Question 1

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:

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

Question 2

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 and cash used for dividends

Accepted Answer

Free cash flow is the cash generated from operations after deducting the capital expenditures required to maintain productive capacity and payments to shareholders in the form of dividends. Hence, option D correctly represents free cash flow. Option A is incorrect since cash in the bank may include borrowed funds or funds earmarked for other purposes. Option B is incorrect since it does not take into account the capital expenditures required to maintain the business. Option C is incorrect since it includes cash from financing activities, which may be a one-time occurrence and not related to the company's ongoing operations.

Question 3

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.

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

Question 4

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:

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

Question 5

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 6

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

Accepted Answer

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

Question 7

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.

Accepted Answer

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

Question 8

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.

Accepted Answer

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

Question 9

Lamar Corporation purchased land for $150,000. Later in the year the company sold land with a book value of $190,000 for $200,000. Show how the effects of these transactions are reported on the statement of cash flows using the indirect method.

Accepted Answer

The answer of Lamar Corporation purchased land for $150,000. Later...

Question 10

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 11

The following two problems are independent of one another.

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The answer of The following two problems are independent of...

Question 12

The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following:

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The answer of The cash flows from operating activities are...

Question 13

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise.

Accepted Answer

The answer of Cost of merchandise sold reported on the...

Question 14

The board of directors declared cash dividends total $168,000 during 2014. The comparative balance sheet indicated dividends payable of $46,000 at the beginning of the year and $42,000 at the end of the year. What was the amount of cash payment to stockholders during the year?

Accepted Answer

The answer of The board of directors declared cash dividends...

Question 15

Free cash flow is cash from operations, less cash for
A) dividends and cash for fixed assets needed to maintain productivity
B) dividends and cash to redeem bonds payable
C) fixed assets needed to maintain productivity
D) fixed assets needed to maintain productivity, and cash to redeem bonds payable

Accepted Answer

Free cash flow is a measure of a company's ability to generate cash for its investors after meeting the costs necessary to maintain its productive capacity. This includes subtracting cash used for dividends (which goes to investors) and cash used for fixed assets needed to maintain productivity (which is necessary for the company's continued operations). Option A is the only choice that includes both of these necessary subtractions.

Question 16

Master Designs Company has cash flows for operating activities of $350,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity.
What is the free cash flow for Master Designs?

Accepted Answer

The answer of Master Designs Company has cash flows for...

Question 17

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

Using the direct method of reporting cash flows from operating activities, we need to calculate cash payments for merchandise as follows:

Cost of merchandise sold = Beginning inventory + Purchases - Ending inventory
$45,000 = $13,500 + Purchases - $10,500
Purchases = $42,000

Cash payments for merchandise = Purchases - Increase in accounts payable
Cash payments for merchandise = $42,000 - ($5,000 - $7,000)
Cash payments for merchandise = $44,000

Therefore, the correct answer is B.

Question 18

Sales reported on the income statement were $690,000. The accounts receivable balance declined $39,000 over the year. Determine the amount of cash received from customers.

Accepted Answer

The answer of Sales reported on the income statement were...

Question 19

Selected data taken from the accounting records of Laser Inc. for the current year ended December 31, are as follows:

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The answer of Selected data taken from the accounting records...

Question 20

Kennedy, Inc. reported the following data:

Accepted Answer

The answer of Kennedy, Inc. reported the following data:
 ...

Quiz 13: Statement of Cash Flows

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:

Free cash flow is

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.

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:

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

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.

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.

Lamar Corporation purchased land for $150,000. Later in the year the company sold land with a book value of $190,000 for $200,000. Show how the effects of these transactions are reported on the statement of cash flows using the indirect method.

The following two problems are independent of one another.

The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine the following:

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise.

The board of directors declared cash dividends total $168,000 during 2014. The comparative balance sheet indicated dividends payable of $46,000 at the beginning of the year and $42,000 at the end of the year. What was the amount of cash payment to stockholders during the year?

Free cash flow is cash from operations, less cash for

Master Designs Company has cash flows for operating activities of $350,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity. What is the free cash flow for Master Designs?

Sales reported on the income statement were $690,000. The accounts receivable balance declined $39,000 over the year. Determine the amount of cash received from customers.

Selected data taken from the accounting records of Laser Inc. for the current year ended December 31, are as follows:

Kennedy, Inc. reported the following data: