Question 1

A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as follows:
A) an increase of $54,000 from investing activities
B) an increase of $63,000 from investing activities and a deduction from net income of $9,000
C) an increase of $9,000 from investing activities
D) an increase of $54,000 from investing activities and an addition to net income of $9,000

Accepted Answer

The sale of the building for $63,000 cash is an investing activity and would be shown as an increase of $63,000 from investing activities. However, the book value of the building was only $54,000, so there is a gain on the sale of $9,000 ($63,000 - $54,000). This gain is a deduction from net income, so the transaction should also be shown as a deduction from net income of $9,000. Therefore, the correct option is B.

Question 2

On the statement of cash flows, a $7,500 gain on the sale of fixed assets would be
A) added to net income in converting the net income reported on the income statement to cash flows from operating activities
B) deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
C) added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
D) deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

Accepted Answer

The answer of On the statement of cash flows, a...

Question 3

The following information is available from the current period financial statements: Net income
$165,000
Depreciation expense
28,000
Increase in accounts receivable
16,000
Decrease in accounts payable
21,000
The net cash flow from operating activities using the indirect method is
A) $230,000
B) $188,000
C) $198,000
D) $156,000

Accepted Answer

Net cash flow from operating activities is calculated as: Net income + Depreciation expense - Increase in accounts receivable - Decrease in accounts payable = $165,000 + $28,000 - $16,000 - $21,000 = $156,000.

Question 4

Cash dividends paid on capital stock would be reported in the statement of cash flows in
A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

Accepted Answer

Cash dividends paid on capital stock are a financing activity because they involve distributing profits to shareholders, which involves a change in the company's equity. As such, they should be reported in the cash flows from financing activities section of the statement of cash flows.

Question 5

On the statement of cash flows, the cash flows from financing activities section would include
A) receipts from the sale of investments
B) payments for the acquisition of investments
C) receipts from a note receivable
D) receipts from the issuance of capital stock

Accepted Answer

Cash flows from financing activities include transactions involving the funding of the business, such as borrowing money, repaying loans, and issuing or repurchasing shares of stock. Receipts from the issuance of capital stock fall under this category, whereas the other options involve cash flows from investing or operating activities.

Question 6

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

Accepted Answer

The equipment's book value is calculated as the original cost ($75,000) minus accumulated depreciation ($20,000), resulting in $55,000. Selling it at a loss of $7,000 means it was sold for $48,000 ($55,000 - $7,000), which increases cash by $48,000.

Question 7

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
A) $45,000
B) $635,000
C) $355,000
D) $125,000

Accepted Answer

To find the cash balance at the end of the period, we need to add the net cash flow from operating activities, investing activities, and financing activities to the beginning cash balance.

Beginning cash balance: $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 
Ending cash balance: $310,000 + $185,000 - $43,000 - $97,000 = $355,000

Therefore, the correct answer is C: $355,000.

Question 8

On the statement of cash flows, the cash flows from investing activities section would include
A) receipts from the issuance of capital stock
B) payments for dividends
C) payments for retirement of bonds payable
D) receipts from the sale of investments

Accepted Answer

Cash flows from investing activities represent cash inflows and outflows associated with investments in long-term assets, such as property, plant, and equipment or investments in securities. Option A is a cash inflow associated with financing activities. Option B is a cash outflow associated with financing activities. Option C is a cash outflow associated with financing activities. Option D is a cash inflow associated with investing activities.

Question 9

Cash paid for equipment would be reported on the statement of cash flows in
A) the cash flows from operating activities section
B) the cash flows from financing activities section
C) the cash flows from investing activities section
D) a separate schedule

Accepted Answer

Cash paid for equipment is an investing activity, as it involves the purchase of a capital asset that will benefit the company over a long period of time. Therefore, it should be reported in the cash flows from investing activities section of the statement of cash flows.

Question 10

Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
A) $173,000
B) $140,000
C) $313,000
D) $33,000

Accepted Answer

The amount reported as an investing activity on the statement of cash flows for the sale of land is the cash received from the sale, which is $173,000.

Question 11

The net income reported on the income statement for the current year was $250,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:  What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
A) $271,000
B) $279,000
C) $327,000
D) $256,000

Accepted Answer

The answer of The net income reported on the income...

Question 12

If a gain of $11,000 is realized in selling for cash) office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is
A) $44,000
B) $11,000
C) $55,000
D) $66,000

Accepted Answer

The answer of If a gain of $11,000 is realized...

Question 13

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:  What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
A) $198,000
B) $324,000
C) $352,000
D) $296,000

Accepted Answer

Calculation of cash flows from operating activities using the indirect method:

Net Income: $275,000
Depreciation: +$40,000
Amortization: +$9,000
Increase in Current Assets:
Accounts Receivable: -$20,000
Inventory: -$28,000
Prepaid Expenses: -$11,000
Increase in Current Liabilities:
Accounts Payable: +$15,000
Accrued Expenses: +$20,000

Net increase in current assets: ($20,000 + $28,000 + $11,000) = $59,000
Net increase in current liabilities: $15,000 + $20,000 = $35,000

Cash Flows from Operating Activities: 
Net Income + Depreciation + Amortization - Increase in Current Assets + Increase in Current Liabilities
= $275,000 + $40,000 + $9,000 - $59,000 + $35,000
= $296,000

Therefore, the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method is $296,000.

Question 14

The following information is available from the current period financial statements:

Accepted Answer

The answer of The following information is available from the...

Question 15

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
A) $50,000
B) $40,000
C) $55,000
D) $35,000

Accepted Answer

The dividends payable at the beginning of the year is not to be included in the payment of dividends during the year because it was already included in the previous year's payment of dividends. Therefore, the amount of cash for the payment of dividends during the year is:
Dividends declared: $45,000
Add: Dividends payable at the end of the year: $15,000
Less: Dividends payable at the beginning of the year: $10,000
Total payment of dividends during the year: $50,000 - $10,000 = $40,000.

Question 16

A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows in
A) a separate schedule
B) the cash flows from financing activities section
C) the cash flows from investing activities section
D) the cash flows from operating activities section

Accepted Answer

The answer of A business issues 20-year bonds payable in...

Question 17

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?
A) $50,000
B) $71,000
C) $121,000
D) $21,000

Accepted Answer

The amount reported in the investing activities section of the statement of cash flows is the cash received from the sale of the land, which is $50,000. The original cost of the land is not relevant for the statement of cash flows, as it only shows the cash inflows and outflows during the period. Therefore, the answer is A.

Question 18

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?
A) a decrease in inventory
B) a decrease in accounts payable
C) preferred dividends declared and paid
D) a decrease in accounts receivable

Accepted Answer

The answer of Which of the following should be deducted...

Question 19

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?
A) issuance of bonds payable
B) issuance of capital stock
C) purchase of treasury stock
D) purchase of noncurrent assets

Accepted Answer

Purchase of noncurrent assets is an investing activity as it involves the acquisition of assets that are expected to generate future benefits for the company. Investing activities include the purchase and sale of property, plant, and equipment and investments in other companies. Choices A and B are financing activities, and choice C is a treasury stock transaction that is reported under financing activities if the treasury stock is repurchased by the company.

Question 20

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?
A) depreciation expense
B) an increase in inventory
C) a gain on the sale of equipment
D) dividends declared and paid

Accepted Answer

Depreciation expense is a non-cash expense that is subtracted from net income to arrive at operating cash flow using the indirect method.

Quiz 14: Statement of Cash Flows

A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as follows:

On the statement of cash flows, a $7,500 gain on the sale of fixed assets would be

The following information is available from the current period financial statements: Net income $165,000 Depreciation expense 28,000 Increase in accounts receivable 16,000 Decrease in accounts payable 21,000 The net cash flow from operating activities using the indirect method is

Cash dividends paid on capital stock would be reported in the statement of cash flows in

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

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

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

Cash paid for equipment would be reported on the statement of cash flows in

Land costing $140,000 was sold for $173,000 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

If a gain of $11,000 is realized in selling for cash) office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

The following information is available from the current period financial statements:

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

A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the statement of cash flows 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?

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?