Question 1

Pittsburgh Company pays cash for all inventory purchases. The company had a beginning inventory of $18,500 and an ending inventory of $16,900. Their cost of goods sold amounted to $75,000. Based on this information, what was the amount of cash paid for inventory purchases?
A)$76,600
B)$73,400
C)$75,000
D)$81,800

Accepted Answer

The amount of cash paid for inventory purchases can be calculated using the formula:
Cash paid for inventory purchases = Cost of goods sold + Ending inventory - Beginning inventory
Substituting the given values, we get:
Cash paid for inventory purchases = $75,000 + $16,900 - $18,500 = $73,400
Therefore, the answer is B. Cash paid for inventory purchases = Cost of goods sold + Beginning inventory - Ending inventory
Cash paid for inventory purchases = $75,000 + $18,500 - $16,900
Cash paid for inventory purchases = $73,400

Question 2

For the year ended December 31, Year 1, Carsem Company had cash collections from customers of $220,000, cash paid to employees of $32,000, cash paid to suppliers of $100,000, cash used to retire long-term bonds of $32,000, and cash payments for dividends of $20,000. Based on this information, what is the net cash provided from operating activities?
A)$68,000
B)$88,000
C)$188,000
D)$120,000

Accepted Answer

Cash flows reported as operating activities include cash receipts from revenues,including interest and dividend revenue and cash payments for expenses,including interest expense.
Net cash flow from operating activities = Cash collected from customers of $220,000 - Cash paid to employees of $32,000 - Cash paid to suppliers of $100,000 = $88,000

Question 3

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
Howard Company sold equipment with a book value of $20,000 for $17,000 cash.

Accepted Answer

The answer of Howard Company uses the direct method to...

Question 4

Statler Corporation has beginning and ending accounts payable balances of $400 and $800, respectively. Inventory had beginning and ending balances of $700 and $600, respectively. If cost of goods sold was $2,800, how much cash was spent to purchase inventory?
A)$2,100
B)$2,500
C)$2,700
D)$2,300

Accepted Answer

The cash spent to purchase inventory is calculated as: Beginning Inventory + Purchases - Ending Inventory = Cost of Goods Sold. Rearranging for Purchases gives: Purchases = Cost of Goods Sold + Ending Inventory - Beginning Inventory. Purchases = $2,800 + $600 - $700 = $2,700. The change in accounts payable ($800 - $400 = $400) indicates that $400 of the purchases were not paid in cash. Therefore, cash spent = Purchases - Increase in Accounts Payable = $2,700 - $400 = $2,300.

Question 5

LePage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account. During the year, a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800. How much cash did LePage pay for insurance during the year?
A)$16,600
B)$17,400
C)$17,000
D)$18,800

Accepted Answer

Ending balance of prepaid insurance of $1,800 = Beginning balance of prepaid insurance of $2,200 + Increase due to premiums paid in advance (the unknown)- Decrease due to insurance expense of $17,000
Premiums paid in advance = $1,800 - $2,200 + $17,000 = $16,600

Question 6

Oglethorpe Corporation reported a beginning balance of $12,400 in its Prepaid Insurance account. During the year, Oglethorpe paid a total of $42,000 to purchase insurance, and the Prepaid Insurance account had an ending balance of $13,100. What was the amount of insurance expense for the year?
A)$42,000
B)$42,300
C)$42,700
D)$41,300

Accepted Answer

To find the amount of insurance expense for the year, we need to calculate the change in the Prepaid Insurance account. The beginning balance of $12,400 plus the amount paid during the year of $42,000 gives us a total of $54,400. The ending balance of $13,100 represents the portion of insurance that has not yet been used or expensed. Therefore, we can subtract the ending balance from the total to get the amount that was expensed during the year: $54,400 - $13,100 = $41,300. Therefore, the correct answer is choice D. The amount of insurance expense for the year can be calculated by subtracting the ending balance of prepaid insurance ($13,100) from the sum of the beginning balance ($12,400) and the amount paid to purchase insurance during the year ($42,000), which is $42,400. Then, by subtracting the beginning balance from this total, we get the insurance expense for the year, which is $30,000 (=$42,400 - $12,400). Therefore, the best choice is D.

Question 7

Which of the following would not be reported in the body of the statement of cash flows?
A)The payment of a cash dividend
B)The issuance of preferred stock for cash
C)The purchase and retirement of treasury stock
D)A 2-for-1 stock split

Accepted Answer

A 2-for-1 stock split does not involve any cash transactions and therefore would not be reported in the body of the statement of cash flows. The payment of a cash dividend would be reported as a cash outflow from financing activities, the issuance of preferred stock for cash would be reported as a cash inflow from financing activities, and the purchase and retirement of treasury stock would be reported as a cash outflow from financing activities. A 2-for-1 stock split is an adjustment to the number of shares outstanding and does not involve any cash transactions. Therefore, it would not be reported in the statement of cash flows. The payment of a cash dividend, the issuance of preferred stock for cash, and the purchase and retirement of treasury stock all involve cash transactions and would be reported in the statement of cash flows.

Question 8

Which of the following transactions would be disclosed on a schedule of noncash investing and financing activities?
A)A building acquired by issuing a mortgage note
B)Recording depreciation expense
C)The issuance of bonds for cash
D)All of these answer choices are correct

Accepted Answer

A building acquired by issuing a mortgage note is an example of a noncash investing or financing activity, as it involves the exchange of a note rather than cash. Recording depreciation expense is not a noncash investing or financing activity, and the issuance of bonds for cash is a cash financing activity. Therefore, the correct answer is A. The schedule of noncash investing and financing activities reports significant noncash transactions like the acquisition of a building by issuing a mortgage note. Recording depreciation expense and the issuance of bonds for cash are not reported on this schedule because they do not involve noncash transactions.

Question 9

Which of the following cash flows would be included in the operating activities section of the statement of cash flows if the direct method is used?
A)Cash received from a bond issue
B)Cash paid to purchase equipment
C)Cash receipts from dividends
D)Cash gains and losses from the sale of operational assets

Accepted Answer

Cash receipts from dividends would be included in the operating activities section of the statement of cash flows if the direct method is used, as they are part of the company's operating income. Cash received from a bond issue would be included in the financing activities section, cash paid to purchase equipment would be included in the investing activities section, and cash gains and losses from the sale of operational assets would be included in the operating activities section if the indirect method is used, but not if the direct method is used. Cash receipts from dividends would be included in the operating activities section of the statement of cash flows under the direct method because they represent cash received from the company's regular operations. The other options would be included in the financing activities (bond issue) or investing activities (purchase of equipment and sale of operational assets) sections.

Question 10

Anton Company reported a beginning balance of $13,200 and an ending balance of $14,400 in its Unearned Revenue account for the current year. During the year, $36,000 of revenue (previously unearned)was recognized. Considering only this information, how much cash was received in advance from customers during the year?
A)$36,000
B)$37,200
C)$36,800
D)$27,600

Accepted Answer

Ending balance of unearned revenue of $14,400 = Beginning balance of unearned revenue of $13,200 + Increase due to cash collected in advance of (the unknown)-Decrease due to services provided to customers of $36,000
Cash collected in advance from customers = $14,400 - $13,200 + $36,000 = $37,200

Question 11

Mercury Company rents out a portion of its office space to another company. At the beginning of the year, the balance in the Unearned Rent Revenue account was $3,400. During the year, Mercury recognized $16,600 of rent revenue. If the ending balance of Unearned Rent Revenue is $2,600, how much cash was received from the tenant for rent during the year?
A)$14,000
B)$16,600
C)$17,400
D)$15,800

Accepted Answer

To determine the amount of cash received from the tenant for rent during the year, we need to calculate the change in the balance of the Unearned Rent Revenue account.

Beginning balance = $3,400
Rent revenue recognized during the year = $16,600
Ending balance = $2,600

To calculate the change in the balance, we can use the formula:
Change in balance = Ending balance - Beginning balance - Rent revenue recognized
Change in balance = $2,600 - $3,400 - $16,600
Change in balance = -$17,400

A negative number means the balance decreased, indicating that Mercury received more cash from the tenant than the rent revenue recognized during the year. Thus, the cash received from the tenant for rent during the year is:
Cash received = Rent revenue recognized + Decrease in unearned rent revenue
Cash received = $16,600 - (-$17,400)
Cash received = $16,600 + $17,400
Cash received = $34,000

Therefore, the correct answer is D, $15,800. The amount of cash received from the tenant can be calculated by subtracting the decrease in the Unearned Rent Revenue account from the total rent revenue recognized during the year:

Cash received = Rent revenue recognized - Decrease in unearned rent revenue
Cash received = $16,600 - ($3,400 - $2,600)
Cash received = $16,600 - $800
Cash received = $15,800

Therefore, the answer is D) $15,800.

Question 12

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
Howard Company purchased $4,000 of supplies, paying $1,500 in cash and charging the remainder on account. $1,600 of the supplies were used during the accounting period. (Show the combined effects of the events.)

Accepted Answer

The answer of Howard Company uses the direct method to...

Question 13

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
Howard Company purchased land by issuing a note payable in the amount of $150,000.

Accepted Answer

The answer of Howard Company uses the direct method to...

Question 14

Statler Corporation has beginning and ending accounts payable balances of $500 and $950, respectively. Inventory had beginning and ending balances of $800 and $650, respectively. If cost of goods sold was $3,800, how much cash was spent to purchase inventory?
A)$2,850
B)$3,300
C)$3,650
D)$3,200

Accepted Answer

To find the cash spent on inventory, calculate the purchases first: Ending Inventory ($650) + COGS ($3,800) - Beginning Inventory ($800) = Purchases ($3,650). Then, adjust for accounts payable: Beginning Accounts Payable ($500) + Purchases ($3,650) - Ending Accounts Payable ($950) = Cash Spent ($3,200).

Question 15

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
At the beginning of the current year, Howard Company paid cash to purchase equipment costing $80,000. There was $10,000 of depreciation expense recognized during the accounting period. (Show the combined effects of these two events.)

Accepted Answer

The answer of Howard Company uses the direct method to...

Question 16

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
Howard Company purchased land costing $25,000 by paying $8,000 cash and issuing a note payable for the remaining balance.

Accepted Answer

The answer of Howard Company uses the direct method to...

Question 17

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows.
Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected.
Howard Company made a $25,000 cash payment on a term loan. The payment included a $23,000 reduction of principal as well as $2,000 of interest. (Show the combined effects of the events.)

Accepted Answer

The answer of Howard Company uses the direct method to...

Question 18

Grace Company sold equipment for $40,000 cash. The equipment has cost $70,000 and had accumulated depreciation of $44,000 at the time of the sale. Based on this information alone, which of the following statements is true?
A)Cash flow from investing activities would be less if the sale of equipment is reported on the statement of cash flows under the direct method than if it is reported under the indirect method.
B)Cash flow from investing activities would be greater if the sale of equipment is reported on the statement of cash flows under the direct method than if it is reported under the indirect method.
C)Cash flow from investing activities would be the same regardless of whether the sale of equipment is reported on the statement of cash flows under the direct method or the indirect method.
D)The answer cannot be determined because the amount of the salvage value is unknown.

Accepted Answer

Under generally accepted accounting principles,the operating activities section of the statement of cash flows can be presented using either the direct or the indirect method.
The investing activities section of the statement of cash flows is not affected by the choice of direct or indirect method.

Question 19

Which of the following would not be presented in the financing activities section of the statement of cash flows?
A)Purchased a new office building by issuing a note payable
B)Purchased treasury stock
C)Repayment of long-term bonds payable
D)Issuing of preferred stock

Accepted Answer

The purchase of a new office building by issuing a note payable is a non-cash investing and financing activity and would be disclosed in a separate schedule or in the notes to the financial statements, not in the financing activities section.

Question 20

Bristol Corporation reported a beginning balance of $6,200 in accounts receivable. During the year, sales on account totaled $49,600. If the ending balance of accounts receivable amounts to $25,000, what was the amount of cash received from customers?
A)$24,600
B)$25,000
C)$30,800
D)$68,400

Accepted Answer

To find the amount of cash received from customers, we need to subtract the increase in accounts receivable from the sales on account.

Beginning balance of accounts receivable = $6,200 
Sales on account = $49,600 
Ending balance of accounts receivable = $25,000

Increase in accounts receivable = Ending balance - Beginning balance = $25,000 - $6,200 = $18,800

Cash received from customers = Sales on account - Increase in accounts receivable = $49,600 - $18,800 = $30,800

Therefore, the answer is C. To find the cash received from customers, we need to subtract the ending accounts receivable balance from the sum of beginning balance and credit sales.

Beginning accounts receivable balance = $6,200
Credit sales = $49,600
Ending accounts receivable balance = $25,000

Cash received from customers = Beginning AR balance + Credit sales - Ending AR balance
Cash received from customers = $6,200 + $49,600 - $25,000
Cash received from customers = $30,800

Therefore, the correct option is C) $30,800.

Quiz 12: Statement of Cash Flows

Pittsburgh Company pays cash for all inventory purchases. The company had a beginning inventory of $18,500 and an ending inventory of $16,900. Their cost of goods sold amounted to $75,000. Based on this information, what was the amount of cash paid for inventory purchases?

Statler Corporation has beginning and ending accounts payable balances of $400 and $800, respectively. Inventory had beginning and ending balances of $700 and $600, respectively. If cost of goods sold was $2,800, how much cash was spent to purchase inventory?

LePage Corporation reported a beginning balance of $2,200 in its Prepaid Insurance account. During the year, a total of $17,000 was recognized as Insurance Expense and the Prepaid Insurance account had an ending balance of $1,800. How much cash did LePage pay for insurance during the year?

Oglethorpe Corporation reported a beginning balance of $12,400 in its Prepaid Insurance account. During the year, Oglethorpe paid a total of $42,000 to purchase insurance, and the Prepaid Insurance account had an ending balance of $13,100. What was the amount of insurance expense for the year?

Which of the following would not be reported in the body of the statement of cash flows?

Which of the following transactions would be disclosed on a schedule of noncash investing and financing activities?

Which of the following cash flows would be included in the operating activities section of the statement of cash flows if the direct method is used?

Statler Corporation has beginning and ending accounts payable balances of $500 and $950, respectively. Inventory had beginning and ending balances of $800 and $650, respectively. If cost of goods sold was $3,800, how much cash was spent to purchase inventory?

Grace Company sold equipment for $40,000 cash. The equipment has cost $70,000 and had accumulated depreciation of $44,000 at the time of the sale. Based on this information alone, which of the following statements is true?

Which of the following would not be presented in the financing activities section of the statement of cash flows?

Bristol Corporation reported a beginning balance of $6,200 in accounts receivable. During the year, sales on account totaled $49,600. If the ending balance of accounts receivable amounts to $25,000, what was the amount of cash received from customers?