Question 1

A building with a book value of $54,000 is sold for $63,000 cash.Using the indirect method,this transaction should be shown on the statement of cash flows as follows:
A)an increase of $54,000 from investing activities
B)an increase of $63,000 from investing activities and a deduction from net income of $9,000
C)an increase of $9,000 from investing activities
D)an increase of $54,000 from investing activities and an addition to net income of $9,000

Accepted Answer

The sale of the building generates cash inflow of $63,000, which is an investing activity. However, since the building had a book value of $54,000, there is a gain of $9,000 ($63,000 - $54,000) that should be deducted from net income (if using the indirect method) to get to cash flows from operating activities. Therefore, the transaction should be shown as an increase of $63,000 from investing activities and a deduction from net income of $9,000.

Question 2

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?
A)depreciation expense
B)an increase in inventory
C)a gain on the sale of equipment
D)dividends declared and paid

Accepted Answer

Depreciation expense is a non-cash expense that reduces net income but does not affect cash flows. Therefore, it needs to be added back to net income while calculating net cash flow from operating activities using the indirect method. The other options, such as an increase in inventory, gain on the sale of equipment, and dividends declared and paid, would either decrease or increase cash flows and would be accounted for separately in the cash flow statement.

Question 3

Cash dividends of $45,000 were declared during the year.Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year.The amount of cash for the payment of dividends during the year is
A)$50,000
B)$40,000
C)$55,000
D)$35,000

Accepted Answer

The cash for payment of dividends during the year is calculated by adding the beginning balance of dividends payable to the dividends declared during the year and subtracting the ending balance of dividends payable.
Cash for payment of dividends = Beginning dividends payable + Dividends declared - Ending dividends payable
Cash for payment of dividends = $10,000 + $45,000 - $15,000
Cash for payment of dividends = $40,000

Question 4

Cash dividends paid on capital stock would be reported in the statement of cash flows in
A)the cash flows from financing activities section
B)the cash flows from investing activities section
C)a separate schedule
D)the cash flows from operating activities section

Accepted Answer

Cash dividends paid on capital stock are considered a financing activity and would be reported in the cash flows from financing activities section of the statement of cash flows.

Question 5

A business issues 20-year bonds payable in exchange for preferred stock.This transaction would be reported on the statement of cash flows in
A)a separate schedule
B)the cash flows from financing activities section
C)the cash flows from investing activities section
D)the cash flows from operating activities section

Accepted Answer

The answer of A business issues 20-year bonds payable in...

Question 6

The following information is available from the current period financial statements:

The net cash flow from operating activities using the indirect method is 
A) $166,000
B) $184,000
C) $110,000
D) $240,000

Accepted Answer

The answer of The following information is available from the...

Question 7

On the statement of cash flows,a $7,500 gain on the sale of fixed assets would be
A)added to net income in converting the net income reported on the income statement to cash flows from operating activities
B)deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
C)added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
D)deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

Accepted Answer

The answer of On the statement of cash flows,a $7,500...

Question 8

On the statement of cash flows,the cash flows from investing activities section would include
A)receipts from the issuance of capital stock
B)payments for dividends
C)payments for retirement of bonds payable
D)receipts from the sale of investments

Accepted Answer

The cash flows from investing activities section includes transactions related to the purchase and sale of long-term assets and investments, such as property, plant, and equipment and marketable securities. Receipts from the sale of investments would be included in this section. Receipts from issuance of capital stock (financing activities section), payments for dividends (financing activities section), and payments for retirement of bonds payable (financing or operating activities section) would not be included in the cash flows from investing activities section.

Question 9

Cash paid for equipment would be reported on the statement of cash flows in
A)the cash flows from operating activities section
B)the cash flows from financing activities section
C)the cash flows from investing activities section
D)a separate schedule

Accepted Answer

Cash paid for equipment is a cash outflow related to investment, therefore it would be reported on the statement of cash flows in the cash flows from investing activities section.

Question 10

Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000.As a result of this transaction,cash would
A)increase by $48,000
B)decrease by $7,000
C)increase by $55,000
D)decrease by $27,000

Accepted Answer

The equipment's book value is calculated as the original cost ($75,000) minus accumulated depreciation ($20,000), resulting in $55,000. Selling it at a loss of $7,000 means it was sold for $48,000 ($55,000 - $7,000), which increases cash by $48,000.

Question 11

The following information is available from the current period financial statements:

The net cash flow from operating activities using the indirect method is 
A) $230,000
B) $188,000
C) $198,000
D) $156,000

Accepted Answer

The answer of The following information is available from the...

Question 12

Land costing $140,000 was sold for $173,000 cash.The gain on the sale was reported on the income statement as other income.On the statement of cash flows,what amount should be reported as an investing activity from the sale of land?
A)$173,000
B)$140,000
C)$313,000
D)$33,000

Accepted Answer

The amount reported as an investing activity on the statement of cash flows for the sale of land is the cash received from the sale, which is $173,000.

Question 13

The net income reported on the income statement for the current year was $275,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: $\begin{array}{l}
\begin{array}{lll}
\
\text { Cash}\
\text { Accounts receivable}\
\text { Inventories}\
\text { Prepaid expenses}\
\text { Accounts payable merchandise creditors}\
\end{array}
\begin{array}{lll}
\underline { \text { End}}\
\$ 50,000 \
112,000 \
105,000 \
4,500 \
75,000
\end{array}
\begin{array}{lll}

\underline { \text { Beginning}}\
\$ 60,000 \
108,000 \
93,000 \
6,500 \
89,000
\end{array}
\end{array}$
 What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
A)$198,000
B)$324,000
C)$352,000
D)$296,000

Accepted Answer

To determine the cash flows from operating activities using the indirect method, we need to start with the net income and adjust for non-cash items and changes in current assets and liabilities.

Net income: $275,000
Add: Depreciation expense: $40,000
Add: Amortization expense: $9,000
Subtract: Increase in accounts receivable: ($4,000) [$112,000 - $108,000]
Add: Increase in inventories: $12,000 [$105,000 - $93,000]
Subtract: Decrease in prepaid expenses: ($2,000) [$6,500 - $4,500]
Subtract: Increase in accounts payable: ($14,000) [$75,000 - $89,000]

Cash flows from operating activities: $275,000 + $40,000 + $9,000 - $4,000 + $12,000 - $2,000 - $14,000 = $296,000

Therefore, the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method is $296,000. Option D is the correct answer.

Question 14

If a gain of $11,000 is realized in selling for cash office equipment having a book value of $55,000,the total amount reported in the cash flows from investing activities section of the statement of cash flows is
A)$44,000
B)$11,000
C)$55,000
D)$66,000

Accepted Answer

The answer of If a gain of $11,000 is realized...

Question 15

On the statement of cash flows,the cash flows from financing activities section would include
A)receipts from the sale of investments
B)payments for the acquisition of investments
C)receipts from a note receivable
D)receipts from the issuance of capital stock

Accepted Answer

The cash flows from financing activities section includes cash transactions that involve raising or repaying capital, such as issuing and repurchasing stocks, borrowing and repaying loans, and paying dividends. Receipts from the issuance of capital stock would fall under this category. A represents cash flows from investing activities, B represents cash outflows from investing activities, and C represents cash inflows from operating activities.

Question 16

Land costing $71,000 was sold for $50,000 cash.The loss on the sale was reported on the income statement as other expense.On the statement of cash flows,what amount should be reported as an investing activity from the sale of land?
A)$50,000
B)$71,000
C)$121,000
D)$21,000

Accepted Answer

The amount of cash received from the sale of land should be reported as an investing activity on the statement of cash flows. In this case, the cash received was $50,000, which is the answer choice A. The original cost of the land is irrelevant for this purpose.

Question 17

The net income reported on the income statement for the current year was $250,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: $\begin{array}{l}
\begin{array}{lll}
\
\text { Cash}\
\text { Accounts receivable}\
\text { Inventories}\
\text { Prepaid expenses}\
\text { Accounts payable merchandise creditors}\
\end{array}
\begin{array}{lll}
\underline { \text { End}}\
\$ 50,000 \
112,000 \
105,000 \
4,500 \
75,000
\end{array}
\begin{array}{lll}

\underline { \text { Beginning}}\
\$ 60,000 \
108,000 \
93,000 \
6,500 \
89,000
\end{array}
\end{array}$
 What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?
A)$271,000
B)$279,000
C)$327,000
D)$256,000

Accepted Answer

Net income + Depreciation and amortization + Decrease in current assets - Increase in current liabilities = $250,000 + $49,000 + $18,000 - $14,000 = $271,000

Question 18

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?
A)issuance of bonds payable
B)issuance of capital stock
C)purchase of treasury stock
D)purchase of noncurrent assets

Accepted Answer

The purchase of noncurrent assets is an investing activity, as it involves the acquisition of assets that will generate future income for the company. Issuance of bonds payable and capital stock are financing activities, as they involve obtaining funds from external sources. Purchase of treasury stock is a financing activity if it is acquired for cancellation or retirement, but it could also be an investing activity if it is held for resale.

Question 19

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?
A)a decrease in inventory
B)a decrease in accounts payable
C)preferred dividends declared and paid
D)a decrease in accounts receivable

Accepted Answer

The answer of Which of the following should be deducted...

Question 20

The current period statement of cash flows includes the following:

The cash balance at the end of the period is 
A) $45,000
B) $635,000
C) $355,000
D) $125,000

Accepted Answer

The current period statement of cash flows indicates that there was a net increase in cash and cash equivalents of $200,000. If we add that to the beginning cash balance of $155,000, we get a total of $355,000 as the ending cash balance.

Quiz 14: Statement of Cash Flows

A building with a book value of $54,000 is sold for $63,000 cash.Using the indirect method,this transaction should be shown on the statement of cash flows as follows:

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

Cash dividends of $45,000 were declared during the year.Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year.The amount of cash for the payment of dividends during the year is

Cash dividends paid on capital stock would be reported in the statement of cash flows in

A business issues 20-year bonds payable in exchange for preferred stock.This transaction would be reported on the statement of cash flows in

The following information is available from the current period financial statements: The net cash flow from operating activities using the indirect method is

On the statement of cash flows,a $7,500 gain on the sale of fixed assets would be

On the statement of cash flows,the cash flows from investing activities section would include

Cash paid for equipment would be reported on the statement of cash flows in

Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000.As a result of this transaction,cash would

The following information is available from the current period financial statements: The net cash flow from operating activities using the indirect method is

Land costing $140,000 was sold for $173,000 cash.The gain on the sale was reported on the income statement as other income.On the statement of cash flows,what amount should be reported as an investing activity from the sale of land?

If a gain of $11,000 is realized in selling for cash office equipment having a book value of $55,000,the total amount reported in the cash flows from investing activities section of the statement of cash flows is

On the statement of cash flows,the cash flows from financing activities section would include

Land costing $71,000 was sold for $50,000 cash.The loss on the sale was reported on the income statement as other expense.On the statement of cash flows,what amount should be reported as an investing activity from the sale of land?

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

The current period statement of cash flows includes the following: The cash balance at the end of the period is