Question 1

Which of the following statements about the capital acquisitions ratio is correct?

Accepted Answer

A high capital acquisitions ratio suggests that a company can finance its property, plant, and equipment needs internally, reducing reliance on external financing.

Question 2

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?

Accepted Answer

Net cash flow from financing activities includes issuing bonds (+$50,000), paying cash dividends (-$8,000), and purchasing treasury stock (-$15,000). Adding these together gives a net inflow of $27,000.

Question 3

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
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How much was Flow's net cash flow from investing activities?

Accepted Answer

Net cash flow from investing activities includes cash transactions for the purchase and sale of long-term assets. Cash paid for equipment purchase ($27,000) and cash received from the sale of land ($25,000) are the relevant transactions. The net cash flow is $25,000 (inflow) - $27,000 (outflow) = -$2,000, which is a net outflow of $2,000.

Question 4

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?

Accepted Answer

The net cash flow from investing activities is calculated by subtracting cash outflows from cash inflows related to investments. Cash inflows: $250,000 (equipment) + $280,000 (investments) = $530,000. Cash outflows: $6,500,000 (building). Net cash flow = $530,000 - $6,500,000 = $5,970,000 outflow.

Question 5

Which of the following transactions decreases the quality of income ratio?

Accepted Answer

The answer of Which of the following transactions decreases the...

Question 6

Significant noncash financing and investing activities:

Accepted Answer

Significant noncash financing and investing activities are not reported as cash flows in the statement of cash flows. Instead, they are disclosed in a separate schedule as a supplement to the statement of cash flows. This schedule provides additional information about the transactions that affected the company's financing and investing activities, but did not result in cash receipts or payments. Examples of significant noncash transactions include the issuance of bonds or stock, the acquisition of assets through issuance of debt or equity securities, and the exchange of noncash assets or liabilities. The purpose of this disclosure is to provide users of the financial statements with a clearer understanding of the company's financing and investing activities, and how these activities impact the company's financial position and cash flows.

Question 7

Which of the following is correct?

Accepted Answer

According to GAAP guidelines, borrowing and repayment of debts should be disclosed separately and not netted against each other in the financing section of the cash flow statement. Therefore, option C is correct. Options A, B, and D are incorrect as they provide inaccurate information.

Question 8

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:

Accepted Answer

The cash flow from investing activities would show an inflow of $222 million from the sale of equipment and an outflow of $1,515 million for the purchase of new equipment.

Question 9

Which of the following transactions would not be reported within the investing section of the cash flow statement?

Accepted Answer

The cash receipt of a dividend from a stock investment would be reported in the operating activities section of the cash flow statement, as it represents cash received as a result of the company's normal operations. The other three transactions involve investing activities and would be reported in the investing section of the cash flow statement.

Question 10

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?

Accepted Answer

Carlos's capital acquisitions ratio of 3.4 indicates that it invested more in property, plant, and equipment than Edna, not half of what Edna invested.

Question 11

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?

Accepted Answer

Financing activities include cash transactions related to liabilities and shareholders' equity. For Flow Company, these include: - Cash proceeds from bank loan: $29,000 (inflow) - Cash paid for dividends: $6,000 (outflow) - Cash received from issuance of common stock: $37,000 (inflow) - Cash purchase of treasury stock: $11,000 (outflow) Net cash flow from financing activities = $29,000 + $37,000 - $6,000 - $11,000 = $49,000 (net inflow).

Question 12

Which of the following transactions would be reported within the investing section of the cash flow statement?

Accepted Answer

The investing section of the cash flow statement includes transactions involving the purchase and sale of long-term assets and investments. The cash purchase of land is an investing activity.

Question 13

Which of the following would be a financing activities cash flow?

Accepted Answer

Financing activities involve transactions between a company and its creditors and investors, such as issuing stock, paying dividends, and repurchasing shares. The purchase of treasury stock (C) is a financing activity because it involves the company buying back its own shares from investors, which affects the equity section of the company's balance sheet.

Question 14

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?

Accepted Answer

Net cash flow from investing activities = (-)purchase of stock + (-)treasury stock repurchase + (-)purchase of short-term investments + (+)proceeds from sale of used equipment + (-)purchase of new equipment
= (-)2.2 million + (-)1.0 million + (-)0.5 million + (+)0.8 million + (-)3.4 million 
= (-)5.3 million net cash outflow.

Question 15

Which of the following statements about the capital acquisitions ratio is incorrect?

Accepted Answer

A high capital acquisitions ratio indicates that a company is generating enough cash from operating activities to cover its investments in property, plant, and equipment, suggesting less need for outside financing, not more.

Question 16

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?

Accepted Answer

Cash flow from financing activities = Short-term borrowings + Long-term borrowings - Repayments of long-term borrowings - Purchase of common stock shares for treasury - Cash dividends declared= $2.5 million + $6.8 million - $3.5 million - $0.5 million - $1.1 million= $5.3 million

Question 17

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?

Accepted Answer

The net cash flow from financing activities can be calculated as follows:

Sale of equipment: $250,000 (inflow)

Purchase of building: $6,500,000 (outflow)

Sale of short-term investments: $280,000 (inflow)

Repayment of note payable: $2,530,000 ($2,300,000 principal + $230,000 interest) (outflow)

Payment of cash dividends: $20,000 (outflow)

Net cash flow from financing activities = -$6,500,000 + $250,000 + $280,000 - $2,530,000 - $20,000 = -$2,320,000 (outflow)

Therefore, the best choice is B, which represents a net cash outflow of $2,320,000 from financing activities.

Question 18

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?

Accepted Answer

This transaction involves a noncash investing activity (issuing common stock) to acquire the land. Therefore, it should be reported in a schedule of significant noncash investing and financing activities in the statement of cash flows.

Question 19

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:

Accepted Answer

The capital acquisitions ratio is calculated as cash flow from operating activities divided by cash paid for property, plant, and equipment. Thus, $5,968 million / $755 million = 7.9.

Question 20

Which of the following is reported as a cash flow from investing activities?

Accepted Answer

Selling a long-term investment at a loss for cash is reported as a cash flow from investing activities. A) is considered a cash flow from operating activities, B) is a non-cash transaction and doesn't affect cash flow, and D) is a cash flow from operating activities.

Quiz 12: Statement of Cash Flows