Question 1

A company reported annual income tax expense of $328,000. During the year, income tax payable increased from a $24,800 beginning balance to a $35,200 ending balance.
How much is cash paid for income taxes during the year?

Accepted Answer

$328,000 + $24,800 - $35,200 = $317,600

Question 2

With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?

Accepted Answer

The indirect method is easier and cheaper because it takes less time. The direct method requires an additional step in that companies must also present a supplemental indirect method section.

Question 3

The following amounts have been taken from the recent financial statements for Bright Star Industries:
 To the closest hundredth, which of the following amounts is Bright Star's operating cash flow to current liabilities ratio?

Accepted Answer

Rationale:
$6,650,000 / [($2,480,000 + $2,600,000)/2] = 2.62

Question 4

The following amounts have been taken from the recent financial statements for Lumos Enterprises:
 Which of the following amounts is the free cash flow for Lumos Industries?

Accepted Answer

$4,100,000 - $1,000,000 = $3,100,000

Question 5

The direct method of presenting net cash flow from operating activities:

Accepted Answer

Cash received from customers, cash paid for inventory, cash paid for interest, cash paid for income taxes, and cash paid for operating expenses are the major cash flows reporting under the direct method in the operating activities section.

Question 6

Which of the following is a required separate disclosure for firms using the direct method in the statement of cash flows?

Accepted Answer

All three are required when the direct method is used. Only answer choices B and C are required with the indirect method.

Question 7

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash dividends received

Accepted Answer

Cash dividends received are considered an operating cash inflow as they are part of the company's core business activities.

Question 8

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash interest received

Accepted Answer

Cash interest received is typically classified as an operating cash inflow because it represents cash received by the company, usually from investments or loans made to others, which is part of the company's primary revenue-generating activities.

Question 9

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash receipts from customers

Accepted Answer

Cash receipts from customers are considered an operating cash inflow because they result from the primary revenue-producing activities of the business.

Question 10

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash collection on loans

Accepted Answer

Cash collection on loans is considered an Investing Cash Inflow (Inv In) because it involves the return of money lent out, which is categorized under investing activities.

Question 11

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash proceeds from the issuance of stock

Accepted Answer

Cash proceeds from the issuance of stock are classified as a financing activity cash inflow on the statement of cash flows.

Question 12

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash interest paid

Accepted Answer

Cash interest paid is considered an operating cash outflow because it is a regular expense related to the core business operations.

Question 13

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash purchase of equipment

Accepted Answer

The cash purchase of equipment is classified as an Investing Cash Outflow because it represents money spent on long-term assets to generate future income and cash flows.

Question 14

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow?
Use the following abbreviations:
-Cash dividends paid

Accepted Answer

The answer of In which of the three activity categories...

Question 15

Cloud Industries acquired a $1,800,000 building by issuing a $1,800,000 note payable due to Square Bank.
a. In terms of cash flow reporting, what type of transaction is this?
b. What special disclosure is required for this transaction?

Accepted Answer

The answer of Cloud Industries acquired a $1,800,000 building by...

Question 16

Write an X in the appropriate column to show whether each of the following cash flows should be classified as an operating, investing, or financing.

Accepted Answer

The answer of Write an X in the appropriate column...

Question 17

Put an X in the appropriate column to show whether each of the following cash flows should be classified as an operating, investing, or financing cash flow.

Accepted Answer

The answer of Put an X in the appropriate column...

Question 18

Caritech had the following income statement for 2016:
  Additional information about the company follows:
  Calculate Caritech's cash flows provided by operating activities for 2016 using the indirect method.

Accepted Answer

The answer of Caritech had the following income statement for...

Question 19

The following information relates to Kailey Company for 2016, in which the company reported a $264,000 net income.
  Calculate the 2016 net cash flow from operating activities using the indirect method.

Accepted Answer

The answer of The following information relates to Kailey Company...

Question 20

Consider the following 2016 data for two manufacturing firms ($ in millions):
  a. Compute the operating cash flow to current liabilities ratio for each firm for 2016.
b. Compute the operating cash flow to capital expenditures ratio for 2016.
c. Comment on the results of your computations.

Accepted Answer

The answer of Consider the following 2016 data for two...

Quiz 4: Reporting and Analyzing Cash Flows

A company reported annual income tax expense of $328,000. During the year, income tax payable increased from a $24,800 beginning balance to a $35,200 ending balance. How much is cash paid for income taxes during the year?

With reference to the reporting of net cash flow from operating activities, which method do most companies use and why?

The following amounts have been taken from the recent financial statements for Bright Star Industries: To the closest hundredth, which of the following amounts is Bright Star's operating cash flow to current liabilities ratio?

The following amounts have been taken from the recent financial statements for Lumos Enterprises: Which of the following amounts is the free cash flow for Lumos Industries?

The direct method of presenting net cash flow from operating activities:

Which of the following is a required separate disclosure for firms using the direct method in the statement of cash flows?

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash dividends received

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash interest received

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash receipts from customers

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash collection on loans

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash proceeds from the issuance of stock

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash interest paid

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash purchase of equipment

In which of the three activity categories of a statement of cash flows would each of the following items appear and do they represent a cash inflow or cash outflow? Use the following abbreviations: -Cash dividends paid

Cloud Industries acquired a $1,800,000 building by issuing a $1,800,000 note payable due to Square Bank. a. In terms of cash flow reporting, what type of transaction is this? b. What special disclosure is required for this transaction?

Write an X in the appropriate column to show whether each of the following cash flows should be classified as an operating, investing, or financing.

Put an X in the appropriate column to show whether each of the following cash flows should be classified as an operating, investing, or financing cash flow.

Caritech had the following income statement for 2016: Additional information about the company follows: Calculate Caritech's cash flows provided by operating activities for 2016 using the indirect method.

The following information relates to Kailey Company for 2016, in which the company reported a $264,000 net income. Calculate the 2016 net cash flow from operating activities using the indirect method.

Consider the following 2016 data for two manufacturing firms ($ in millions): a. Compute the operating cash flow to current liabilities ratio for each firm for 2016. b. Compute the operating cash flow to capital expenditures ratio for 2016. c. Comment on the results of your computations.