Question 1

For each of the following, identify whether it would be disclosed as an operating O, financing F, or investing I activity on the statement of cash flows under the indirect method.
a.____purchased treasury stock
b.____sold equipment at book value
c.____net income
d.____sold long-term investments
e.____issued common stock
f.____depreciation expense

Accepted Answer

The answer of For each of the following, identify whether...

Question 2

For each of the following, identify whether it would be disclosed as an operating O, financing F, or investing I activity on the statement of cash flows under the indirect method.
a.____received dividends
b.____paid of dividends
c.____purchased of equipment
d.____net income
e.____issued company's common stock
f.____amortization expense

Accepted Answer

The answer of For each of the following, identify whether...

Question 3

Free cash flow is flow cash from operations less cash used for
A)investments in PP&E needed to maintain current production
B)dividends and cash to redeem bonds payable
C)investments in PP&E needed to achieve desired future production
D)fixed assets needed to maintain productivity and cash to redeem bonds payable

Accepted Answer

Free cash flow subtracts cash used for investments in PP&E needed to maintain current production, not those needed for future production or cash used for dividends or bonds payable.

Question 4

Identify which section the statement of cash flows using the indirect method would present information regarding the following activities.Use O for operating, I for investing, or F for financing.
a.Issued common stock
b.Redeemed bonds
c.Issued preferred stock
d.Purchased patents
e.Net income
f.Paid cash dividends
g.Purchased treasury stock
h.Sold long-term investment
i.Sold equipment
j.Purchased buildings
k.Issued bonds

Accepted Answer

The answer of Identify which section the statement of cash...

Question 5

The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current productive capacity is called the
A)free cash flow
B)modified cash flow
C)PPE cash flow
D)restricted cash flow

Accepted Answer

Free cash flow is calculated as operating cash flow minus capital expenditures required to maintain current productive capacity. This represents the cash flow available for use by the company after it has invested in maintaining its current operations. The other options (modified cash flow, PPE cash flow, and restricted cash flow) are not commonly used terms in financial analysis.

Question 6

Free cash flow is
A)all cash in the bank
B)cash from operations
C)cash from financing less cash used to purchase fixed assets to maintain productive capacity and cash used for dividends
D)cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

Accepted Answer

Free cash flow is the cash flow available to the company after accounting for necessary investments in fixed assets to maintain productive capacity. Therefore, option D is the correct choice as it subtracts the cash used for fixed asset investments from the cash flow from operations to arrive at free cash flow. Choices A and B are incorrect as they do not take into account the necessary investments required for maintaining the company's productive capacity. Choice C subtracts cash used for dividends, which is not necessarily a requirement for determining free cash flow.

Question 7

Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:
a Increase in prepaid expenses
b Amortization of patents
c Increase in salaries payable
d Gain on sale of fixed assets
e Decrease in accounts receivable
f Increase in notes receivable due in 60 days
g Amortization of discount on bonds payable
h Decrease in merchandise inventory
i Depreciation of fixed assets
j Loss on retirement of long-term debt
k Decrease in accounts payable
l Increase in notes payable due in 30 days
m Increase in income taxes payable

Accepted Answer

The answer of Indicate whether each of the following would...

Question 8

The income statement disclosed the following items for the current year:
  Balances of the current assets and current liabilities accounts changed between December 31, last year, and December 31, this year, as follows:
  Required:
Prepare the Cash Flows from Operating Activities section of the statement of cash flows, using the indirect method.

Accepted Answer

The answer of The income statement disclosed the following items...

Question 9

The cost of merchandise sold during the year was $45,000.Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year, respectively.Accounts payable were $7,000 and $5,000 at the beginning and end of the year, respectively.Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total
A)$46,000
B)$44,000
C)$50,000
D)$40,000

Accepted Answer

To calculate cash payments for merchandise using the direct method, we need to start with the cost of merchandise sold ($45,000) and adjust for the change in merchandise inventories and accounts payable.

Beginning merchandise inventory: -$13,500
Ending merchandise inventory: +$10,500
Change in merchandise inventory: -$3,000

Beginning accounts payable: +$7,000
Ending accounts payable: -$5,000
Change in accounts payable: -$2,000

Cash payments for merchandise = Cost of merchandise sold - change in merchandise inventory + change in accounts payable
Cash payments for merchandise = $45,000 - (-$3,000) - (-$2,000) = $44,000

Therefore, the best choice is B: $44,000.

Question 10

The net income reported on the income statement for the current year was $210,000.Depreciation recorded on equipment and a building amount to $62,500 for the year.Balances of the current asset and current liabilities accounts at the beginning and end of the year are as follows:
  Required:
1 Prepare the cash flows from operating activities section of the statement of cash flows, using the indirect method.
2 If the direct method had been used, would the net cash flow from operating activities have been the same? Explain.

Accepted Answer

The answer of The net income reported on the income...

Question 11

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:
  Adjust Year 2 net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

Accepted Answer

The answer of Fortune Corporation's comparative balance sheet for current...

Question 12

Each of the events below may have an effect on the statement of cash flows.Designate how the event should be reported within the statement of cash flows using the codes provided below.Codes may be used more than once, or not at all.
Codes
I + investing activity; cash inflow
I - investing activity; cash outflow
F + financing activity; cash inflow
F - financing activity; cash outflow
O + operating activity; cash inflow
O - operating activity; cash outflow
NC noncash investing and financing activity
Events
_____ 1.Paid the weekly payroll
_____ 2.Paid an account payable
_____ 3.Issued bonds payable for cash
_____ 4.Declared and paid a cash dividend
_____ 5.Paid cash for a new piece of equipment
_____ 6.Purchased treasury stock for cash

Accepted Answer

The answer of Each of the events below may have...

Question 13

When using the Spreadsheet work sheet method to analyze noncash accounts, it is best to start with
A)cash
B)net income
C)retained earnings
D)revenue

Accepted Answer

The answer of When using the Spreadsheet work sheet method...

Question 14

Cash payments for merchandise were
A)$39,000
B)$33,000
C)$29,000
D)$23,000

Accepted Answer

The answer of Cash payments for merchandise were
A)$39,000
B)$33,000
C)$29,000
D)$23,000...

Question 15

For each of the following, identify whether it would be disclosed as an operating O, financing F, or investing I activity on the statement of cash flows under the indirect method.
a._____purchased buildings
b._____sold patents
c._____net income
d._____issued common stock
e._____paid cash dividends
f._____depreciation expense

Accepted Answer

The answer of For each of the following, identify whether...

Question 16

When using the spreadsheet work sheet for the statement of cash flows, indirect method, entries made on the spreadsheet are
A)not recorded in the journal or posted to the ledger
B)recorded in the journal and posted to the ledger
C)recorded in the journal but not posted to the ledger
D)not recorded in to the journal but are posted to the ledger

Accepted Answer

When using the spreadsheet worksheet for the statement of cash flows, indirect method, entries made on the spreadsheet are not recorded in the journal or posted to the ledger. The spreadsheet is a tool used to calculate the amounts necessary to prepare the statement of cash flows, but it does not replace the actual journal entries or posting to the ledger. The information entered on the spreadsheet must be used to create the necessary journal entries and ledger postings outside of the spreadsheet.

Question 17

Durrand Corporation's accumulated depreciation increased by $12,000, while patents decreased by $2,200 between consecutive balance sheet dates.There were no purchases or sales of depreciable or intangible assets during the year.In addition, the income statement showed a gain of $4,300 from sale of land.Reconcile a net income of $65,000 to net cash flow from operating activities.

Accepted Answer

The answer of Durrand Corporation's accumulated depreciation increased by $12,000,...

Question 18

Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year, respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is
A)$175,000
B)$165,000
C)$205,000
D)$215,000

Accepted Answer

The cash payments for income tax can be calculated as follows:

Income tax paid = Income tax payable at the beginning of the year + Income tax expense - Income tax payable at the end of the year 
                = $30,000 + $175,000 - $40,000 
                = $165,000

Therefore, the correct answer is choice B.

Question 19

State the sections of the statement of cash flows prepared by the indirect method operating activities, investing activities, financing activities, or not reported and the amount that would be reported for each of the following transactions:
a Received $120,000 from the sale of land costing $70,000.
b Purchased investments for $75,000.
c Declared $35,000 cash dividends on stock.$5,000 dividends were payable at the beginning of the year, and $6,000 were payable at the end of the year.
d Acquired equipment for $64,000 cash.
e Declared and issued 100 shares of $20 par common stock as a stock dividend, when the market price of the stock was $32 a share.
f Recognized depreciation for the year, $37,000.
g Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash.
h Issued $500,000 of 20-year, 10% bonds payable at 99.
i Borrowed $43,000 from Regional Bank, issuing a 5-year, 8% note for that amount.

Accepted Answer

The answer of State the sections of the statement of...

Question 20

Indicate the section operating activities, investing activities, financing activities, or none in which each of the following would be reported on the statement of cash flows prepared by the indirect method:
a gain on sale of fixed assets
b net income
c retirement of long-term debt
d sale of capital stock
e distribution of stock dividends
f payment of cash dividends
g purchase of fixed assets
h sale of fixed assets
i receipt of interest revenue
j Payment of interest expense

Accepted Answer

The answer of Indicate the section operating activities, investing activities,...

Quiz 13: Statement of Cash Flows

Free cash flow is flow cash from operations less cash used for

The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current productive capacity is called the

Free cash flow is

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows: Adjust Year 2 net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

When using the Spreadsheet work sheet method to analyze noncash accounts, it is best to start with

Cash payments for merchandise were

When using the spreadsheet work sheet for the statement of cash flows, indirect method, entries made on the spreadsheet are

Income tax was $175,000 for the year.Income tax payable was $30,000 and $40,000 at the beginning and end of the year, respectively.Cash payments for income tax reported on the statement of cash flows using the direct method is