulated depreciation account balance increased $35,000. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. Which of the following statements is correct with respect to determining cash flow from operating activities? A)Using the indirect method,net income is increased by the $30,000 increase in the accumulated depreciation account balance. B)Using the indirect method,net income is decreased by the $30,000 sales price of the equipment. C)Using the indirect method,net income is increased by the $65,000 depreciation expense. D)Using the indirect method,net income is increased by the $10,000 gain on the sale of the equipment.

Allen Company's 2019 income statement reported total revenues,$850,000 and total expenses (including $40,000 depreciation)of $720,000.The company's accounting records showed the following: accounts receivable-beginning balance,$50,000 and ending balance,$40,000;accounts payable-beginning balance,$22,000 and ending balance,$28,000.Therefore,based only on this information,how much was the 2019 net cash provided by operating activities? A)$126,000. B)$166,000. C)$174,000. D)$186,000.

Which statement regarding the indirect method is false? A)Depreciation expense is added to net income. B)An increase in accounts receivable is added to net income. C)An increase in accounts payable is added to net income. D)An increase in merchandise inventory is subtracted from net income.

Which of the following statements about the quality of income ratio is correct? A)When sales are growing,receivables and inventory normally increase faster than accounts payable so the ratio increases. B)Seasonal variations in sales have no impact on the quality of income ratio. C)Failure to accrue appropriate expenses will inflate net income and reduce the quality of income ratio. D)The quality of income ratio is computed by dividing net income by cash flow from operating activities.

Which of the following statements about the quality of income ratio is incorrect? A)An increase in operating assets and a decrease in liabilities will reduce operating cash flows and thereby reduce the quality of income ratio. B)Seasonal variations in sales and purchases of inventory can cause wide deviations in the quality of income ratio. C)When sales are growing,receivables and inventory normally increase at a faster rate than accounts payable,which often causes cash flows from operating activities to be less than net income. D)Aggressive revenue recognition tends to increase the quality of income ratio.

During 2019,Boogle reported net income of $785 million and net cash inflow from operating activities of $1,196 million.During 2018,Boogle's net income was $563 million and net cash inflow from operations was $1,237 million.Which of the following is incorrect about the quality of income ratios? A)In 2018 the ratio was 2.2 and in 2019 it was 1.5. B)The ratio in 2018 was better than the ratio in 2019. C)Boogle's quality of income ratios indicate poor performance because net income is less than cash flow. D)The ratio in both years shows the company's ability to generate positive cash flow from its operating activities.

Which of the following transactions increases the quality of income ratio? A)The accrual of revenue. B)The accrual of an expense. C)The cash payment of an account payable. D)The payment of a cash dividend.

Which of the following transactions increases the quality of income ratio? A)The cash payment of an account payable. B)The payment of a cash dividend. C)A decrease in receivables. D)The accrual of revenue.

Which of the following transactions decreases the quality of income ratio? A)The cash purchase of equipment. B)The issue of stock in exchange for cash. C)Collecting cash for services to be provided in the future. D)Earning revenue that was previously recorded as unearned revenue.

Which of the following transactions would not be reported within the investing section of the cash flow statement? A)The cash sale of land at a gain. B)The purchase of a building for cash. C)The purchase of a stock investment for cash. D)The cash receipt of a dividend from a stock investment.

Which of the following is reported as a cash flow from investing activities? A)Cash received from dividends on investments. B)Purchasing land in exchange for common stock. C)Selling a long-term investment at a loss for cash. D)Cash received from interest earned.

Which of the following transactions would be reported within the investing section of the cash flow statement? A)The cash purchase of land at a price in excess of appraised value. B)The purchase of a building in exchange for common stock. C)The receipt of a stock dividend from a stock investment. D)The cash receipt of a dividend from a stock investment.

Canadian Beer reported equipment sold for $222 million cash and new equipment purchased $1,515 million cash.The equipment sold had a net book value of $150 million.Cash flow from investing activities would show: A)An inflow of $222 million and outflow of $1,515 million. B)An inflow of $222 million and outflow of $150 million. C)Cash paid for equipment of $1,293 million. D)A net outflow of $1,365 million.

Milliken Company paid $2.2 million to purchase stock in another company,$1.0 million to repurchase treasury shares,$0.5 million to buy short-term investments,sold used equipment for $0.8 million when its book value was $0.6 million,and purchased new equipment for $3.4 million.What was the net cash flow from investing activities? A)$6.3 million net cash outflow. B)$5.3 million net cash outflow. C)$5.1 million net cash outflow. D)$4.8 million net cash outflow.

Which of the following statements about the capital acquisitions ratio is correct? A)A high ratio indicates less need for outside financing of property,plant and equipment. B)The ratio is computed by dividing cash flow from operating activities by the average net property,plant,and equipment. C)A low ratio may indicate a failure to update property,plant,and equipment,which can limit a company's ability to compete in the future. D)The ratio is comparable across industries.

Which of the following statements about the capital acquisitions ratio is incorrect? A)The ratio is computed by dividing cash flow from operating activities by cash paid for property,plant,and equipment. B)Because the need for investment in property,plant,and equipment differs dramatically across industries,a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry. C)A high ratio indicates more need for outside financing of current and future purchases of property,plant,and equipment. D)The ratio increases when an account receivable is collected.

During 2019,Eva's Enterprises cash paid for property,plant and equipment was $755 million and cash flow from operating activities was $5,968 million.The average property,plant,and equipment from the comparative balance sheets were $6,094 million.Eva's capital acquisitions ratio for 2019 is closest to: A)1.0 B)5.3 C)7.9 D)6.0

During 2019,Edna Enterprises had a capital acquisitions ratio of 8.0.During 2019,Carlos Corporation had a capital acquisitions ratio of 3.4.The amount of cash flow from operating activities was $5,968,000 for Edna and $5,054,000 for Carlos.Which of the following statements is incorrect? A)Edna used less cash for investments in property,plant and equipment during 2019 than did Carlos. B)Compared to Carlos,Edna's capital acquisitions ratio is higher which indicates that Edna has less need for external financing of its investments in property,plant,and equipment. C)Edna invested approximately $746,000 in property,plant,and equipment during 2019. D)Carlos invested approximately one-half the amount that Edna invested in property,plant,and equipment during 2019.

Flow Company has provided the following information for the year ended December 31,2019: • Cash paid for interest,$20,000 • Cash paid for dividends,$6,000 • Cash dividends received,$4,000 • Cash proceeds from bank loan,$29,000 • Cash purchase of treasury stock,$11,000 • Cash paid for equipment purchase,$27,000 • Cash received from issuance of common stock,$37,000 • Cash received from sale of land with a $32,000 book value,$25,000 • Acquisition of land costing $51,000 in exchange for preferred stock issuance • Payment of a $100,000 note payable by exchanging used machinery with a $77,000 book value and $100,000 fair value How much was Flow's net cash flow from investing activities? A)A net outflow of $2,000. B)A net inflow of $2,000. C)A net outflow of $53,000. D)A net inflow of $49,000.

Flow Company has provided the following information for the year ended December 31,2019: • Cash paid for interest,$20,000 • Cash paid for dividends,$6,000 • Cash dividends received,$4,000 • Cash proceeds from bank loan,$29,000 • Cash purchase of treasury stock,$11,000 • Cash paid for equipment purchase,$27,000 • Cash received from issuance of common stock,$37,000 • Cash received from sale of land with a $32,000 book value,$25,000 • Acquisition of land costing $51,000 in exchange for preferred stock issuance • Payment of a $100,000 note payable by exchanging used machinery with a $77,000 book value and $100,000 fair value How much was Flow's net cash flow from financing activities? A)A net outflow of $51,000. B)A net inflow of $29,000. C)A net outflow of $53,000. D)A net inflow of $49,000.

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000. What was the net cash flow from investing activities? A)$6,250,000 outflow. B)$8,320,000 outflow. C)$8,270,000 outflow. D)$5,970,000 outflow.

Roberts Company sold equipment for $250,000,purchased a building for $6,500,000,sold short-term investments for $280,000,repaid principal on a note payable for $2,300,000 plus $230,000 of interest,and paid cash dividends of $20,000. What was the net cash flow from financing activities? A)$2,300,000 outflow. B)$2,320,000 outflow. C)$2,530,000 outflow. D)$2,550,000 outflow.

Burich Co.reported short-term borrowings of $2.5 million,long-term borrowings of $6.8 million,repayments of long-term borrowings of $3.5 million,interest payments of $780,000,purchase of common stock shares for treasury of $.5 million,and cash dividends declared of $1.1 million.What is the cash flow from financing activities? A)$5,300,000 net cash inflow. B)$4,200,000 net cash inflow. C)$1,700,000 net cash inflow. D)$2,800,000 net cash inflow.

Which of the following is correct? A)Repayments of principal and interest both reduce financing activities cash flows. B)Purchase of common stock shares for treasury is a cash outflow connected to investing activities. C)If a company borrows $450 million in long-term notes and repays $380 million of long-term notes,these items must both be disclosed separately and not netted against each other in the financing section of the cash flow statement. D)Issuing common stock in exchange for the purchase of a building creates both a financing activity and investing activity cash flow.

Which of the following would be a financing activities cash flow? A)Common stock dividends received from an investment in another company. B)Interest payments. C)Purchase of treasury stock. D)Purchase of a building by signing a note payable.

Lab Industries,Inc. ,issued $50,000 of bonds,paid cash dividends of $8,000,sold long-term investments for $12,000,received $5,000 of dividend revenue,purchased treasury stock for $15,000,and purchased new equipment for $19,000.What is the net cash flow from financing activities? A)$70,000 inflow. B)$27,000 inflow. C)$80,000 inflow. D)$20,000 outflow.

Significant noncash financing and investing activities: A)must be reported in the notes to the financial statements. B)are not separately disclosed within the financial statements. C)are disclosed in a separate schedule as a supplement to the statement of cash flows. D)are reported as cash flows because of their significance.

A company acquired some land (independently appraised at $12,000)and paid for it by issuing 1,000 shares of its common stock (par $10 per share;no market price was quoted).How should this be reported on the statement of cash flows? A)Report $12,000 as inflow and outflow of cash. B)Report $12,000 as an inflow of cash. C)The transaction should not be reported on the statement of cash flows. D)Report in a schedule of significant noncash investing and financing activities.

Which of the following transactions is not reported in the statement of cash flows as a cash flow from investing activities? A)Selling a depreciable asset for cash at a loss. B)Purchasing a patent using cash. C)Purchasing land in exchange for common stock. D)Purchasing shares of common stock of another company using cash.

Which of the following is not reported as a cash flow from investing activities? A)Sale of a depreciable asset for cash. B)Purchasing land in exchange for common stock. C)Selling a long-term investment at a loss for cash. D)Selling a patent in exchange for cash.

KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable. How would this transaction be reported within the cash flow from investing activities section of the cash flow statement? A)An outflow of $250,000. B)An outflow of $215,000. C)An outflow of $35,000. D)It would not be reported in the investing activities section of the cash flow statement.

KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable. How would this transaction be reported within the cash flow from financing activities section of the cash flow statement? A)An inflow of $215,000. B)An outflow of $215,000. C)An outflow of $35,000. D)It would not be reported in the financing activities section.

During 2019,Tommy's Toys reported the following: long-term debt repayments,$503 million;interest paid,$143 million;proceeds from exercise of stock options,$27 million,and issue of common stock in exchange for land costing $10 million.What is the 2019 net cash flow from financing activities? A)$476 million net cash outflow. B)$530 million net cash outflow. C)$673 million net cash outflow. D)$76 million net cash outflow.

Which of the following would not be reported as a financing activities cash flow? A)Issuing common stock for cash. B)Cash dividend payments. C)Purchasing treasury stock. D)Purchase of a building by signing a note payable.

A company's 2019 income statement reported total sales revenue of $1,200,000;accounts receivable increased by $25,000 and the unearned sales revenue account decreased $15,000 during 2019.How much cash was collected from customers during 2019? A)$1,225,000. B)$1,160,000. C)$1,175,000. D)$1,185,000.

Bold Company's 2019 income statement reported total sales revenue of $250,000.During 2019,accounts receivable decreased by $20,000 and accounts payable increased $10,000.How much cash was collected from customers during 2019? A)$230,000. B)$270,000. C)$250,000. D)$280,000.

The financial statements for World Company show the following: Cost of goods sold,$725,000. How much cash was paid to suppliers? A)$731,000. B)$736,000. C)$719,000. D)$714,000.

Madison Company had sales of $154,000.Additional information from the balance sheet is below: How much cash was collected from customers? A)$148,000. B)$150,000. C)$154,000. D)$160,000.

Amanda Company reported income tax expense of $250,000.Beginning income taxes payable was $30,000,while ending income taxes payable was $25,000,and accounts payable decreased $10,000.How much cash was paid for taxes? A)$280,000. B)$255,000. C)$245,000. D)$265,000.

Aaron Inc.reported operating expenses during 2019 of $765,000 (including $80,000 of depreciation expense).Prepaid expenses increased $25,000 while accrued liabilities increased $43,000.How much cash was paid for operating expenses during 2019? A)$702,000. B)$622,000. C)$667,000. D)$703,000.

A company reported an increase in accounts payable and a decrease in inventory during 2019.Which of the following statements is correct? A)Cash paid to suppliers equals cost of goods sold plus both the increase in accounts payable and the decrease in inventory. B)Cash paid to suppliers equals cost of goods sold minus both the increase in accounts payable and the decrease in inventory. C)Cash paid to suppliers equals cost of goods sold minus the increase in accounts payable,plus the decrease in inventory. D)Cash paid to suppliers equals cost of goods sold plus the increase in accounts payable,minus the decrease in inventory.

A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2019.Which of the following statements is correct? A)Cash collected from customers equals sales revenues plus both the increase in accounts receivable and the increase in unearned sales revenues. B)Cash collected from customers equals sales revenues minus both the increase in accounts receivable and the increase in unearned sales revenues. C)Cash collected from customers equals sales revenues plus the increase in accounts receivable,minus the increase in unearned sales revenues. D)Cash collected from customers equals sales revenues minus the increase in accounts receivable,plus the increase in unearned sales revenues.

A company reported an increase in prepaid rent and an increase in accrued liabilities during 2019.Which of the following statements is correct? A)When determining cash paid for operating expenses,both the increase in prepaid rent and the increase in accrued liabilities are subtracted from operating expenses. B)When determining cash paid for operating expenses,both the increase in prepaid rent and the increase in accrued liabilities are added to operating expenses. C)When determining cash paid for operating expenses,the increase in prepaid rent is added to operating expenses and the increase in accrued liabilities is subtracted from operating expenses. D)When determining cash paid for operating expenses,the increase in prepaid rent is subtracted from operating expenses and the increase in accrued liabilities is added to operating expenses.

A company reported an increase in accrued sales revenues and a decrease in unearned sales revenues during 2019.Which of the following statements is correct? A)When determining cash collected from customers,both the increase in accrued revenues and the decrease in unearned revenues are subtracted from sales revenues. B)When determining cash collected from customers,both the increase in accrued revenues and the decrease in unearned revenues are added to sales revenues. C)When determining cash collected from customers,the increase in accrued revenues is subtracted from sales revenues and the decrease in unearned revenues is added to sales revenues. D)When determining cash collected from customers,the increase in accrued revenues is added to sales revenues and the decrease in unearned revenues is subtracted from sales revenues.

Slipper Company sold a productive asset,a machine,for cash.It originally cost Slipper $20,000.The accumulated depreciation at the date of disposal was $15,000.A gain on the disposal of $2,000 was reported.What was the asset's selling price? A)$7,000. B)$3,000. C)$4,000. D)$5,000.

Halbur Company reported the following for its recent year of operation: No new equipment was purchased during the year.What was the selling price of the equipment? A)$3,900. B)$1,000. C)$900. D)$600.

Atkins Corporation has provided the following information for the year ended December 31,2019: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year. • The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. Which of the following statements is correct with respect to determining cash flow from investing activities? Assume that the equipment purchase and sale resulted in cash flows. A)A $60,000 cash inflow is reported from the equipment sale. B)A $200,000 cash outflow is reported for equipment purchases. C)A $50,000 cash outflow is reported for the equipment sale. D)A $250,000 cash outflow is reported for equipment purchases.

Atkins Corporation has provided the following information for the year ended December 31,2019: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year. • The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows. A)A $30,000 cash inflow is reported from the equipment sale. B)Using the indirect method,net income is increased by the $65,000 depreciation expense. C)Using the indirect method,net income is decreased by the $10,000 gain on the sale of the equipment. D)A $60,000 cash inflow is reported from the equipment sale.

Atkins Corporation has provided the following information for the year ended December 31,2019: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year. • The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. What was the amount of the investing activities cash inflow from the sale of the equipment? Assume that the equipment purchase and sale resulted in cash flows. A)$30,000. B)$60,000. C)$40,000. D)$50,000.

For each of the following items,indicate with the letter X whether the transaction would appear in the operating,investing,or financing activities section of the statement of cash flows,or is not reported in any one of these three categories.Assume the indirect method is used for reporting.

State the three cash flow classifications that are reported within a statement of cash flows and describe the primary activities included in each.

Use the following information to prepare a statement of cash flows for Stable Equipment Company for the year ended December 31,2019.Use the indirect method for the operating activities section of the statement. Net income for the year 2019 was $5,000.Accounts receivable decreased $2,000,while inventories increased $4,000,and accounts payable decreased $7,000.Depreciation expense included in net income was $8,000. During the year,a piece of land held for future expansion was sold for its book value of $8,000 and a new service truck was purchased for $14,000. The company borrowed $18,000 on a two-year note from the bank.Dividends of $6,000 were paid in cash.Preferred stock was issued to retire $7,000 of long-term notes payable. The beginning cash balance was $22,000 and the ending balance was $32,000.

Marissa Company is preparing a statement of cash flows using the indirect method for the year ended December 31,2019.The following data are available: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31,2019.

Hill Company reported net income of $10,000 for the year ended December 31,2019.Additional 2019 information is as follows: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31,2019.

Brooks Company reported net income of $40,000,which included depreciation expense and amortization expense of $21,000 and $18,000,respectively.The following changes also occurred during the year ended December 31,2019: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31,2019.

Sagaworth Inc.reported the following information: Prepare the operating activities section of the statement of cash flows for the year ended December 31,2019 using the indirect method.

Below is the 2019 income statement for the Critters Corporation. Accounts receivable increased by $8,000. Merchandise inventory increased by $4,000. Accounts payable increased by $6,000. Prepaid expenses decreased by $2,000. Accrued liabilities decreased by $5,000. Interest payable increased by $1,000. Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31,2019.

The following information was reported from the statement of cash flows for Landlover's Restaurants for the years 2017 through 2019 (in millions of dollars): A.Calculate the quality of income ratio for the years 2017 through 2019.Round your answers to two decimals places. B.Interpret the quality of income ratio for Landlover's for the three-year period.

During the year ended December 31,2019,Blythe Company paid cash of $2.2 million to purchase stock in another company,$1.0 million to purchase its common stock for treasury shares,$.5 million to buy short-term investments,and $3.4 million to purchase new equipment.Blythe also sold used equipment for cash of $.8 million when its book value was $.6 million. A.Prepare the investing activities section of Blythe's cash flow statement for the year ended December 31,2019. B.Is the net cash flow for investing activities a net cash inflow,or a net cash outflow? Briefly describe the reason for your answer.

The following information was available from the financial statements of Collateral,Inc.for the years 2019 and 2018 (in millions of dollars): A.Calculate the capita acquisitions ratio for each of the two years.Round your answers to two decimals places. B.Calculate the free cash flow for each of the two years. C.Comment on the sufficiency of the capita acquisitions ratio and free cash flow for the two years and implications for future corporate strategy.

During 2019,Tommy's Toys reported the following: short-term borrowings of $419 million;long-term borrowings of $147 million;long-term debt repayments of $45 million;interest paid,$128 million;treasury shares purchased $632 million;and exercise of stock options by employees,$2 million. A.Calculate the net cash flow from financing activities during 2019.Show your work and details of whether an item is added or subtracted to arrive at your answer. B.Is the net cash flow provided by,or used in,the financing activities? Briefly describe the reason for your answer.

For the year ended December 31,2019,Kennel Company reported short-term borrowings of $2,500,000,long-term borrowings of $6,800,000,repayments of long-term borrowings of $3,500,000,interest payments of $780,000,purchase of treasury shares of $500,000,cash dividends declared of $1,100,000,and cash dividend payments of $800,000.Kennel also issued its common stock in exchange for a building costing $400,000. A.Prepare the financing activities section of the Kennel Company cash flow statement for the year ended December 31,2019. B.Is the net cash flow for financing activities a net cash inflow,or a net cash outflow? Briefly describe the reason for your answer.

While preparing a statement of cash flows,you encountered the following transaction: February 1,2019: Battle Corporation acquired a small office building in exchange for 50,000 shares of its own common stock;par value $10 per share;market value $15 per share. Should this transaction be shown on the statement of cash flows? Why or why not?

Complete the following statement of cash flows using the indirect method:

Brice Corporation reported the following information: Compute Brice's cash paid to suppliers for inventory for 2019.

Brice Corporation reported the following information: Compute Brice's cash paid for operating expenses for 2019.

Brice Corporation reported the following information: Compute Brice's cash paid for operating expenses in 2019.

Brice Corporation reported the following information: Compute Brice's cash paid for income taxes in 2019.

Use the following information to prepare a statement of cash flows (direct method)for Ames Corporation for the year ended December 31,2019.