Question 1

Slipper Company sold a productive asset,a machine,for cash.It originally cost $20,000.The accumulated depreciation at the date of disposal was $15,000.A gain on the disposal of $2,000 was reported.What was the asset's selling price?

Accepted Answer

Book value ($5,000) = Cost of equipment sold ($20,000) - Accumulated depreciation on equipment sold ($15,000).Gain on sale ($2,000) means book value ($5,000) is less than selling price ($7,000).

Question 2

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities when using the indirect method?

Accepted Answer

Under the indirect method, an increase in accrued liabilities will be added to net income, because accrued expenses were greater than the related cash payments.

Question 3

A company reported an increase in accounts payable and a decrease in inventory during 2010.Which of the following statements is correct?

Accepted Answer

An increase in accounts payable is deducted because some inventory purchases weren't paid for; a decrease in inventory is deducted because cost of goods sold exceeds inventory purchases.

Question 4

A company acquired some land (independently appraised at $12,000)and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted).How should this be reported on the statement of cash flows?

Accepted Answer

Noncash investing and financing activities are reported as a supplement to the statement of cash flows.

Question 5

Non-cash financing and investing activities

Accepted Answer

Noncash investing and financing activities are reported as a supplement to the statement of cash flows.

Question 6

Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
The equipment accumulated depreciation account increased $35,000.
 Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
Depreciation expense on the equipment recorded during the year was $65,000.
How much was the investing activities cash inflow from the sale of the equipment? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

The sale of the equipment resulted in a cash flow of $30,000. The selling price ($30,000) exceeded the equipment book value* ($20,000) by the gain ($10,000).*Cost ($50,000) - Accumulated depreciation ($65,000 - $35,000)

Question 7

A Company reported net income of $200,000 during 2010.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Based on the information provided,how much is the company's cash flow from operating activities?

Accepted Answer

Cash flow from operating activities ($250,000) = Net income ($200,000) + Depreciation expense ($35,000) + Patent amortization ($10,000) + Loss on equipment sale ($5,000)

Question 8

Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
 The equipment accumulated depreciation account increased $35,000.
Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

The sale of the equipment resulted in a cash flow of $30,000. The selling price ($30,000) exceeded the equipment book value* ($20,000) by the gain ($10,000).*Cost ($50,000) - Accumulated depreciation ($65,000 - $35,000)

Question 9

Atkins Corporation has provided the following information for the year ended December 31,2010:
 The equipment account balance increased $200,000.
The equipment accumulated depreciation account increased $35,000.
 Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is correct with respect to cash flow from investing activities determination? Assume that the equipment purchase and sale resulted in cash flows.

Accepted Answer

Equipment purchases ($250,000) = Equipment account increase ($200,000) + The cost of the equipment sold ($50,000)

Question 10

Halbur Company reported the following for its recent year of operation: $$\begin{array}{l}
\text { From the income statement: }\
\begin{array} { l r } 
\text { Depreciation expense } & \$ 1,000 \
\text { Loss on sale of equipment } & 3,000 \
\text { From the comparative balance sheet: } & \
\text { Beginning balance, equipment } & \$ 12,500 \
\text { Ending balance, equipment } & 8,000 \
\text { Beginning balance, accumulated depreciation } & 2,000 \
\text { Ending balance, accumulated depreciation } & 2,400
\end{array}
\end{array}$$ No new equipment was purchased during the year.What was the selling price of the equipment?

Accepted Answer

The answer of Halbur Company reported the following for its...

Question 11

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities when using the indirect method?

Accepted Answer

Under the indirect method, an increase in income taxes payable will be added to net income, because income tax expense was greater than the related cash payments.

Question 12

The following information has been provided to you by RKJ Company: $$\begin{array} { l c } 
\text { Net income } & \$ 300,000 \
\text { Decrease in accounts payable } & \$ 114,000 \
\text { Increase in inventory } & \$ 22,000 \
\text { Increase in accounts receivable } & \$ 24,000 \
\text { Decrease in bonds payable } & \$ 25,000 \
\text { Loss on sale of a depreciable asset } & \$ 19,000 \
\text { Depreciation expense } & \$ 40,000 \
\text { Decrease in income taxes payable } & \$ 12,000
\end{array}$$ What is the net cash flow from operating activities?

Accepted Answer

The answer of The following information has been provided to...

Question 13

Which of the following transactions increases the quality of income ratio?

Accepted Answer

The quality of income ratio is cash flow from operating activities divided by net income. Accruing (incurred but unpaid) expenses decreases net income (the denominator) and therefore increases the ratio.

Question 14

Atkins Corporation has provided the following information for the year ended December 31,2010:
The equipment account balance increased $200,000.
The equipment accumulated depreciation account increased $35,000.
 Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
 Depreciation expense on the equipment recorded during the year was $65,000.
Which of the following statements is correct with respect to cash flow from operating activities determination?

Accepted Answer

Depreciation expense is added to net income when determining cash flow from operating activities under the indirect method.

Question 15

A company reported an increase in prepaid rent and an increase in accrued liabilities during 2010.Which of the following statements is correct?

Accepted Answer

An increase in prepaid rent is added because rent cash payments exceed rent expense; an increase in accrued liabilities is deducted because accrued expenses exceed the related cash payments.

Question 16

A company reported an increase in accrued revenues and a decrease in unearned revenues during 2010.Which of the following statements is correct?

Accepted Answer

An increase in accrued revenues is deducted because revenues exceed cash collections; a decrease in unearned revenues is deducted because revenues exceed cash collections.

Question 17

Which of the following transactions would be reported within the investing section of the cash flow statement?

Accepted Answer

The investing section of the cash flow statement would include the cash sale of the land regardless of whether the sale was at a gain or loss.

Question 18

Which of the following transactions decreases the quality of income ratio?

Accepted Answer

The quality of income ratio is cash flow from operating activities divided by net income. Earning revenue increases net income (the denominator) and therefore decreases the ratio.

Question 19

A company reported an increase in accounts receivable and an increase in unearned revenues during 2010.Which of the following statements is correct?

Accepted Answer

An increase in accounts receivable is deducted because sales revenues exceed cash collections; an increase in unearned revenues is added because cash collections exceed revenues earned.

Question 20

Which of the following transactions would not be reported within the investing section of the cash flow statement?

Accepted Answer

Cash dividends are reported as operating cash flows.

Quiz 13: Statement of Cash Flows

Slipper Company sold a productive asset,a machine,for cash.It originally cost $20,000.The accumulated depreciation at the date of disposal was $15,000.A gain on the disposal of $2,000 was reported.What was the asset's selling price?

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities when using the indirect method?

A company reported an increase in accounts payable and a decrease in inventory during 2010.Which of the following statements is correct?

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted) .How should this be reported on the statement of cash flows?

Non-cash financing and investing activities

A Company reported net income of $200,000 during 2010.The company reported depreciation expense of $35,000,patent amortization of $10,000 and a $5,000 loss on the sale of equipment.Based on the information provided,how much is the company's cash flow from operating activities?

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities when using the indirect method?

Which of the following transactions increases the quality of income ratio?

A company reported an increase in prepaid rent and an increase in accrued liabilities during 2010.Which of the following statements is correct?

A company reported an increase in accrued revenues and a decrease in unearned revenues during 2010.Which of the following statements is correct?

Which of the following transactions would be reported within the investing section of the cash flow statement?

Which of the following transactions decreases the quality of income ratio?

A company reported an increase in accounts receivable and an increase in unearned revenues during 2010.Which of the following statements is correct?

Which of the following transactions would not be reported within the investing section of the cash flow statement?