Question 1

An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)

Accepted Answer

An increase in inventory balance means that the company has purchased more inventory, which will be recorded as an expense in the income statement, reducing net income. However, the increase in inventory is not a cash outflow but a use of funds, and therefore needs to be deducted from net income in arriving at net cash flow from operating activities in the statement of cash flows using the indirect method (reconciliation method).

Question 2

Which of the following is shown on a statement of cash flows?

Accepted Answer

The statement of cash flows shows the inflow and outflow of cash for a particular period of time. It does not include information about stock dividends, stock splits, or appropriations of retained earnings.

Question 3

How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?

Accepted Answer

Significant noncash transactions are not included in the statement of cash flows itself but are instead reported in a separate schedule or supplementary information to the financial statements, according to FASB Statement No. 95.

Question 4

Declaration of a cash dividend on common stock affects cash flows from operating activities under the direct and indirect methods as follows:

Accepted Answer

The answer of Declaration of a cash dividend on common...

Question 5

During 2015, Stout Inc. had the following activities related to its financial operations:  The amount of net cash used in financing activities to appear in Stout's statement of cash flows for 2015 should be

Accepted Answer

The net cash used in financing activities is the sum of the cash outflows from financing activities and the sum of the cash inflows from financing activities.

Cash outflows from financing activities: 
- Dividends paid = $680,000 
- Repurchase of common stock = $1,906,000 
- Payment of long-term debt = $6,000 
Total cash outflows from financing activities = $2,592,000

Cash inflows from financing activities: 
- Issuance of common stock = $46,000 
- Issuance of long-term debt = $10,000 
Total cash inflows from financing activities = $56,000

Net cash used in financing activities = Total cash outflows - Total cash inflows 
Net cash used in financing activities = $2,536,000 (Option C)

Question 6

Hager Company sold some of its plant assets during 2015. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $75,000. The information concerning the sale of the plant assets should be shown on Hager's statement of cash flows (indirect method) for the year ended December 31, 2015, as a(n)

Accepted Answer

The sale of plant assets represents a loss on disposal of $25,000 ($750,000 - $700,000 - $75,000 = $25,000). This loss should be added back to net income on the statement of cash flows. Since the sale of plant assets is an investing activity, the $75,000 proceeds from the sale should be shown as an increase in cash flows from investing activities. Therefore, the answer is choice C.

Question 7

A statement of cash flows typically would not disclose the effects of

Accepted Answer

Stock dividends declared do not affect the cash flow of a company since they are merely a distribution of additional shares to shareholders, not involving any cash transaction.

Question 8

An analysis of the machinery accounts of Noller Company for 2015 is as follows:  The information concerning Noller's machinery accounts should be shown in Noller's statement of cash flows (indirect method) for the year ended December 31, 2015, as a(n)

Accepted Answer

The answer of An analysis of the machinery accounts of...

Question 9

When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities?

Accepted Answer

Changes in dividends payable are not considered in the adjustment to reconcile net income to net cash provided by operating activities when using the indirect method. This is because dividends payable relate to financing activities, not operating activities.

Question 10

Which of the following is false concerning the statement of cash flows?

Accepted Answer

The FASB requires companies to classify all income taxes paid as operating cash outflows, not investing cash outflows.

Question 11

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted from net income to compute cash provided by/used by operating activities?

Accepted Answer

B) Gain on sale of land is deducted from net income because it is a non-cash item that increased net income. The indirect method starts with net income and then adjusts for non-cash transactions and changes in working capital to arrive at cash provided by operating activities.

Question 12

Use the following information for questions 51 through 55.
Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below. 
 The following additional data were provided:
1. Dividends for the year 2015 were $144,000.
 2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
 3. All depreciation expense is in the selling expense category.
-The net cash provided (used) by financing activities is

Accepted Answer

The net cash provided (used) by financing activities is calculated by summing up all cash inflows and outflows related to financing activities such as issuing or buying back shares, paying dividends, and borrowing or repaying debt. Without specific details of the transactions, it's not possible to provide a detailed explanation or calculation. However, the correct answer to a question like this would typically involve analyzing a given set of financial transactions to determine the net effect on cash from financing activities.

Question 13

Use the following information for questions 51 through 55.
Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below. 
 The following additional data were provided:
1. Dividends for the year 2015 were $144,000.
 2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
 3. All depreciation expense is in the selling expense category.
-Under the direct method, the total taxes paid is

Accepted Answer

The answer of Use the following information for questions 51...

Question 14

In reporting extraordinary transactions on a statement of cash flows (indirect method), the

Accepted Answer

The answer of In reporting extraordinary transactions on a statement...

Question 15

Dolan Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Moss Co. during the current year, even though no dividends were declared or paid by Moss during the year. On Dolan's statement of cash flows (indirect method), the $25,000 should

Accepted Answer

Under the equity method, income recognized from an investment increases the investor's net income but does not affect cash if no dividends are received. Therefore, on the statement of cash flows prepared using the indirect method, this non-cash income must be deducted from net income to reconcile it to net cash provided by operating activities.

Question 16

During 2015, equipment was sold for $312,000. The equipment cost $524,000 and had a book value of $288,000. Accumulated Depreciation-Equipment was $1,374,000 at 12/31/14 and $1,470,000 at 12/31/15. Depreciation expense for 2015 was

Accepted Answer

The answer of During 2015, equipment was sold for $312,000....

Question 17

Use the following information for questions 51 through 55.
Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below. 
 The following additional data were provided:
1. Dividends for the year 2015 were $144,000.
 2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
 3. All depreciation expense is in the selling expense category.
-The net cash provided by operating activities is

Accepted Answer

Net income: $510,000 - $72,000 = $438,000
Adjustments:
Depreciation expense: $144,000 + $120,000 = $264,000
Increase in accounts payable: $42,000 - $36,000 = $6,000
Decrease in prepaid expenses: $24,000 - $18,000 = $6,000
Net cash provided by operating activities: $438,000 + $264,000 - $6,000 + $6,000 = $702,000 - $144,000 = $558,000
Net cash used in investing activities: $180,000
Net cash used in financing activities: $144,000
Net increase in cash: $234,000
Beginning cash balance: $120,000
Ending cash balance: $354,000

Question 18

Use the following information for questions 51 through 55.
Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below. 
 The following additional data were provided:
1. Dividends for the year 2015 were $144,000.
 2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
 3. All depreciation expense is in the selling expense category.
-The net cash provided (used) by investing activities is

Accepted Answer

The sale of equipment resulted in a cash inflow of $180,000. The cost of the equipment was $264,000, so there was a loss of $48,000 ($216,000 book value - $264,000 cost = $48,000 loss). However, since the loss was incorrectly charged to cost of sales, this has no effect on the statement of cash flows. Therefore, the net cash provided by investing activities is $180,000.

Question 19

Use the following information for questions 51 through 55.
Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below. 
 The following additional data were provided:
1. Dividends for the year 2015 were $144,000.
 2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
 3. All depreciation expense is in the selling expense category.
-Under the direct method, the cash received from customers is

Accepted Answer

The answer of Use the following information for questions 51...

Question 20

Equipment which cost $213,000 and had accumulated depreciation of $114,000 was sold for $111,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n)

Accepted Answer

The sale of equipment is a cash inflow from investing activities because it involves the disposal of a long-term asset. The amount that should be deducted from net income is the difference between the selling price and the book value of the equipment, which is $102,000 ($213,000 cost minus $114,000 accumulated depreciation minus $111,000 selling price). Therefore, the correct option is C, deduction from net income of $12,000 and a $111,000 cash inflow from investing activities.

Quiz 23: Statement of Cash Flows

An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a(n)

Which of the following is shown on a statement of cash flows?

How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?

Declaration of a cash dividend on common stock affects cash flows from operating activities under the direct and indirect methods as follows:

During 2015, Stout Inc. had the following activities related to its financial operations: The amount of net cash used in financing activities to appear in Stout's statement of cash flows for 2015 should be

A statement of cash flows typically would not disclose the effects of

An analysis of the machinery accounts of Noller Company for 2015 is as follows: The information concerning Noller's machinery accounts should be shown in Noller's statement of cash flows (indirect method) for the year ended December 31, 2015, as a(n)

When preparing a statement of cash flows (indirect method) , which of the following is not an adjustment to reconcile net income to net cash provided by operating activities?

Which of the following is false concerning the statement of cash flows?

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted from net income to compute cash provided by/used by operating activities?

In reporting extraordinary transactions on a statement of cash flows (indirect method) , the

During 2015, equipment was sold for $312,000. The equipment cost $524,000 and had a book value of $288,000. Accumulated Depreciation-Equipment was $1,374,000 at 12/31/14 and $1,470,000 at 12/31/15. Depreciation expense for 2015 was

Equipment which cost $213,000 and had accumulated depreciation of $114,000 was sold for $111,000. This transaction should be shown on the statement of cash flows (indirect method) as a(n)