Question 1

Free cash flow equals cash provided by

Accepted Answer

The answer of Free cash flow equals cash provided by
...

Question 2

Which of the following would not be needed to determine net cash provided by operating activities?

Accepted Answer

Payment of cash dividends is a financing activity and would not be included in the calculation of net cash provided by operating activities. Depreciation expense, change in accounts receivable, and change in prepaid expenses are all operating activities that do affect cash flow.

Question 3

Which of the following transactions would not be classified as a financing activity?

Accepted Answer

Purchasing a long-term investment in bonds is classified as an investing activity, not a financing activity. A financing activity involves obtaining or repaying capital, such as issuing or retiring debt, making or repurchasing equity, or paying dividends.

Question 4

During 2011, Klugman Industries reported cash provided by operations of $€ 690,000$, cash used in investing of $€ 1,029,000$, and cash used in financing of $€ 135,000$. In addition, cash spent for fixed assets during the period was $€ 414,000$. No dividends were paid. Based on this information, what was Klugman's free cash flow?

Accepted Answer

Free cash flow is calculated as cash provided by operations minus capital expenditures. Here, it is $€ 690,000 - € 414,000 = € 276,000$.

Question 5

When equipment is sold for cash, the amount received is reflected as a cash

Accepted Answer

When equipment is sold for cash, it is considered an investing activity. The cash received from the sale of the equipment would be reflected as an inflow in the investing section of the cash flow statement.

Question 6

LF's Pest Control Products has the following information available: $$\begin{array} { l r } 
\text { Net Income } & \$ 25,000 \
\text { Cash Provided by Operations } & 31,000 \
\text { Cash Sales } & 65,000 \
\text { Capital Expenditures } & 11,000 \
\text { Dividends Paid } & 3,000
\end{array}$$ What is LF's free cash flow?

Accepted Answer

The answer of LF's Pest Control Products has the following...

Question 7

In Rooney Company, Treasury Shares increased $30,000 from a cash purchase, and Retained Earnings increased $80,000 as a result of net income of $124,000 and cash dividends paid of $44,000.Net cash used by financing activities is:

Accepted Answer

The answer of In Rooney Company, Treasury Shares increased $30,000...

Question 8

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

Accepted Answer

The answer of In preparing the statement of cash flows,...

Question 9

If $250,000 of bonds are issued during the year but $100,000 of old bonds are retired during the year, the statement of cash flows will show a(n)

Accepted Answer

Issuing $250,000 of bonds results in an increase in cash flow, while retiring $100,000 of old bonds results in a decrease in cash flow. Therefore, the statement of cash flows will show a net increase in cash flow of $150,000 ($250,000 - $100,000 = $150,000).

Question 10

$$\begin{array}{l}
\text { The following data are available for Cole Company. }\
\begin{array} { l r } 
\text { Sale of land } & \$ 200,000 \
\text { Sale of equipment } & 100,000 \
\text { ISsuance of ordinary shares } & 140,000 \
\text { Purchase of equipment } & 60,000 \
\text { Payment of cash dividends } & 120,000
\end{array}
\end{array}$$ Net cash provided by financing activities is:

Accepted Answer

The answer of \[\begin{array}{l}
\text { The following data are available...

Question 11

Land acquired from the issuance of ordinary shares is reported

Accepted Answer

The answer of Land acquired from the issuance of ordinary...

Question 12

In the Green Company, the beginning and ending balances in Land were $198,000 and $240,000 respectively.During the year, land costing $45,000 was sold for $45,000 cash, and land costing $87,000 was purchased for cash.The entries in the reconciling columns of the worksheet will include a:

Accepted Answer

The answer of In the Green Company, the beginning and...

Question 13

To determine the net cash provided (used) by operating activities, it is necessary to analyze

Accepted Answer

To determine the net cash provided (used) by operating activities, one must analyze the income statement, comparative financial position, and additional information to understand changes in working capital and non-cash expenses.

Question 14

A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

Accepted Answer

Free cash flow is calculated as cash from operating activities minus capital expenditures (money spent on long-term assets) minus dividends paid to shareholders. It represents the cash available for the company to reinvest in the business, repay debt, or distribute to shareholders.

Question 15

The statement of cash flows

Accepted Answer

The statement of cash flows is used to assess an entity's ability to pay dividends and meet obligations by showing the inflows and outflows of cash during a specific period of time. It is not prepared instead of an income statement under IFRS, but is an additional financial statement required under both IFRS and GAAP. It is prepared using information from the comparative balance sheets and income statements, not just comparative income statements. Earnings per share figures are not included in the statement of cash flows.

Question 16

In Wallace Company, net income is $260,000.If accounts receivable increased $140,000 and accounts payable decreased $40,000, net cash provided by operating activities using the indirect method is:

Accepted Answer

The answer of In Wallace Company, net income is $260,000.If...

Question 17

In Shannon Company, there was an increase in the land account during the year of $48,000.Analysis reveals that the change resulted from a cash sale of land at a cost $110,000, and a cash purchase of land for $158,000.In the statement of cash flows, the change in the land account should be reported in the investment section:

Accepted Answer

The answer of In Shannon Company, there was an increase...

Question 18

All of the following statements about free cash flow are false except:

Accepted Answer

Free cash flow is typically reported on the statement of cash flows as a separate section. A is false because significant free cash flow can actually provide more potential to finance new investments. B is a true statement about how free cash flow is commonly calculated. D is false because significant free cash flow can potentially lead to additional dividends being paid to shareholders.

Question 19

The statement of cash flows will not provide insight into

Accepted Answer

The statement of cash flows provides information on the cash inflows and outflows of a company during a specific period, including operating, investing, and financing activities. However, it does not provide specific details about future bond issues or exact proceeds from those issues.

Question 20

The following data are available for Nichols Corporation. $$\begin{array} { l r } 
\text { Sale of land } & \$ 200,000 \
\text { Sale of equipment } & 100,000 \
\text { Issuance of ordinary shares } & 140,000 \
\text { Purchase of equipment } & 60,000 \
\text { Payment of cash dividends } & 120,000
\end{array}$$ Net cash provided by investing activities is:

Accepted Answer

Net cash provided by investing activities is calculated by subtracting cash outflows from cash inflows related to investments. Cash inflows include the sale of land ($200,000) and sale of equipment ($100,000), totaling $300,000. Cash outflows include the purchase of equipment ($60,000). Therefore, net cash provided by investing activities is $300,000 - $60,000 = $240,000.

Quiz 13: Statement of Cash Flows