Question 1

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 2

Selected data taken from the accounting records of Laser Inc. for the current year ended December 31, are as follows:
  During the current year, the cost of merchandise sold was $448,500, and the operating expenses other than depreciation were $78,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash flows.
Required:
Determine the amount reported on the statement of cash flows for:
(1) Cash payments for merchandise; and
(2) Cash payments for operating expenses.

Accepted Answer

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

Question 3

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 4

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

Accepted Answer

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

Question 5

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 the cash from operations that remains after accounting for the cash required to maintain the company's productive capacity (i.e. fixed assets) and payments to shareholders in the form of dividends. Therefore, the correct choice is A, which includes both of these factors. Option B includes cash to redeem bonds payable, which is not necessary to calculate free cash flow, and option C only includes fixed assets needed to maintain productivity, without accounting for dividend payments. Option D is a combination of options A and B, which includes more information than is necessary to calculate free cash flow.

Question 6

State the section(s) 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:

Accepted Answer

The answer of State the section(s) of the statement of...

Question 7

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, we need to calculate cash payments for merchandise. This can be done by adjusting the cost of merchandise sold for changes in merchandise inventory and accounts payable:

Cash payments for merchandise = Cost of merchandise sold + Increase in accounts payable - Decrease in accounts payable + Decrease in merchandise inventory - Increase in merchandise inventory
Cash payments for merchandise = $45,000 + ($5,000 - $7,000) + ($13,500 - $10,500) 
Cash payments for merchandise = $45,000 - $2,000 + $3,000 
Cash payments for merchandise = $46,000 - $2,000 
Cash payments for merchandise = $44,000

Therefore, the correct answer is B.

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

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 11

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows:
  Adjust 2012 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

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 13

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:

Accepted Answer

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

Question 14

Kennedy, Inc. reported the following data:
  Prepare the cash flows for operating activities under the indirect method as it would appear on the statement of cash flows.

Accepted Answer

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

Question 15

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 16

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 17

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
  Events

Accepted Answer

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

Question 18

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 19

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 20

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 minus the cash used to purchase fixed assets required to maintain the current level of productive capacity, and less the cash used for dividends. Therefore, option D is the best choice. Option A is incorrect because all cash in the bank does not represent free cash flow. Similarly, option B is incorrect because cash from operations alone does not account for capital expenditures necessary for growth. Option C is incorrect because cash from financing activities has nothing to do with free cash flow.

Quiz 16: Statement of Cash Flows

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?

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?

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

Free cash flow is cash from operations, less cash for

State the section(s) 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:

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.

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.

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows: Adjust 2012 net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.

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:

Kennedy, Inc. reported the following data: Prepare the cash flows for operating activities under the indirect method as it would appear on the statement of cash flows.

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.

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 Events

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.

Free cash flow is