Question 1

St.Pierre Enterprises reported the following information in its financial statements:
 
-Use the information above to answer the following question.What is the amount of cash collected from customers during the current year?
A) $350,000
B) $380,500
C) $340,000
D) $410,000

Accepted Answer

The answer of St.Pierre Enterprises reported the following information in...

Question 2

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.
 
-Use the information above to answer the following question.If the cash balance at the beginning of the current year was $0,what is the amount of cash at the end of the year?
A) $112,500
B) $425,000
C) $737,500
D) $311,500

Accepted Answer

The answer of Flynn Corporation had the following cash flows...

Question 3

When the direct method is used to determine the cash flows from operating activities,which of the following adjustments must be made to interest expense to determine total interest payments?
A) Add all changes in Interest Payable
B) Add decreases in Interest Payable and subtract increases in Interest Payable
C) Add increases in Interest Payable and subtract decreases in Interest Payable
D) Subtract all changes in Interest Payable

Accepted Answer

The adjustments that need to be made to interest expense in order to determine total interest payments under the direct method of determining cash flows from operating activities are to add decreases in interest payable and subtract increases in interest payable. This is because decreases in interest payable represent cash payments for interest expense that were previously recorded as liabilities, while increases in interest payable represent cash receipts for interest income that were previously recorded as assets. Therefore, adding decreases in interest payable and subtracting increases in interest payable will give the net cash payments for interest expense during the period.

Question 4

Which of the following would be reported on the statement of cash flows,using the direct method,as a cash flow from operating activities?
A) Payment of income taxes
B) Payment of cash dividends
C) Purchase of a building
D) Purchase of treasury stock

Accepted Answer

Payment of income taxes is a cash flow related to the operating activities of the business. Option B is incorrect because payment of cash dividends is a cash flow related to the financing activities of the business. Option C is incorrect because purchase of a building is a cash flow related to the investing activities of the business. Option D is incorrect because purchase of treasury stock is a cash flow related to the financing activities of the business.

Question 5

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.
 
-Use the information above to answer the following question.What is the net cash flows provided by (used in)financing activities?
A) $620,000
B) $410,000
C) $610,000
D) $490,000

Accepted Answer

The net cash flows provided by (used in) financing activities is $610,000, as indicated in the information provided.

Question 6

St.Pierre Enterprises reported the following information in its financial statements:
 
-Use the information above to answer the following question.What is the amount of cash payments made to suppliers during the current year?
A) $280,500
B) $269,500
C) $394,500
D) $230,500

Accepted Answer

The answer of St.Pierre Enterprises reported the following information in...

Question 7

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.
 
-Use the information above to answer the following question.What is the net cash provided by (used in)investing activities?
A) ($200,000)
B) $420,000
C) $410,000
D) ($190,000)

Accepted Answer

The net cash provided by (used in) investing activities is typically calculated by subtracting cash outflows from cash inflows related to investments. The negative sign indicates a net cash outflow, which matches option A.

Question 8

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.
 
-Use the information above to answer the following question.What is the net cash provided by (used in)operating activities?
A) $15,000
B) $6,000
C) ($4,000)
D) ($75,000)

Accepted Answer

Net income + depreciation and amortization - change in working capital = net cash provided by (used in) operating activities.$10,000 + $5,000 - ($10,000) = $15,000

Question 9

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.Which of the following statements is correct concerning a decrease in Accounts Payable?
A) Since the cash payments were more than the credit purchases, the decrease must be added to purchases to calculate cash payments to suppliers.
B) Since the cash payments were less than credit purchases, the decrease must be added to purchases to calculate cash payments to suppliers.
C) Since the cash payments were more than credit purchases, the decrease must be subtracted from purchases to cash payments to suppliers.
D) Since the cash payments were less than credit purchases, the decrease must be subtracted from purchases to calculate cash payments to suppliers.

Accepted Answer

The answer of Assume that the direct method is used...

Question 10

If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500,respectively,the cash paid to employees is:
A) $450,000.
B) $433,500.
C) $448,500.
D) $451,500.

Accepted Answer

The answer of If Salaries and Wages Expense is $450,000...

Question 11

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.Which related balance sheet account will explain the difference between revenues on the income statement and cash collected from customers?
A) Inventory
B) Accounts Payable
C) Cost of Goods Sold
D) Accounts Receivable

Accepted Answer

Accounts Receivable is the balance sheet account that will explain the difference between revenues on the income statement and cash collected from customers. This is because accounts receivable represents the amount of revenue earned that has not yet been collected in cash. Therefore, any changes in accounts receivable during the period will affect the amount of cash collected from customers.

Question 12

A company has a net cash inflow from operating activities of $789,000,a net cash outflow of $50,000 from investing activities and a net cash inflow of $100,000 from financing activities.The company paid $124,000 in interest,$186,500 in income taxes,and $200,000 in cash dividends.Which of the following statements about the statement of cash flows is not correct?
A) The cash dividends of $200,000 paid will be reported as a cash outflow in the cash flow from investing activities section.
B) Supplemental disclosures required for a company using the indirect method include the amount of interest and the amount of income taxes paid.
C) The statement of cash flows will show a net increase in cash and cash equivalents of $839,000.
D) If the direct method is used, the $124,000 of interest paid and the $186,500 of income taxes paid will be reported in the cash flows from operating activities.

Accepted Answer

Cash dividends paid are reported in the cash flow from financing activities section, not in the cash flow from investing activities section.

Question 13

During the current year,a company paid $4,500 which it owed from its prior year income tax liability and $30,000 for its current year tax liability.The company still owes $6,000 at the end of the current year.How much should the company report as cash paid for income taxes on its statement of cash flows for the current year?
A) $34,500
B) $40,500
C) $30,000
D) $3,500

Accepted Answer

The cash paid for income taxes would include both the prior year tax liability and the current year tax liability, which were paid amounts of $4,500 and $30,000 respectively. Therefore, the total cash paid would be $34,500 ($4,500 + $30,000). The fact that the company still owes $6,000 at the end of the year does not affect the cash paid during the year.

Question 14

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.When Accrued Liabilities increase,it means that the company:
A) paid more cash than it recorded as operating expenses.
B) paid less cash than it recorded as operating expenses.
C) prepaid the operating expenses before they were incurred or recorded.
D) paid for the operating expenses as they were recorded.

Accepted Answer

An increase in Accrued Liabilities means that the company paid less cash than it recorded as operating expenses. This is because Accrued Liabilities represent expenses that have been incurred but not yet paid for, so an increase in this account means that the company recorded more expenses than it actually paid for during the period.

Question 15

Penman Corporation showed Salaries and Wages Expense of $488,000 on its income statement.If the Salaries and Wages Payable account was $54,000 at the beginning of the year and $37,000 at the end of the year,how much cash was paid to employees?
A) $434,000
B) $451,000
C) $505,000
D) $471,000

Accepted Answer

The cash paid to employees is calculated as: Salaries and Wages Expense + Beginning Salaries and Wages Payable - Ending Salaries and Wages Payable = $488,000 + $54,000 - $37,000 = $505,000.

Question 16

If Insurance Expense is $7,000 and the beginning and ending balances of Prepaid Insurance are $1,500 and $2,000,respectively,the cash paid for insurance is:
A) $7,000.
B) $6,500.
C) $5,000.
D) $7,500.

Accepted Answer

The cash paid for insurance is calculated as: Insurance Expense + Increase in Prepaid Insurance = $7,000 + ($2,000 - $1,500) = $7,500.

Question 17

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?
A) Direct
B) Indirect
C) Accrual
D) Cash

Accepted Answer

The direct method of preparing the operating activities section of the statement of cash flows involves listing each major operating cash receipt and payment, essentially summarizing each component of operating transactions that affect cash.

Question 18

When the direct method is used to determine the cash flows from operating activities,which of the following adjustments must be made to income tax expense to determine total income tax payments?
A) Add all changes in income taxes and income taxes payable.
B) Add decreases in income taxes payable and subtract increases in income taxes payable.
C) Add increases in income taxes payable and subtract decreases in income taxes payable.
D) Subtract all changes in income taxes payable.

Accepted Answer

The answer of When the direct method is used to...

Question 19

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.Why is a decrease in Accounts Receivable decrease added to sales revenue when computing cash collected from customers?
A) There were more cash sales than credit sales during the year.
B) There were more collections of Accounts Receivable than sales on account during the year.
C) There were more credit sales than cash sales during the year.
D) There were more sales on account than collections of Accounts Receivable during the year.

Accepted Answer

A decrease in Accounts Receivable means that more customers paid for their credit purchases during the year, which indicates more collections of Accounts Receivable compared to sales on account. Therefore, this amount needs to be added to sales revenue when computing cash collected from customers.

Question 20

If a company uses the indirect method to determine cash flows from operating activities,gains:
A) must be added to net income and losses subtracted from net income.
B) and losses must be added to net income.
C) must be subtracted from net income and losses added to net income.
D) and losses must be subtracted from net income.

Accepted Answer

According to the indirect method, gains and losses are added/subtracted from net income to arrive at the net cash flows from operating activities. Since gains are already included in net income and represent an increase in cash, they must be subtracted from net income. On the other hand, losses are already included in net income and represent a decrease in cash, therefore they must be added back to net income.

Quiz 12: Reporting and Interpreting the Statement of Cash Flows

St.Pierre Enterprises reported the following information in its financial statements: -Use the information above to answer the following question.What is the amount of cash collected from customers during the current year?

When the direct method is used to determine the cash flows from operating activities,which of the following adjustments must be made to interest expense to determine total interest payments?

Which of the following would be reported on the statement of cash flows,using the direct method,as a cash flow from operating activities?

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows. -Use the information above to answer the following question.What is the net cash flows provided by (used in) financing activities?

St.Pierre Enterprises reported the following information in its financial statements: -Use the information above to answer the following question.What is the amount of cash payments made to suppliers during the current year?

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows. -Use the information above to answer the following question.What is the net cash provided by (used in) investing activities?

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows. -Use the information above to answer the following question.What is the net cash provided by (used in) operating activities?

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.Which of the following statements is correct concerning a decrease in Accounts Payable?

If Salaries and Wages Expense is $450,000 during the year and the beginning and ending balances of Salaries and Wages Payable are $18,000 and $16,500,respectively,the cash paid to employees is:

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.Which related balance sheet account will explain the difference between revenues on the income statement and cash collected from customers?

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.When Accrued Liabilities increase,it means that the company:

Penman Corporation showed Salaries and Wages Expense of $488,000 on its income statement.If the Salaries and Wages Payable account was $54,000 at the beginning of the year and $37,000 at the end of the year,how much cash was paid to employees?

If Insurance Expense is $7,000 and the beginning and ending balances of Prepaid Insurance are $1,500 and $2,000,respectively,the cash paid for insurance is:

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?

When the direct method is used to determine the cash flows from operating activities,which of the following adjustments must be made to income tax expense to determine total income tax payments?

Assume that the direct method is used to prepare the operating activities section of the statement of cash flows.Why is a decrease in Accounts Receivable decrease added to sales revenue when computing cash collected from customers?

If a company uses the indirect method to determine cash flows from operating activities,gains: