Question 1

Indicate where the payment of income taxes would appear if at all on the statement of cash flows.

Accepted Answer

Income tax payments are typically classified as operating expenses and appear in the operating activities section of the statement of cash flows.

Question 2

If a loss of $25000 is incurred in selling (for cash) office equipment having a book value of $90000 the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The total amount reported in the cash flows from investing activities section would be $65,000, which is the cash received from the sale. This is calculated by subtracting the loss ($25,000) from the book value of the office equipment ($90,000).

Question 3

Jean's Vegetable Market had the following transactions during 2016:
1) Issued $50000 of par value common stock for cash.
2) Repaid a 6 year note payable in the amount of $22000.
3) Acquired land by issuing common stock of par value $50000.
4) Declared and paid a cash dividend of $7000.
5) Sold a long-term investment (cost $3000) for cash of $6000.
6) Acquired an investment in IBM stock for cash of $10000.
What is the net cash provided by financing activities?

Accepted Answer

Financing activities include issuing common stock ($50000), repaying note payable (-$22000), and paying dividends (-$7000). The net cash provided by financing activities is $50000 - $22000 - $7000 = $21000.

Question 4

Jean's Vegetable Market had the following transactions during 2016:
1) Issued $50000 of par value common stock for cash.
2) Repaid a 6 year note payable in the amount of $22000.
3) Acquired land by issuing common stock of par value $100000.
4) Declared and paid a cash dividend of $2000.
5) Sold a long-term investment (cost $3000) for cash of $8000.
6) Acquired an investment in IBM stock for cash of $15000.
What is the net cash provided (used) by investing activities?

Accepted Answer

The net cash provided (used) by investing activities is calculated by adding the cash inflows and subtracting the cash outflows from investing activities. 
Cash inflows: 
- Sale of long-term investment for $8000

Cash outflows: 
- Purchase of IBM stock for $15000

Therefore, the net cash provided (used) by investing activities is ($7000).

Question 5

In Jude Company land decreased $150000 because of a cash sale for $150000 the equipment account increased $60000 as a result of a cash purchase and Bonds Payable increased $120000 from issuance for cash at face value. The net cash provided by investing activities is

Accepted Answer

The land decreased by $150000 due to a cash sale, which means cash was received. This would be a cash inflow from investing activities. 
The equipment account increased by $60000 due to a cash purchase, which means cash was paid. This would be a cash outflow from investing activities. 
Bonds Payable increased by $120000 due to issuance for cash at face value, which means cash was received. This would be a cash inflow from financing activities. 
Therefore, the net cash provided by investing activities would be ($150000 - $60000) = $90000.

Question 6

The third (final) step in preparing the statement of cash flows is to

Accepted Answer

The third (final) step in preparing the statement of cash flows is to compare the net change in cash with the change in the cash account reported on the balance sheet. This is done to ensure that the amounts match and there are no discrepancies.

Question 7

If a gain of $12000 is incurred in selling (for cash) office equipment having a book value of $110000 the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash inflow from the sale of office equipment is $110,000 + $12,000 gain = $122,000. This amount is reported under the cash flows from investing activities section of the statement of cash flows.

Question 8

Accounts receivable arising from sales to customers amounted to $40000 and $55000 at the beginning and end of the year respectively. Income reported on the income statement for the year was $180000. Exclusive of the effect of other adjustments the cash flows from operating activities to be reported on the statement of cash flows is

Accepted Answer

The operating activities section of the statement of cash flows begins with net income and makes adjustments for non-cash expenses (such as depreciation) and changes in current assets and liabilities. In this case, the increase in accounts receivable from $40,000 to $55,000 means that cash collections from customers were less than the amount of sales revenue recognized on the income statement. This represents a use of cash, and must be subtracted from net income to arrive at the cash flows from operating activities. Therefore:

Cash flows from operating activities = $180,000 (net income) - ($55,000 - $40,000) = $180,000 - $15,000 = $165,000

Therefore, the correct option is D) $165000.

Question 9

Adama Company reported a net loss of $6000 for the year ended December 31 2016. During the year accounts receivable increased $15000 merchandise inventory decreased $12000 accounts payable decreased by $20000 and depreciation expense of $12000 was recorded. During 2016 operating activities

Accepted Answer

To calculate the net cash provided or used by operating activities, we need to start with the net loss of $6000, add back depreciation expense of $12000, and then adjust for the changes in current assets and liabilities:
Increase in accounts receivable: -$15000
Decrease in merchandise inventory: +$12000
Decrease in accounts payable: +$20000
Net cash used by operating activities = - $6000 + $12000 - $15000 + $12000 + $20000 = -$17000. Therefore, the correct answer is A) used net cash of $17000.

Question 10

Bush Company reported net income of $60000 for the year. During the year accounts receivable decreased by $8000 accounts payable increased by $4000 and depreciation expense of $5000 was recorded. Net cash provided by operating activities for the year is

Accepted Answer

To calculate net cash provided by operating activities, start with the net income of $60,000. Adjust for the decrease in accounts receivable by adding $8,000 (since a decrease in accounts receivable means cash was received), add the increase in accounts payable of $4,000 (since an increase in accounts payable means cash payment was deferred), and add back the non-cash depreciation expense of $5,000. The total is $60,000 + $8,000 + $4,000 + $5,000 = $77,000.

Question 11

Indicate where the issuance of common stock issued for cash would appear if at all on the indirect statement of cash flows.

Accepted Answer

Issuing common stock for cash is considered a financing activity and would appear in the financing activities section of the indirect statement of cash flows.

Question 12

Wilson Company reported net income of $105000 for the year ended December 31 2016. During the year inventories decreased by $15000 accounts payable decreased by $20000 depreciation expense was $18000 and a gain on disposal of equipment of $9000 was recorded. Net cash provided by operating activities in 2016 using the indirect method was

Accepted Answer

To calculate net cash provided by operating activities using the indirect method, start with the net income of $105,000. Adjust for non-cash and working capital changes: add back depreciation expense ($18,000) and subtract the gain on disposal of equipment ($9,000) because it does not affect cash flow from operations. Adjust for changes in working capital: add the decrease in inventories ($15,000) and subtract the decrease in accounts payable ($20,000). The calculation is $105,000 + $18,000 - $9,000 + $15,000 - $20,000 = $109,000.

Question 13

The net income reported on the income statement for the current year was $245000. Depreciation was $40000. Account receivable and inventories decreased by $12000 and $35000 respectively. Prepaid expenses and accounts payable increased respectively by $1000 and $8000. How much cash was provided by operating activities?

Accepted Answer

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

Question 14

Accounts receivable arising from sales to customers amounted to $86000 and $77000 at the beginning and end of the year respectively. Income reported on the income statement for the year was $290000. Exclusive of the effect of other adjustments the cash flows from operating activities to be reported on the statement of cash flows is

Accepted Answer

The correct cash flow from operating activities is calculated by adjusting the income reported on the income statement for the change in accounts receivable. The decrease in accounts receivable ($86000 - $77000 = $9000) indicates that more cash was received than the income reported. Therefore, add this decrease to the reported income: $290000 + $9000 = $299000.

Question 15

The net income reported on the income statement for the current year was $220000. Depreciation recorded on plant assets was $35000. Accounts receivable and inventories increased by $2000 and $8000 respectively. Prepaid expenses and accounts payable decreased by $2000 and $12000 respectively. How much cash was provided by operating activities?

Accepted Answer

Net income: $220000
Plus: Depreciation: $35000
Plus: Increase in accounts receivable: $2000
Plus: Increase in inventory: $8000
Less: Decrease in prepaid expenses: $2000
Less: Decrease in accounts payable: $12000
Total: $235000

Question 16

Indicate where the purchase of land and a building with a mortgage would appear if at all on the indirect statement of cash flows.

Accepted Answer

The purchase of land and a building with a mortgage does not represent a cash flow because it is a non-cash investing and financing activity.

Question 17

Vision Company purchased treasury stock with a cost of $16000 during 2016. During the year the company paid dividends of $20000 and issued bonds payable for proceeds of $860000. Cash flows from financing activities for 2016 total

Accepted Answer

The cash flows from financing activities include the proceeds from issuing bonds and the payment of dividends, but also the purchase of treasury stock. The net cash inflow from financing activities is calculated as follows: $860,000 (proceeds from bonds) - $20,000 (dividends paid) - $16,000 (purchase of treasury stock) = $824,000 net cash inflow.

Question 18

Indicate where the purchase of land for cash would appear if at all on the indirect statement of cash flows.

Accepted Answer

The purchase of land for cash would appear in the investing activities section of the indirect statement of cash flows, as it represents a cash outflow for the purchase of an asset.

Question 19

Kanet Company issued common stock for proceeds of $386000 during 2016. The company paid dividends of $80000 and issued a long-term note payable for $95000 in exchange for equipment during the year. The company also purchased treasury stock that had a cost of $15000. The financing section of the statement of cash flows will report net cash inflows of

Accepted Answer

The financing section of the statement of cash flows includes cash transactions related to the company's equity and long-term debt. Issuing common stock (an inflow) adds $386,000, paying dividends (an outflow) subtracts $80,000, and issuing a long-term note payable does not affect this section as it is a non-cash transaction for acquiring equipment. Purchasing treasury stock (an outflow) subtracts $15,000. Therefore, the net cash inflows from financing activities are $386,000 - $80,000 - $15,000 = $291,000.

Question 20

Which one of the following items is not necessary in preparing a statement of cash flows?

Accepted Answer

The cash in all bank accounts is not necessary in preparing a statement of cash flows. The statement of cash flows focuses on the changes and sources of cash from operating, financing, and investing activities, rather than the specific amount of cash in bank accounts at a given point in time.

Quiz 17: Statement of Cash Flows