Question 1

A transaction involving a gain on the sale of equipment affects cash provided (used) by

Accepted Answer

A gain on the sale of equipment would affect the cash flow from operating and investing activities since it is related to the sale of a long-term asset and is not related to financing activities.

Question 2

If a loss of $9,000 is incurred in selling (for cash) office equipment having a book value of $80,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash flows from investing activities section reports the actual cash received from the sale of the office equipment, which is the book value minus the loss: $80,000 - $9,000 = $71,000.

Question 3

Laser Performance Inc. has the following information available (amount in thousands). $$\begin{array} { l r } 
\text { Net Income } & \$ 30,000 \
\text { Average Total Liabilities } & 80,000 \
\text { Average Current Liabilities } & 36,000 \
\text { Cash Provided by Operations } & 48,000 \
\text { Cash Sales } & 130,000 \
\text { Capital Expenditures } & 22,000 \
\text { Dividends Paid } & 6,000
\end{array}$$ What is the cash debt coverage?

Accepted Answer

The answer of Laser Performance Inc. has the following information...

Question 4

The statement of cash flows will not provide insight into

Accepted Answer

The statement of cash flows does not provide information on exact future bond issuance proceeds as it reports on past cash flows, not future projections. Choices A, B, and D are all items that can be analyzed using the statement of cash flows.

Question 5

The current cash debt coverage is used to evaluate

Accepted Answer

Current cash debt coverage is a liquidity ratio that measures a company's ability to meet its short-term debt obligations using its current cash and cash equivalents.

Question 6

If a gain of $13,500 is incurred in selling (for cash) office equipment having a book value of $100,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash flows from investing activities section reports the cash received from the sale of office equipment, which is the book value plus the gain. Therefore, $100,000 (book value) + $13,500 (gain) = $113,500.

Question 7

When using the indirect method to compute cash provided by operating activities

Accepted Answer

Amortization expense is a non-cash charge and is added back to net income in the indirect method to adjust for cash flow from operating activities.

Question 8

The cash debt coverage is computed by dividing net cash provided by operating activities by

Accepted Answer

The cash debt coverage ratio is calculated by dividing net cash provided by operating activities by average total liabilities, which measures a company's ability to repay its total liabilities from its operating cash flow.

Question 9

Minette Company reported net income of $120,000 for the year ended December 31, 2014. During the year, inventories decreased by $24,000, accounts payable decreased by $36,000, depreciation expense was $27,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in 2014 using the indirect method was

Accepted Answer

The answer of Minette Company reported net income of $120,000...

Question 10

The current cash debt coverage is computed by dividing

Accepted Answer

Cash provided by operating activities is divided by average current liabilities to calculate the current cash debt coverage.

Question 11

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's free cash flow?

Accepted Answer

The answer of During 2014, Ecuyer Industries reported cash provided...

Question 12

All of the following adjustments are added to net income in computing net cash provided by operating activities except

Accepted Answer

The answer of All of the following adjustments are added...

Question 13

Land costing $125,000 was sold for $325,000 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?

Accepted Answer

The statement of cash flows reports the total cash received from the sale of land, which is $325,000, as an investing activity.

Question 14

Laser Performance Inc. has the following information available (amount in thousands). $$\begin{array} { l r } 
\text { Net Income } & \$ 30,000 \
\text { Average Total Liabilities } & 80,000 \
\text { Average Current Liabilities } & 36,000 \
\text { Cash Provided by Operations } & 48,000 \
\text { Cash Sales } & 130,000 \
\text { Capital Expenditures } & 22,000 \
\text { Dividends Paid } & 6,000
\end{array}$$ What is the current cash debt coverage?

Accepted Answer

The current cash debt coverage is calculated as Cash Provided by Operations divided by Average Current Liabilities. Here, it is $48,000 / $36,000 = 1.333 times.

Question 15

If a loss of $27,000 is incurred in selling (for cash) office equipment having a book value of $200,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash flows from investing activities would report the actual cash received from the sale, which is the book value minus the loss: $200,000 - $27,000 = $173,000.

Question 16

Free cash flow provides an indication of a company's ability to

Accepted Answer

Free cash flow indicates a company's ability to generate cash that can be used for new capital expenditures and to pay dividends.

Question 17

During 2014, Ecuyer Industries reported cash provided by operations of $397,000,000, cash used in investing of $343,000,000, and cash used in financing of $95,000,000. In addition, cash spent for fixed assets during the period was $138,000,000. Average current liabilities were $325,000,000 and average total liabilities were $858,000,000. No dividends were paid. Based on this information, what was Ecuyer's current cash debt coverage?

Accepted Answer

The answer of During 2014, Ecuyer Industries reported cash provided...

Question 18

If a gain of $45,000 is incurred in selling (for cash) office equipment having a book value of $180,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Accepted Answer

The cash received from the sale is the book value plus the gain, which is $180,000 + $45,000 = $225,000.

Question 19

All of the following adjustments would be deducted in determining net cash provided by operating activities except a(n)

Accepted Answer

The answer of All of the following adjustments would be...

Question 20

Each of the following is an adjustment to convert net income to net cash provided by operating activities except

Accepted Answer

The answer of Each of the following is an adjustment...

Quiz 12: Statement of Cash Flows