Question 1

Joyce Company began the year with a $21,000 balance in its Accounts Receivable account.During the accounting period,Joyce earned revenue on account amounting to $35,000.At the end of the accounting period,the Accounts Receivable account had a balance of $8,500.Using the above information,determine the amount of cash collected from accounts receivable during the current accounting period.

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Question 2

What is the major advantage of using the direct method of preparing the statement of cash flows?

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Question 3

What are the two methods used to prepare the statement of cash flows? What section(s)of the statement of cash flows are impacted by the choice of method?

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Question 4

Can a company have a negative cash flow from operating activities for the year on the statement of cash flows but still have a net income on the income statement? Explain.

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Question 5

Diaz Company had the following comparative balance sheet information at the end of Year 2 and Year 1:
 $\begin{array}{c}
\text {Diaz Company}\
\text { Comparative Balance Sheets}\
\begin{array}{lll}
\
\text {Cash}\
\text {Accounts receivable}\
\text {Inventory}\
\text {Prepaid insurance}\
\text {Property, plant and equipment}\
\text {Accumulated depreciation}\
\text {Total}\
\text {Accounts payable}\
\text {Bonds payable}\
\text {Common stock}\
\text {Retained earnings}\
\text {Total}
\end{array}
\begin{array}{cc}
 \text { Year } 2 &  \text { Year } 1 \
 \$  30,000&  \$  28,000 \
  48,000 &  50,000 \
 158,000 &  156,000\
 10,000&  8,000 \
 70,000  & 60,000 \
 (14,000)  & (10,000) \
\$  302,000 & \$ 292,000 \
\$  14,000 & \$  18,000 \
 90,000 & 120,000 \
140,000 & 120,000 \
58,000 &  34,000 \
\$302,000 &\$292,000 \
\end{array}
\end{array}$
 Diaz reported net income for Year 2 of $40,000.There were no sales or disposals of property,plant,and equipment during the year.Diaz uses the indirect method to prepare the statement of cash flows.
Calculate Diaz's cash flow from financing activities for Year 2.

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The answer of Diaz Company had the following comparative balance...

Question 6

Vinton Corp.had beginning accounts receivable of $36,000 and ending accounts receivable of $32,000.If total sales were $110,000,what amount of cash was collected from customers,and how would it be classified on the statement of cash flows?

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Question 7

Would issuing a mortgage to purchase a building be reported on the statement of cash flows? If so,where would it be reported? If not,why not?

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Question 8

What kinds of cash flows are reported as investing activities on the statement of cash flows?

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Question 9

Diaz Company had the following comparative balance sheet information at the end of Year 2 and Year 1:
 $\begin{array}{c}
\text {Diaz Company}\
\text { Comparative Balance Sheets}\
\begin{array}{lll}
\
\text {Cash}\
\text {Accounts receivable}\
\text {Inventory}\
\text {Prepaid insurance}\
\text {Property, plant and equipment}\
\text {Accumulated depreciation}\
\text {Total}\
\text {Accounts payable}\
\text {Bonds payable}\
\text {Common stock}\
\text {Retained earnings}\
\text {Total}
\end{array}
\begin{array}{cc}
 \text { Year } 2 &  \text { Year } 1 \
 \$  30,000&  \$  28,000 \
  48,000 &  50,000 \
 158,000 &  156,000\
 10,000&  8,000 \
 70,000  & 60,000 \
 (14,000)  & (10,000) \
\$  302,000 & \$ 292,000 \
\$  14,000 & \$  18,000 \
 90,000 & 120,000 \
140,000 & 120,000 \
58,000 &  34,000 \
\$302,000 &\$292,000 \
\end{array}
\end{array}$
 Diaz reported net income for Year 2 of $40,000.No property,plant,and equipment were disposed of during the year.Diaz uses the indirect method to prepare the statement of cash flows.
Calculate Diaz's cash flow from investing activities for Year 2.

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The answer of Diaz Company had the following comparative balance...

Question 10

What can cause cash flow from operating activities to be greater than net income from operating activities?

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Question 11

The following information is available for Kent Company Year 2.
 $$\begin{array} { l r } 
\text { Net income, Year 2 } & \$ 280,000 \
\text { Inventory, } 1 / 1 / \text { Year 2 } & 300,000 \
\text { Inventory, } 12 / 31 / \text { Year 2 } & 260,000 \
\text { Cost of goods sold, Year 2 } & 1,500,000 \
\text { Accounts payable, } 1 / 1 / \text { Year 2 } & 180,000 \
\text { Accounts payable, } 12 / 31 / \text { Year 2 } & 230,000
\end{array}$$ Required:
1)What amount of cash was paid for the purchase of merchandise?
2)How will the above items be shown on the statement of cash flows using the indirect method?
3)How will the amount computed in 1)be shown on the statement of cash flows using the direct method?

Accepted Answer

The answer of The following information is available for Kent...

Question 12

Diaz Company had the following comparative balance sheet information at the end of Year 2 and Year 1:
 $\begin{array}{c}
 \text {Diaz Company}\
 \text { Comparative Balance Sheets}\
\begin{array}{lll}
&\text { Year } 2 \
 \text { Cash } & \$  30,000 \
 \text { Accounts receivable } &  48,000 \
 \text { Inventory } & 158,000 \
 \text {Prepaid insurance } & 10,000 \
\text { Property, plant and equipment } & 70,000 \
 \text { Accumulated depreciation } &  (14,000) \
 \text { Total } & \$  302,000 \
 \text { Acounts payable } & \$  14,000 \
 \text { Bonds payable } &  90,000 \
 \text { Common stock } &  140,000 \
\text { Retained earnings }  & 58,000 \
 & \$ 302,000 \
\end{array}
\begin{array}{r}
\text { Year } 1 \
 \$ 28,000 \
50,000 \
156,000 \
8,00 0 \
60,000 \
(10,000) \
 292,000 \
 \$ 18,000\
120,000 \
120,000 \
34,000 \
 292,000
\end{array}
\end{array}$
 Diaz reported net income for Year 2 of $40,000.No property,plant,and equipment were disposed of during the year.Diaz uses the indirect method to prepare the statement of cash flows.
Using the indirect method,calculate Diaz's cash flow from operating activities for Year 2.

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The answer of Diaz Company had the following comparative balance...

Question 13

How is the direct method of preparing the statement of cash flows different from the indirect method?

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Question 14

Under the direct method,cash payments to suppliers would be reported in the operating section of a cash flow statement.

Accepted Answer

The direct method of preparing a cash flow statement categorizes cash receipts and payments into operating activities (including cash payments to suppliers), investing activities, and financing activities. Therefore, cash payments to suppliers would be reported in the operating section under the direct method.

Question 15

What kinds of cash flows are reported as financing activities on the statement of cash flows?

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Question 16

What is the major advantage of using the indirect method of preparing the statement of cash flows?

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Question 17

Use the reconciliation approach to determine cash received from customers for the Boyd Company for the year.Beginning and ending balances of accounts receivable were $6,500 and 5,900,respectively.Sales (all on account)amounted to $127,000.

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Question 18

What types of accounts are reconciled to determine cash flows from operating activities?

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Question 19

Increases in long-term asset balances indicate cash outflows to purchase assets.

Accepted Answer

Long-term assets, such as property, plant, and equipment, require a significant amount of cash outflow to acquire. Therefore, an increase in long-term asset balances indicates cash outflows to purchase assets.

Question 20

Use the reconciliation approach to determine cash paid for inventory for the Ji Company.Assume all inventory is bought on account and the Accounts Payable account is used only for inventory.Beginning and ending balances of merchandise inventory were $12,400 and $18,800,respectively.Beginning and ending balances of accounts payable were $4,000 and $2,800,respectively.Sales revenue amounted to $137,024 and cost of goods sold equaled $83,808.

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Quiz 14: Statement of Cash Flows

What is the major advantage of using the direct method of preparing the statement of cash flows?

What are the two methods used to prepare the statement of cash flows? What section(s)of the statement of cash flows are impacted by the choice of method?

Can a company have a negative cash flow from operating activities for the year on the statement of cash flows but still have a net income on the income statement? Explain.

Vinton Corp.had beginning accounts receivable of $36,000 and ending accounts receivable of $32,000.If total sales were $110,000,what amount of cash was collected from customers,and how would it be classified on the statement of cash flows?

Would issuing a mortgage to purchase a building be reported on the statement of cash flows? If so,where would it be reported? If not,why not?

What kinds of cash flows are reported as investing activities on the statement of cash flows?

What can cause cash flow from operating activities to be greater than net income from operating activities?

How is the direct method of preparing the statement of cash flows different from the indirect method?

Under the direct method,cash payments to suppliers would be reported in the operating section of a cash flow statement.

What kinds of cash flows are reported as financing activities on the statement of cash flows?

What is the major advantage of using the indirect method of preparing the statement of cash flows?

Use the reconciliation approach to determine cash received from customers for the Boyd Company for the year.Beginning and ending balances of accounts receivable were $6,500 and 5,900,respectively.Sales (all on account)amounted to $127,000.

What types of accounts are reconciled to determine cash flows from operating activities?

Increases in long-term asset balances indicate cash outflows to purchase assets.