Intermediate Accounting Volume 1, 7th Edition By Spiceland - Test Bank

Intermediate Accounting Volume 1, 7th Edition By Spiceland – Test Bank

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Sample Questions Posted Below

 

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Student: ___________________________________________________________________________

1. A Statement of Cash Flows using the direct method and one using the indirect method will each produce the same amount of net cash flow from operating activities. 
 
True    False

 

2. Only the indirect method of preparing the Statement of Cash Flows reports the reconciliation of net income and net operating cash flow. 
 
True    False

 

3. All investments meeting the definition of cash equivalent must be so classified.  
 
True    False

 

4. Under IFRS, term preferred shares near their maturity date may be classified as cash equivalents for purposes of the Statement of Cash Flows. 
 
True    False

 

5. Under ASPE, dividends paid must be classified as a financing activity. 
 
True    False

 

6. The write-off of a bad debt (allowance method) during the current period represents an outflow of cash on the Statement of Cash Flows for the current period.  
 
True    False

 

7. A Statement of Cash Flows is significant in that it presents comprehensive information about the operating, financing, and investing activities of a company. 
 
True    False

 

8. Sale of an asset and issuance of long-term debt will each cause an outflow of cash.  
 
True    False

 

9. Sale of an asset for less than its book value results in an inflow of cash. 
 
True    False

 

10. The indirect method of computing operating cash flows effectively converts accrual accounting income to cash basis income as its starting point. 
 
True    False

 

11. A non-cash exchange is a transaction that involves an exchange of resources without any cash being directly paid or received. 
 
True    False

 

12. The Statement of Cash Flows is dated at a specific point in time like the balance sheet.  
 
True    False

 

13. The Statement of Cash Flows can be based on (a) cash only or (b) cash plus cash equivalents. 
 
True    False

 

14. The Statement of Cash Flows is not a required financial statement in the same sense as the income statement and balance sheet.  
 
True    False

 

15. In the preparation of the Statement of Cash Flows using the Direct Method, an operating loss would be reported under cash flows from operating activities.  
 
True    False

 

16. Assume cash paid to suppliers for 2012 is $350,000, merchandise inventory increased by $5,000 during the year, and accounts payable decreased by $10,000 during the year. The COGS for 2012 is $335,000. 
 
True    False

 

17. Depreciation expense represents a “flow” of cash during the current period.  
 
True    False

 

18. Depreciation expense is not a source of cash or cash equivalents. 
 
True    False

 

19. A Statement of Cash Flows is designed to help investors, creditors, and others to project a company’s future cash flows. 
 
True    False

 

20. Cash equivalents are “short-term, highly liquid investments” that are both: (a) readily convertible to known amounts of cash and (b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. 
 
True    False

 

21. Generally, only investments with original maturities (to the investor) of less than three months qualify as a cash equivalent. 
 
True    False

 

22. Examples of cash equivalents are treasury bills, money market funds, and commercial paper. 
 
True    False

 

23. Under ASPE, interest received and paid and dividends received must be classified in the operating activities section of the Statement of Cash Flows. 
 
True    False

 

24. Dividends received may be classified as operating or investing activities under IFRS. 
 
True    False

 

25. Depreciation expense in the Statement of Cash Flows is reported under the investing section.  
 
True    False

 

26. A change in the company’s policy on defining cash equivalents should be reported as a cumulative effect adjustment.  
 
True    False

 

27. Cash from customers equals sales plus the increase in accounts receivable for the year.  
 
True    False

 

28. Accrual based net sales plus a decrease in accounts receivable for the year would equal cash from customers. 
 
True    False

 

29. Writing off an uncollectible account against the allowance would increase cash from customers.  
 
True    False

 

30. Cash paid to suppliers is accrual based cost of goods sold plus the increase in inventory plus the increase in accounts payable for the year.  
 
True    False

 

31. Cost of goods sold plus an increase in inventory minus an increase in accounts payable would equal cash paid to suppliers. 
 
True    False

 

32. Under IFRS, interest received may be classified as operating or financing activities.  
 
True    False

 

33. Under IFRS, interest paid may be classified as operating or financing activities. 
 
True    False

 

34. Under IFRS, dividends received may be classified as operating or financing activities.  
 
True    False

 

35. Under IFRS, dividends paid may be classified as operating or financing activities. 
 
True    False

 

36. Sale for cash of a short-term investment at its cost would cause an inflow of cash. 
 
True    False

 

37. Salary expense plus amortization of deferred compensation expense for the year would equal cash paid for salaries.  
 
True    False

 

38. If Harris Company issues both a balance sheet and an income statement with comparative figures from last year, a statement of cash flows should be issued for each period for which an income statement is presented. 
 
True    False

 

39. Cash paid to suppliers plus an increase in inventory minus an increase in accounts payable would equal cost of goods sold.  
 
True    False

 

40. When a Statement of Cash Flows is prepared using the indirect method, a decrease in the balance of a prepaid expense during the reporting period is an “add back” adjustment to net income to convert it to cash from operating activities.  
 
True    False

 

41. A corporation has paid $20,000 in cash dividends each year on its common shares. Although during year 1 the company had a cash shortage, it declared the dividend. However, it was stipulated that the $20,000 cash dividend would not be paid until year 2. This dividend will affect the year 1 Statement of Cash Flows by: 
 

A. increasing the cash from operating activities.
B. increasing the cash from financing activities.
C. decreasing the cash from financing activities.
D. decreasing the cash from operating activities.
E. will not affect the Statement of Cash Flows.

 

42. The main purpose of the Statement of Cash Flows is: 
 

A. determine the change in cash during the period.
B. list the cash inflows and outflows by meaningful cash flow category.
C. disclose the quality of earnings.
D. explain why the balance sheet accounts changed during the year.

 

43. Which of the following is the operating cash flow? 
 

A. rent payments
B. dividend payments
C. payments for the purchase of a building
D. principal payment on a bank loan

 

44. A corporation recorded the following entry:

 

Investment in common shares to be held indefinitely 2,000
Cash 2,000

How would this transaction be shown on a Statement of Cash Flows? 
 

A. Cash outflow for operating activities
B. Cash outflow for investing activities
C. Cash outflow for financing activities
D. Cash inflow for financing activities

 

45. Which method or format for preparing the Statement of Cash Flows reports the major operating cash flows on an individual line-item basis? 
 

A. Only direct method
B. Only indirect method
C. Both direct and indirect
D. Neither direct nor indirect

 

46. Which of the following is a financing cash flow? 
 

A. Purchase of common shares of another company
B. Dividend payments
C. Rental payments
D. Interest received

 

47. How is depreciation expense treated in the Statement of Cash Flows and related disclosures when the statement is prepared using the indirect format? 
 

A. added to net income
B. subtracted from net income
C. placed into the investing section
D. does not appear because it is not a cash flow

 

48. Under IFRS, interest received may be classified as: 
 

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

49. Under IFRS, interest paid may be classified as: 
 

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

50. Under IFRS, dividends received may be classified as: 
 

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

51. Under IFRS, dividends paid may be classified as: 
 

A. Operating activities.
B. Financing Activities.
C. Investing Activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

52. In a Statement of Cash Flows: 
 

A. net cash flow from operating activities is always the same as net income.
B. net cash flow from operating activities must be the same as net increase in cash during the period.
C. net cash flow from operating activities is always greater than net income.
D. net cash flow from operating activities is always less than net income.
E. net cash flow from operating activities may be less than or greater than net income.

 

53. Which of the following would not be shown in one of the three activity sections of the Statement of Cash Flows prepared using the indirect format? 
 

A. Refinancing a bond issue currently due with a new bond issue
B. A decrease in trade accounts receivable over the period
C. Purchase of a subsidiary corporation
D. A decrease in long-term notes payable over the period

 

54. A corporation paid $4,000 cash for rent. This payment should be reflected on the Statement of Cash Flows as a: 
 

A. cash inflow from operating activities.
B. cash outflow from operating activities.
C. cash outflow from investing activities.
D. cash outflow from financing activities.

 

55. A corporation reported the following information in its income statement:

 

Sales revenue (none on credit) $60,000
Cost of goods sold (paid in cash) 40,000
Gross margin on sales 20,000
Depreciation expense (2,000)
Amortization expense (1,000)
Wage expense (paid in cash) (2,500)
Income before taxes 14,500
Income taxes (20%) (paid in cash) (2,900)
Net income $11,600

The corporation should report the following amount on its Statement of Cash Flows for net cash from operating activities: 
 

A. $11,600.
B. $13,600.
C. $14,600.
D. $17,100.

 

56. The following item is found on the income statement of a corporation: Gain from sale of equipment, $5,000. The equipment sold during the year originally cost $20,000, had accumulated depreciation of $16,000 and was sold for cash. The Statement of Cash Flows should show an inflow of cash from investing activities of: 
 

A. $1,000.
B. $4,000.
C. $5,000.
D. $9,000.

 

57. A company started business on January 1, year 1. At the end of year 1, the financial statements showed the following amounts:

 

Sales $180
Cost of goods sold 112
Expenses 40
Accrued wages payable 4
Accounts receivable 18
Accounts payable 8

Income on the accrual basis and net cash inflow from operating activities were:

Income-accrual basis Cash inflow from operating activities
(A) $28 $22
(B) $68 $22
(C) $28 $28
(D) $68 $62


 

A. Choice A.
B. Choice B.
C. Choice C.
D. Choice D.

 

58. Which one of the following statement does not primarily report changes in amounts or accounts? 
 

A. Statement of Cash Flows
B. Balance sheet
C. Income statement
D. Statement of retained earnings

 

59. Which of the following would cause an inflow of cash? 
 

A. Payment of a long-term bond
B. Sale for cash of a short-term investment at its cost
C. Payment of accounts payable
D. Repurchase of common stock for cash
E. Accrual of a dividend

 

60. Which of the following would cause an outflow of cash? 
 

A. Issuance of long-term debt to finance a construction project
B. Collection on an account receivable
C. Cash purchase of a long-term marketable security
D. Sale of a long-term asset for cash

 

61. Which of the following would cause an inflow of cash? 
 

A. Payment of a long-term debt
B. Purchase of inventory for cash
C. Sale of an asset for cash at less than its book value
D. Issuing common stock in payment for legal services already provided

 

62. If a company issues both a balance sheet and an income statement with comparative figures from last year, Statement of Cash Flows: 
 

A. Should be issued for the current year only.
B. Should be issued for each period for which an income statement is presented.
C. is no longer necessary; but may be used at the company’s option.
D. Should not be issued.

 

63. Which of the following causes a net change in cash? 
 

A. Write-off of a bad debt
B. Payment of a long-term debt by issuing common shares
C. Declaration of a cash dividend
D. Declaration and issuance of a stock dividend
E. Payment of a cash dividend declared in a previous period

 

64. What effect does the write-off of an account receivable have on the Statement of Cash Flows? 
 

A. A decrease to operating cash flows under the direct method.
B. A decrease to operating cash flows under the indirect method.
C. A decrease to financing cash flows.
D. There is no effect.

 

65. Which of the following would not be a cash-paid item using the direct method for reporting operating activities? 
 

A. Depreciation expense
B. Cash paid to suppliers
C. Cash paid for income taxes
D. Cash paid for interest

 

66. Under the direct method, cash from customers would be sales plus a(n): 
 

A. Decrease in accounts payable.
B. Increase in accounts payable.
C. Decrease in accounts receivable.
D. Increase in accounts receivable.

 

67. Cash paid for income taxes under the direct method would be income tax expense minus: 
 

A. An increase in income taxes payable.
B. A decrease in income taxes payable.
C. Beginning income taxes payable.
D. Ending income taxes payable.

 

68. When using the direct method for reporting operating activities, which of the following would represent a cash-paid item? 
 

A. Depreciation expense, adjusted for changes in depreciation methods
B. Patent amortization expense, adjusted for changes in estimates
C. Interest expense, adjusted for changes in interest payable and amortization of bond premiums or discounts
D. Loss on sale of plant assets
E. Gain on sale of plant assets

 

69. Under the direct method, cash paid to suppliers can be computed as cost of goods sold for the period: 
 

A. Plus an increase in inventory and minus an increase in accounts payable.
B. Plus a decrease in inventory and minus an increase in accounts payable.
C. Minus an increase in inventory and plus an increase in accounts payable.
D. Minus a decrease in inventory and plus an increase in accounts payable.

 

70. On a reconciliation of net income to cash from operations, depreciation is treated as an adjustment to net income because depreciation: 
 

A. is a direct outflow of cash.
B. reduces net income but does not involve an outflow of cash.
C. reduces net income and involves an outflow of cash.
D. is an outflow of cash to a reserve account for replacement of assets.

 

71. Which of the following is not an inflow of cash? 
 

A. Collection of a short-term receivable
B. Sale of a capital asset for cash
C. Cash borrowed on a short-term note
D. Depreciation expense

 

72. The amortization of bond discount on long-term debt should be presented in a Statement of Cash Flows as a(n): 
 

A. Inflow and outflow of cash.
B. Outflow of cash.
C. Deduction from net income in the adjustments to reconcile net income to cash from operating activities.
D. Addition to net income in the adjustments to reconcile net income to cash from operating activities.

 

73. The amortization of patents should be presented in a Statement of Cash Flows as a(n): 
 

A. inflow and outflow of cash.
B. outflow of cash.
C. addition to net income in the adjustments to reconcile net income to cash from operating activities.
D. deduction from net income in the adjustments to reconcile net income to cash from operating activities.

 

74. Which of the following is not an adjustment to reconcile net income to cash from operating activities? 
 

A. Accrued liability change (increase or decrease)
B. Amortization of premium or discount on bonds payable
C. Cash dividend declared but not yet paid
D. Prepaid expense (increase or decrease)

 

75. Which of the following is a deduction from net income when reconciling to cash flow from operating activities? 
 

A. Amortization of premium on bonds payable
B. Cash dividend declared and paid
C. Collection of an account receivable
D. Bad debt written off (allowance method)

 

76. The gain on the sale of a long-term investment should be disclosed separately in a Statement of Cash Flows of a company with substantial operating profits as a(n): 
 

A. Adjustment to net income in the reconciliation of net income to cash from operating activities.
B. Outflow from operating activities.
C. Outflow from investing activities.
D. Inflow from financing activities.

 

77. A loss on the sale of machinery in the ordinary course of business should be presented in a Statement of Cash Flows as a(n): 
 

A. Adjustment to net income in the reconciliation of net income to cash from operating activities.
B. Inflow from operating activities.
C. Inflow from investing activities.
D. Outflow from investing activities.

 

78. In a Statement of Cash Flows, the amortization of goodwill for a company with substantial operating profits should be presented as a(n): 
 

A. Inflow from operating activities.
B. Inflow from investing activities.
C. Outflow from investing activities.
D. Adjustment to net income in the reconciliation of net income to cash from operating activities.

 

79. When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory over the beginning inventory will result in an adjustment to reported net income because: 
 

A. Cash is increased because inventory is a current asset.
B. Inventory is an expense deducted in computing net earnings, but is not a use of cash.
C. The net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers.
D. All changes in noncash accounts must be disclosed.

 

80. Which of the following independent transactions would cause net income to be more than cash from operating activities? 
 

A. A decrease in the accounts receivable account
B. An increase in the merchandise inventory account
C. An increase in the accounts payable account
D. An increase in the accrued wages account

 

81. Cash flows from investing activities would include all of these except: 
 

A. Proceeds from sale of operating assets.
B. Proceeds from sale of long-term investments.
C. Interest paid on notes receivable.
D. Proceeds from sale of securities available for sale.
E. Collection of principal amounts of loans made to other parties.

 

82. Cash outflows from investing activities would include payments for all of the following except: 
 

A. Purchase of capital assets.
B. Investments in securities available for sale.
C. Repurchase of common stock.
D. Loans to other parties.

 

83. Which one of the following would not be a cash inflow from financing activities for ABC Company? 
 

A. Cash from issuing ABC common stock
B. Cash from issuing ABC preferred stock
C. Cash from issuing ABC bonds payable
D. Cash from sale of XYZ common stock

 

84. Which one of the following would not be a cash outflow from financing activities for ABC Company? 
 

A. Cash paid for dividends on ABC common stock.
B. Cash paid for purchase of XYZ common stock.
C. Cash paid for dividends on ABC preferred stock.
D. Cash paid for interest on ABC bonds payable.

 

85. A Statement of Cash Flows would not report the effects of: 
 

A. Cash dividends paid.
B. A purchase and immediate retirement of common stock.
C. Stock dividends declared and issued.
D. Common shares issued for cash.

 

86. The Statement of Cash Flows does not report the effects of: 
 

A. Common shares purchased for cancellation.
B. Cash dividends paid.
C. Common shares issued for cash to pay for assets or to pay debt.
D. Common shares issued as the result of a stock dividend.

 

87. Which of the following could be a cash equivalent for purposes of reporting in the Statement of Cash Flows? 
 

A. Investment in common shares
B. Cash in a checking account
C. Investment in a treasury bills
D. Investment in redeemable preferred shares

 

88. Choose the operating cash flow for Bikk Inc. 
 

A. Principal payment on a note payable to a supplier for inventory purchased by Bikk for resale by Bikk.
B. Dividend paid to Bikk’s shareholders.
C. Principal payment on a loan from a financial institution; Bikk used the proceeds to purchase inventory for resale.
D. Capitalized interest.

 

89. For which of the following accounts would change during the year and that account would not be found in the reconciliation of net income and net operating cash flow? 
 

A. Dividends payable
B. Interest payable
C. Prepaid rent
D. Wages payable
E. Short-term notes payable to supplier

 

90. The main purpose of the Statement of Cash Flows is: 
 

A. to determine the change in cash for the period.
B. to disclose information about cash receipts and disbursements during the period.
C. to disclose the changes in long-term asset and liability accounts during the period.
D. to disclose significant noncash investing and financing activities during the period.
E. to explain why net income and net operating cash flows are different.

 

91. In preparing the Statement of Cash Flows, which of the following transactions would be considered an investing activity? 
 

A. sale of equipment at book value
B. Sale of merchandise on credit
C. Declaration of cash dividend
D. Issuance of bonds payable at a discount

 

92. Which of the following items involving current trade accounts receivable is most likely to appear in a Statement of Cash Flows? 
 

A. Balance in allowance for uncollectible accounts
B. Write-off of a specific account
C. Sales returns and allowances
D. Collection of an account previously written off
E. Change in net sales

 

93. When preparing the Statement of Cash Flows, which of the following sources of information should be consulted after considering all others? 
 

A. Income statement
B. Comparative balance sheet in general
C. Remaining unexplained balance sheet account changes
D. Retained earnings statement
E. Company records

 

94. Choose the correct statement about preparation of the Statement of Cash Flows: 
 

A. only the indirect method is required; the direct method is optional.
B. a spreadsheet must be used in computerized situations.
C. no particular preparation method is mandated by GAAP.
D. the direct method must be used unless available information does not permit it, in which case the indirect method may be used.

 

95. ABC acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common shares; no market price was quoted). How should this transaction be reported on the Statement of Cash Flows? 
 

A. Reported on the face of the Statement of Cash Flows
B. Report $10,000 as a noncash investing and financing activity on the Statement of Cash Flows
C. Report the $12,000 as an inflow of cash on the Statement of Cash Flows
D. Report the $12,000 as a noncash activity in the notes to the financial statement.

 

96. In the preparation of a Statement of Cash Flows: 
 

A. the statement must include most noncash exchanges.
B. the statement must be prepared using the working capital definition of funds.
C. stock dividends and stock splits must be reported on the statement.
D. the statement must be cumulative over the last two reporting periods.
E. None of these answers are correct.

 

97. An asset (land) was purchased and payment in full was made by issuing the company’s common shares. No cash was paid. Therefore, this transaction should be reported on the Statement of Cash Flows: 
 

A. as an “Adjustment to reconcile net income to operating activities.”
B. should not be reported on the Statement of Cash Flows but details explained in the disclosure notes.
C. as an outflow of cash.
D. as a non-cash exchange.

 

98. In preparing a Statement of Cash Flows, you encountered the following transaction of February 1, 2013: acquired a small office building in exchange for 5,000 of our common shares; market value $15 per share. How should this transaction be reported on the Statement of Cash Flows? 
 

A. Report as a concurrent inflow and outflow of cash on the Statement of Cash Flows.
B. Report as a noncash investing and financing activity.
C. Not reported on the Statement of Cash Flows because it did not affect cash, but details explained in the disclosure notes.
D. Report on a Statement of Cash Flows as an investing activity.

 

99. The purchase of debt securities to be held to maturity would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

100. The change in short-term payables to suppliers would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

101. XYZ has the following assets:

 

Assets Amount
Treasury bills (Acquired with less than 3 month maturity dates) $80,000
Treasury bills (Acquired with greater than 12 month maturity dates 20,000
Commercial paper 40,000
Investment in marketable equity securities 100,000

What would be the total cash equivalents at year-end for XYZ? 
 

A. $80,000
B. $100,000
C. $120,000
D. $140,000
E. $220,000

 

102. The following four events affecting property, plant and equipment, and intangible assets, occurred during the current year for a firm:

(i.) Purchased equipment for $50,000.
(ii.) Successfully defended a patent infringement suit costing the firm $60,000 in legal fees this year; as a result, the firm has sole rights to the patent.
(iii.) Capitalized and paid $30,000 of interest on a building under construction which is to house the firm’s new offices.
(iv.) Received $100,000 in casualty insurance proceeds as a result of fire damage to one of the firm’s factories.

What is the net effect on investing cash flow of the above transactions for the current year? 
 

A. $10,000 increase
B. $110,000 decrease
C. $140,000 decrease
D. $40,000 decrease

 

103. RJB reported sales of $200,000 and an increase in accounts receivable of $30,000 during 2001. Under the direct method, what would be RJB’s cash collected from customers during 2001? 
 

A. $170,000
B. $200,000
C. $230,000
D. Cannot be determined from information given.

 

104. A firm’s accumulated depreciation account increased $30,000 for the year, and total plant assets at cost increased $200,000. During the year, the firm purchased $350,000 of new equipment for cash, and sold equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale. What is the complete disclosure of these events in the indirect method Statement of Cash Flows? 
 

A. $350,000 investing cash outflow; $50,000 investing cash inflow; $70,000 addition reconciling adjustment
B. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment
C. $300,000 investing cash outflow; $130,000 addition reconciling adjustment
D. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment; $70,000 addition reconciling adjustment

 

105. A firm’s dividends payable account increased $10,000 during the year. The firm also declared $35,000 of dividends. What is the complete disclosure in the direct method Statement of Cash Flows for these events? 
 

A. $25,000 financing cash outflow; $10,000 addition reconciling adjustment
B. $45,000 financing cash outflow
C. $25,000 financing cash outflow
D. $35,000 financing cash outflow
E. $25,000 financing cash outflow; $10,000 subtraction reconciling adjustment

 

106. The sale of $3,000 worth of cash equivalents at cost has what effect on the direct method Statement of Cash Flows. 
 

A. add $3,000 in the reconciliation
B. no disclosure
C. $3,000 operating cash inflow
D. $3,000 investing cash inflow
E. $3,000 investing cash outflow

 

107. The sale of $3,000 worth of cash equivalents costing $2,500 has what effect on the indirect method Statement of Cash Flows. 
 

A. $500 operating cash inflow
B. no disclosure
C. $500 operating cash outflow
D. $500 subtraction reconciling adjustment
E. $500 operating cash inflow; $500 subtraction reconciling adjustment

 

108. SDB reported sales of $300,000, write-offs of uncollectible accounts of $10,000 against the allowance, and a decrease in net accounts receivable of $40,000 during 2013. What would be SDB’s cash collected from customers during 2013? 
 

A. $300,000
B. $330,000
C. $340,000
D. $350,000

 

109. If cash collected from customers for 2013 is $780,000 and accounts receivable increased by $20,000 during the year, what were sales for 2013? 
 

A. $600,000
B. $780,000
C. $800,000
D. Cannot be determined from information given.

 

110. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000 during the year and accounts payable decreased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

111. ARI Inc. began 2013 with the following:

 

Accounts receivable $10,000
Allowance for doubtful accounts (800)
Net accounts receivable $9,200

During 2013 the following events occurred:

Accounts written off $1,200
Sales on accounts 30,000
Bad debt expense recognized 2,000

At the end of 2013, ARI showed a balance in gross accounts receivable (before the allowance for doubtful accounts) of $16,800. In the direct method Statement of Cash Flows, what amount would be shown as an operating cash inflow? 
 

A. $21,000
B. $22,000
C. $30,000
D. $28,200

 

112. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000 and trade accounts payable increased by $12,000. The cash paid to suppliers was: 
 

A. $148,000.
B. $98,000.
C. $160,000.
D. $172,000.
E. $102,000.

 

113. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000 during the year, and accounts payable decreased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

114. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000 during the year, and accounts payable increased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

115. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000 during the year, and accounts payable increased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

116. MDB reported sales of $800,000, bad debt expense (allowance method) of $30,000, and an increase in net accounts receivable of $120,000 during 2013. What is MDB’s cash collected from customers for 2013 if MDB did not record any write-offs during the period? 
 

A. $650,000
B. $680,000
C. $710,000
D. $800,000

 

117. Assume cash paid to suppliers for 2011 is $350,000; merchandise inventory increased by $5,000 during the year, and accounts payable decreased by $10,000 during the year. What was cost of goods sold for 2011? 
 

A. $335,000
B. $345,000
C. $355,000
D. $365,000

 

118. Assume cash paid to suppliers for 2011 is $420,000; that merchandise inventory increased by $20,000 during the year, and that cost of goods sold was $415,000 for 2011. During 2011, accounts payable must have: 
 

A. increased by $5,000.
B. decreased by $5,000.
C. increased by $15,000.
D. decreased by $15,000.

 

119. A firm purchased $20,000 worth of investments classified as securities available for sale. At the end of the year, the investments were worth $23,000. What is the correct disclosure of these events in the direct method Statement of Cash Flows? 
 

A. Investing cash outflow, $20,000
B. Add $17,000 in reconciliation of earnings and net operating cash flow
C. Investing cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow
D. No disclosure is needed

 

120. The income statement for CBA reported a net loss of $14,000. Also, the statement reported depreciation expense of $12,000 and amortization of patents of $6,000. Assuming no additional “adjustments to reconcile net income to cash from operating activities,” the cash flow from operations would be a: 
 

A. $4,000 inflow.
B. $6,000 inflow.
C. $16,000 inflow.
D. $30,000 inflow.
E. ($4,000) outflow.

 

121. The following information was provided by the records of QRS for the current reporting year:

 

Cost of goods sold (as reported on the income statement) $80,000
Inventory increase 20,000
Accounts payable increase 3,000

The cash paid to suppliers was: 
 

A. $63,000.
B. $77,000.
C. $80,000.
D. $97,000.

 

122. The sale of $3,000 worth of cash equivalents at cost has what effect on the indirect method Statement of Cash Flows. 
 

A. Add $3,000 in the reconciliation
B. No disclosure
C. $3,000 Operating cash inflow
D. $3,000 investing cash inflow
E. $3,000 investing cash outflow

 

123. The net income for a corporation for the current accounting period was $275,000. Changes in various accounts during the period follow:

 

Cash $12,500 increase
Investments in securities available for sale 40,000 decrease
Accounts receivable 19,000 increase
Inventories 8,000 increase
Short-term prepayments 3,000 decrease
Accounts payable 11,500 increase
Accrued liabilities 2,200 decrease
Notes payable to banks (due in nine months) 50,000 increase

The cash provided by operations for the current period is: 
 

A. $275,000.
B. $260,300.
C. $350,300.
D. $309,550.
E. $278,340.

 

124. The following was provided by the records of RST for the current reporting year:

 

Net loss (as reported on the income statement) $40,000
Decrease in inventory 18,000
Increase in accounts receivable 3,000
Depreciation expense 27,000
Increase in accounts payable 9,000
Cash dividend declared and paid 2,000
Decrease in income tax payable 4,000

The cash flow from operating activities was: 
 

A. $40,000 outflow.
B. $7,000 inflow.
C. $5,000 inflow.
D. $4,000 inflow.

 

125. WXY reported sales revenue of $40,000 and expenses of $35,000 during the period ended December 31, 2011. During the year, accounts receivable increased by $1,500; merchandise inventory increased by $1,000; accounts payable increased by $500; dividends payable decreased by $700; and depreciation expense of $2,500 was recorded. What was the amount of net cash flow from operating activities? 
 

A. $4,800
B. $2,500
C. $4,500
D. $5,500
E. $6,000

 

126. ABC reported sales revenue of $100,000 and expenses of $106,000 for the period ended December 31, 2011; accounts receivable decreased by $500; accounts payable increased by $2,500; accrued wages payable decreased by $1,500; short-term loans to banks increased by $600; and depreciation expense of $4,000 was recorded. What was the amount of net cash flow from operating activities for 2011? 
 

A. $500 inflow
B. $1,000 inflow
C. $100 Inflow
D. $500 outflow
E. $1,000 outflow

 

127. MNO reported net income of $42,000 for the reporting period ended December 3, 2011. MNO’s records provided the following information:

 

Decrease in accounts payable $5,000
Depreciation expense $6,000
Amortization of premium on bonds payable $500
Declared a cash dividend $2,000
Increase in inventory $3,000
Decrease in accounts receivable $8,000
Increase in income tax payable $1,000
Decrease in long-term debt principal $10,000

The net cash flow from operating activities was: 
 

A. $36,500.
B. $38,500.
C. $46,500.
D. $49,500.

 

128. The following information was provided by the records of RST for the annual reporting period ended December 31, 2011:

 

Cost of goods sold (as reported on the income statement) $170
Depreciation expense $10
Merchandise inventory increase $2
Goodwill amortized $4
Accounts payable decrease $18

The cash paid to suppliers was: 
 

A. $172.
B. $188.
C. $190.
D. $200.

 

129. The records of WXY provided the following information for the year ended December 31, 2011:

(1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
(2) Inventory increased by $4,000.
(3) Accounts payable decreased by $6,000.
(4) Declared a cash dividend, $5,000.
(5) Depreciation expense, $2,000.
(6) Net income, $19,000.
(7) Loss on sale of machine, $3,000.
(8) On December 31, 2011, paid insurance premium on all assets, for 2012 and 2013, $800. There was no prepaid insurance on January 1, 2011.

What was the net cash inflow from operating activities for 2011? 
 

A. $7,200
B. $13,200
C. $16,200
D. $21,200

 

130. During 2016, ABC Inc. Accounts Receivable balance decreased by $20,000. The company also accrued bad debt expense in the amount of $5,000 on credit sales of $500,000. $2,000 of accounts receivable were written off during the period. The company’s cash collections from sales during 2016 was (assuming that the accrual-basis sales converted to cash basis): 
 

A. $480,000.
B. $520,000.
C. $518,000.
D. $515,000.
E. $525,000.

 

131. During 2016, ABC Inc. Accounts Payable balance decreased by $20,000. The company purchased $100,000 of inventory on account. The company made another inventory purchases of $100,000 (on account) during the year, $10,000 of which was returned to its suppliers for credit. The company’s cash payments to its inventory suppliers during 2016 was: 
 

A. $90,000.
B. $120,000.
C. $210,000.
D. $110,000.
E. $80,000.

 

132. Choose the combination that best reflects the appropriate classification of cash paid for operating, investing, and financing activities.

 

Cash paid for:
Operating Investing Financing
A) Cash to suppliers Interest Dividends
B) Interest Cash to suppliers Income taxes
C) Income taxes Investment securities Dividends
D) Dividends Income taxes Cash to suppliers


 

A. Choice A
B. Choice B
C. Choice C
D. Choice D

 

133. The purchase of securities available for sale but not considered cash equivalents would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

134. As per ASPE, Dividends received from trading securities would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

135. RJB made inventory purchases amounting to $200,000 during 2014. During the year, its accounts payable (all of which arose from inventory purchases) increased by $20,000. The company had sales of $1,000,000 and is subject to a gross profit percentage of 90%. How much cash did RJB pay to its inventory suppliers during 2014? 
 

A. $120,000
B. $180,000
C. $320,000
D. $220,000

 

136. VJC received the following cash inflows during 2012:

 

Dividends received $10,000
Sale of capital assets 50,000
Proceeds of issuing VJC common shares 60,000
Collection of non-operating notes receivable 15,000
Proceeds from mortgaging a building

What would be VJC’s cash inflow from investing and financing activities, respectively, for 2011 under IFRS?
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

 

137. KWB made the following cash outflows during 2011:

 

Cash for dividend payment on KWB common shares $5,000
Cash for capital assets 50,000
Cash for interest 3,000
Cash for purchase of JCK common stock 40,000

What would be KWB’s cash outflows for investing and financing activities for 2011 under IFRS?
Note: Under IFRS, dividends and interest paid may also be classified as operating cash flows. 
 

 

138. EAE made the following cash outflows during 2012:

 

Cash for EAE common stock dividends $14
Cash for capital assets 100
Cash to retire EAE’s bond principal 60
Cash to purchase common stock 30
Cash to pay interest on EAE’s bonds 8

What would be EAE’s cash outflow for financing activities for 2012 (000s)?
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

 

139. BWL paid the following cash outflows during 2012:

 

Cash for BWL common stock dividends $20,000
Cash for capital assets 100,000
Cash for common stock 30,000
Cash for interest 5,000
Cash for investment in securities available for sale 80,000

What would be BWL’s cash outflow for investing and financing activities, respectively, for 2012 under IFRS?
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

 

140. MNO’s books for the period ended December 31, 2012, contained the following data:

 

Net income (net of $15,000 depreciation expense) $20,000
Issued common shares for cash 3,500
Sold capital asset for cash at book values, $3,000; gain 0
Sold long-term investment (cost of $5,000) for $6,000 cash; gain. (Cost method was used) 1,000
Paid a cash dividend (declared earlier) 2,000
Paid long-term debt with cash (principal only) 5,000
Purchased an investment in securities available for sale 4,500

Under IFRS, the net inflow (outflow) in cash from investing and financing activities (respectively) during 2012 was:
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

 

141. MJC received the following cash inflows during 2012:

 

Cash from customers $600
Sales of investments in securities available for sale 100
Sale of common stock 70
Proceeds from bonds payable 400
Sale of patents 20
Interest received 4

What would be cash inflow from operating, investing, and financing activities, respectively, for 2012?
Note: Under IFRS, interest received may also be an investing activity. 
 

 

142. KEC paid the following cash outflows during 2012:

 

Cash for dividends $12,000
Cash loaned to KEC president 20,000
Cash for interest 4,000
Cash for income taxes 25,000
Cash to purchase KEC common stock 40,000
Cash to purchase ABC common stock 43,000

What would be cash outflow for operating, investing, and financing activities, respectively, for 2012?
Note: Under IFRS, interest received may also be an investing activity. 
 

 

143. ABC had the following balances on its Statement of Financial Position for Year 1:

Accounts Receivable, Jan 1, Year 1: $500
Accounts Receivable, Dec 31, Year 1: $400
Allowance for Doubtful Accounts, Jan 1, Year 1: $50cr
Allowance for Doubtful Accounts, Dec 31st, Year 1: $140cr
All sales during Year 1 were made on credit, in the amount of $1,000. Bad debt expense for the year was $100.
What were ABC’s cash collections for Year1? 
 

 

144. VJW received the following cash inflows during 2012:

 

Cash dividends received $20,000
Sale of preferred stock 30,000
Proceeds from issuing bonds payable 100,000
Proceeds from sale of securities available for sale 40,000

What would be cash inflow from financing activities for 2012? 
 

 

145. The records of CDE provided the following information for the period ended December 31, 2012:

 

Merchandise inventory increase $20
Accounts payable increase 30
Decrease in securities available for sale 15
Interest payable decrease 7
Accounts receivable decrease 10
Wages payable increase 4
Depreciation expense 13
Income (as reported on the income statement) 47

Compute CDE’s cash flow from Operating activities for 2012. 
 

 

146. RLN received the following cash inflows during 2012.

 

Cash from customers $200,000
Sale of capital assets 50,000
Interest on loan receivable 10,000
Proceeds from sale of investments 40,000

What would be cash inflow from investing activities for 2012? 
 

 

147. Given the following data, answer the questions that follow.

Income Statement
For the Year Ended 12/31/Year 2

 

Net Sales $1,500,000
Cost of goods sold (800,000)
Cash operating expenses (400,000)
Depreciation and amortization expense (100,000)
Gain on sale of equipment 60,000
Net income $260,000

Additional Information:

1. Increase in accounts receivable during Year 2 $40,000
2. Decrease in inventory during Year 2 30,000
3. Increase in accounts payable 44,000
4. Sale of old equipment for cash 130,000
5. Dividends declared – $90,000; Dividends paid 80,000
6. New building acquired by issuing common shares 84,000
7. Sold bonds for cash – proceeds of 150,000

1) What was cash from customers during year 2?
2) What was cash paid to suppliers during year 2?
3) What was net cash inflow from operating activities during year 2?
4) What was net cash inflow (outflow) from investing activities during year 2?
5) What was net cash inflow (outflow) from financing activities during year 2? 
 

 

148. For each transaction, enter a check mark to indicate its effect on cash flow. If there is no effect, do not mark either blank.

 

Cash Transaction
Inflow Outflow
(a) Purchased common stock, paid cash ____ ____
(b) Amortization of goodwill ____ ____
(c) Sale of a capital asset at a loss; collected no cash; received a 1-year note receivable ____ ____
(d) Purchased a patent; paid cash ____ ____
(e) Purchased land; gave a 5-year note (paid no cash) ____ ____
(f) Paid a short-term note receivable ____ ____
(g) Paid a long-term note receivable ____ ____
(h) Collected a short-term note payable ____ ____
(i) Collected a long-term note payable ____ ____
(j) Traded three used trucks for one new truck (fixed asset) ____ ____
(k) Sustained a $5,000 fire loss to the plant, will collect this amount of insurance proceeds during coming year. ____ ____
(l) Declared a cash dividend in 19×1; payable in 19×2 ____ ____
(m) Issued a 2 for 1 stock split ____ ____
(n) Issued bonds for land ____ ____
(o) Paid a cash dividend that was declared in prior year ____ ____
(p) Redemption of bonds payable from bond sinking fund ____ ____


 

 

149. Place a check mark in the appropriate column(s) with respect to each item listed below which indicates where the item would be reported on the Statement of Cash Flows.

 

Investing Financing Operating Noncash None
Item

(a) Made periodic transfer of cash to bond sinking fund.
(b) Collected accounts receivable from trade customers.
(c) Paid for extraordinary repairs and debited accum. Depreciation.
(d) Sold securities carried as short-term investment at book value.
(e) Declared cash dividend on common stock to be paid in first month of the next fiscal year.
(f) Increased allowance for doubtful accounts at the end of the fiscal period.
(g) Purchased new equip. by issuing a note due in six months.
(h) Sold unissued common stock at par. Used the cash for working capital purposes.
(i) Bonds covered by a sinking fund matured. The fund was used to pay them in full.
(j) Building acquired; paid no cash but issued a long-term mortgage note payable. 
 

 

150. Given the following data:
 
 Income Statement
For the Year Ended DeC. 31, 2011
 
  

Net sales $750,000
Cost of goods sold (400,000)
Cash operating expenses (200,000)
Depreciation and amortization expense (50,000)
Gain on sale of equipment 30,000
Net income $130,000


 
 
 Additional information:
 
 1. Increase in accounts receivable during 2011 – $25,000
 2. Decrease in inventory during 2011 – $13,000
 3. Decrease in accounts payable during 2001 – $28,000
 4. Sale of old equipment for cash – $65,000
 5. Dividends declared – $45,000; dividends paid – $40,000
 6. New building acquired by issuing common shares – $42,000
 7. Sold bonds for cash – proceeds of $75,000
 
 What was net cash inflow (outflow) from operating activities during 2011?  
 

 

151. JCB, Inc. has completed the Dec. 31, 2012 income statement, balance sheet, and retained earnings statement. The spreadsheet for the Statement of Cash Flows (direct method) has been started below. Complete the spreadsheet.

 

2011 Debit Credit 2012
Sales 800
Cost of goods sold 500
Salary expense 100
Depreciation expense 80
Gain on sale of operation asset 20
Net Income 140
Cash 200 490
Accounts Receivable 300 350
Inventory 400 360
Capital Asset 900 780
Acc. Depreciation – O.A. (100) (110)
Total Assets $1,700 $1,870
Accounts Payable 300 270
Salary Payable 100 120
L-T Notes payable 600 550
C/S – $10 Par 400 500
Contr. Cap. – Excess over Par 100 150
Retained Earnings 200 280
Total Liabilities and Owner Equity $1,700 $1,870

Additional data:

1. Purchased capital asset for $80 cash.
2. Sold capital asset for $150 cash (cost- $200; Acc. Depr.- $70).
3. Issued 10 common shares (MV – $15/share) to retire L-T notes payable.
4. Issued L-T notes payable for $100 cash.
5. Declared and paid cash dividends of $60.

Operating Activities:
Investing Activities:

Financing Activities:
Noncash Exchanges:
Incr. (Decr) in cash 
 

 

152. Reported net income for ABC for 2013 was $20,000. Additional information is as follows:

 

(a) Expenditures for capital assets $6,000
(b) Depreciation of capital assets 2,000
(c) Cash dividends declared and paid on common shares 900
(d) Net increase in accounts payable 400
(e) Net decrease in inventory 200
(f) Amortization of goodwill 70
(g) Decrease in accrued wages payable 30
(h) Loss on sale of capital asset (book value $2,500) 500
(i) Increase in accounts receivable 3,000
(j) Increase in prepaid insurance 130

The Statement of Cash Flows, indirect method, would report cash flow from operations of
$_______________________. 
 

 

153. Complete the following Statement of Cash Flows schedule to determine cash inflow (outflow) from operations:
 
 Statement of Cash Flows
 Operating Activities:
 Net income………………….$100,000
 Adjustments to convert net income to cash from
 operating activities:
 
 (a) Inventory increase, $3,000
 (b) Accounts payable decrease, $7,000
 (c) Depreciation expense, $12,000
 (d) Gain on sale of land, $4,000
 (e) Accounts receivable decrease, $5,000
 (f) Amortization of discount on bonds payable, $1,000
 (g) Loss on sale of investments in SAS, $2,000
 (h) Correction of prior years’ errors, loss, $11,000
 Cash inflow (outflow) from operating activities…  
 

 

154. A corporation is preparing a Statement of Cash Flows. Complete the following part of it in the spaces provided (be sure to indicate + or -):

 

Operating Activities Amount
Net income (accrual), $45,000 $ ____
Adjustments to convert net income to cash from operating activities:
Depreciation Expense, $6,000 ____
Decrease in Accounts Receivable balance, $2,000 ____
Decrease in Accrued wages payable balance, $1,000 ____
Amortization of patent, $500 ____
Increase in Inventory balance, $4,000 ____
Decrease in Accounts Payable balance, $1,500 ____
Net cash inflow (outflow) from operations $ ____


 

 

155. Complete the following Statement of Cash Flows, indirect method, schedule to determine cash inflow (outflow) from operating activities:
Statement of Cash Flows, Indirect Method
Operating Activities:

Net income = $150,000

Adjustments to convert net income to cash from operating activities:

 

Depreciation expense, $12,000 ____
Gain on sale of capital assets, $7,000 ____
Loss on sale of long-term investments, $4,000 ____
Amortization of discount on bonds payable, $3,000 ____
Increase in Inventory, $6,000 ____
Gain on retirement of long-term debt, $8,000 ____
Decrease in Accounts Receivable, $5,000 ____
Correction of prior years’ errors, loss $11,000 ____
Cash inflow (outflow) from operating activities $ ____


 

 

156. You are preparing a Statement of Cash Flows. Complete the following schedule to compute cash flow from operating activities:
Statement of Cash Flows

 

Net Income (accrual basis), $50,000 $ ____
Adjustments to reconcile net income to cash from operating activities:
(a) Depreciation expense, $8,000 ____
(b) Inventory increase, $5,000 ____
(c) Wages payable decrease, $6,000 ____
(d) Accounts receivable decrease, $10,000 ____
(e) Accounts payable increase, $7,000 ____
(f) Cash dividends declared and paid, $4,000 ____
(g) Increase in income tax payable, $3,000 ____
(h) Gain on sale of capital assets, $1,000; book value, $7,500 ____
(i) Payment on long-term note, $20,000 ____
Cash flow from operating activities $ ____


 

 

157. ABC Company has just completed the December 31, 2001, financial statements except for the Statement of Cash Flows. Information on changes in accounts appears in tabular format below. Additional information for 2001:

a. Net income, $16,000.
b. Depreciation expense, $5,000.
c. Cash dividend declared and paid, $4,000.
d. Declared and issued a $10,000 stock dividend, recorded at par.
e. December 30, 2001, purchased a machine (a capital asset) for $10,000; paid half cash and issued a one year, 18%, interest-bearing note of $5,000 for the balance.
f. Sold 20 shares of unissued shares at $26 per share, collected cash in full.
g. Repurchased 10 shares of their ABC shares at $25 per share (assume the single-transaction method is used for common stock), paid cash in full.
h. Purchased a tract of land and paid for it in full by exchanging for it all of the investment in X Corporation shares. The shares were quoted on the market at $12,000 (any gain or loss is included in income as an “ordinary” item).
i. Sold an idle plant for $6,000 cash.
j. Extraordinary gain of $2,000 (net of income tax) due to an earthquake (infrequent and unusual), which caused the loss of capital assets that originally cost $12,000 when they were two-thirds, depreciated; received $6,000 cash settlement from the insurance company.

 

Debits Balance Balance
12-31-2000 Debit Credit 12-31-2001
Cash $31,000 $58,770
Accounts receivable (net) 14,000 12,000
Inventory 40,000 43,000
LT investment, stock of X Corp. (at cost) 12,000 0
Capital assets (cost) 70,000 68,000
Idle plant (at cost) 85,000 0
Land 12,000
Common stock (at cost) 250
Total $252,000 $194,020


 

 

158. Data for XOC for 2013 were as follows:

(a) On December 31, 2013, sold a capital asset with a carrying value of $5,000 for $2,000 cash.
(b) Depreciation expense for 2001, $4,000.
(c) Sold 500 common shares at $10 cash per share.
(d) Paid $1,000 on a long-term note payable.
(e) Sold a long term investment costing $400 for $500 cash.
(f) Inventory increased $2,500.
(g) Amortized $30 of patent costs.
(h) Net income, $23,000.

Required:

1. What was net cash inflow (outflow) from investing activities for 2013? Show computations.
2. What was net cash inflow (outflow) from financing activities for 2013? Show computations. 
 

 

159. The following income statement and additional information for MDB, Inc. is relevant to the statement of changes in financial position.

 

Income Statement Additional Information
Sales $500,000 Increase in Acct/Rec $10,000
Cost of goods sold (300,000) Increase in Inventory $5,000
Operating expenses (140,000) Decrease in Acct/Pay $8,000
Net income 60,000 Increase in Accrued Oper. Exps $6,000

Required:

1. Prepare a schedule showing cash from operations (direct method).
2. Prepare a schedule showing cash from operations (indirect method). 
 

 

160. The following data is provided:
 
 Income Statement
For the Year Ended Dec. 31, 2011
 
  

Net sales $375,000
Cost of goods sold (200,000)
Cash operating expenses (100,000)
Depreciation and amortization expense (25,000)
Gain on sale of equipment 15,000
Net income $65,000


 
 
 Additional information:
  

1. Increase in accounts receivable during2011 $10,000
2. Decrease in inventory during 2011 $7,500
3. Increase in accounts payable during 2011 $11,000
4. Sale of old equipment for cash $32,500
5. Dividends declared – $22,500; dividends paid $20,000
6. New building acquired by issuing common shares $21,000
7. Sold bonds for cash – proceeds of $37,500


 
 
 Required:
 
 Prepare a Statement of Cash Flows, direct method. Include a reconciliation of earnings and net operating cash flow.  
 

 

161. A firm reported the following in its 2011 financial statements:

 

Balance sheet Dec. 31/2010 Dec. 31.2011
Unearned rent $10,000 $17,000

Income statement

Rent revenue = $92,000

(a) Describe the required disclosure implied by the above information for the indirect method Statement of Cash Flows for 2001, including the reconciliation of net income and net operating cash flow.
(b) Explain as completely as possible the reasoning for your response in (a).
(c) Describe the required disclosure implied by the above information for the direct method Statement of Cash Flows for 2011, omitting any reference to the reconciliation of net income and net operating cash flow.  
 

 

162. The adjusted trial balances for a firm, at December 31, 2011 and 2010 are as follows:
Additional information:
No plant assets were sold in 2011. The firm allocates depreciation expense to other operating expense accounts.

 

December 31
2011 2010
Debits:
Cash $35,000 $32,000
Accounts receivable 33,000 30,000
Inventory 31,000 47,000
Property, plant and equipment 100,000 95,000
Unamortized bond discount 4,500 5,000
Cost of goods sold 250,000 380,000
Selling expenses 141,500 172,000
General and administrative expense 137,000 151,300
Interest expense 4,300 2,600
Income tax expense 20,400 61,200
$756,700 $976,100
Credits:
Allowance for doubtful accounts $1,300 $1,100
Accumulated depreciation 16,500 15,000
Trade accounts payable 25,000 17,500
Income taxes payable 21,000 27,100
Future income tax liability 5,300 4,600
8% callable bonds payable 45,000 20,000
Common shares 50,000 40,000
Other contributed capital 9,100 7,500
Retained earnings 44,700 64,600
Sales 538,800 778,700
$756,700 $976,100

Required:

Determine the firm’s 2011 net cash flow from operating activities using the indirect method. 
 

 

163. A firm’s recent comparative balance sheets and income statements follow:

 

Balance sheets, December 31 2011 2010
Assets:
Cash $29,500 $30,000
Accounts receivable 17,000 12,000
Capital assets 138,500 123,500
Accumulated depreciation (89,000) (83,500)
Total assets $96,000 $82,000
Liabilities and shareholders’ equity
Bonds payable $24,500 $23,000
Dividends payable 4,000 2,500
Common shares 11,000 9,500
Additional paid-in capital 4,500 1,500
Retained earnings 52,000 45,500
Total liabilities and stockholders’ equity $96,000 $82,000

Income statement for year ended December 31, 2011

Sales revenue $77,500
Cost of goods sold (53,500)
Gross margin 24,000
Depreciation expense (16,500)
Gain on sale of equipment 6,500
Net income $14,000

Additional information:

1. During 2011, equipment costing $20,000 was sold for cash.
2. During 2011, $10,000 of bonds payable were issued in exchange for capital assets. There was no amortization of bond discount or premium.

Required:

Prepare the 2011 Statement of Cash Flows using the indirect method. 
 

 

164. Two formats of presenting the Statement of Cash Flows are allowed under ASPE and IFRS. Describe the two formats and provide your own opinion on which results in a more complete picture of a firm’s cash flows. 
 

 

165. The records of BCD provided the following information for the year ended December 31, 2011:
 
 (1)
 
  

Balance sheet: 2011 2010
Cash $18,000 $20,000
Accounts receivable (net) 26,000 22,000
Inventory 30,000 27,000
Capital assets (net) 75,000 76,000
Payable (short term) 41,000 40,000
Bonds payable 60,000 60,000
Common stock 30,000 30,000
Retained earnings 18,000 ?


 
 
 (2) Cash dividends of $5,000 were declared in 2010 and paid in 2011, and cash dividends of $2,000 were declared and paid in 2011.
 (3) Net loss in 2011, $1,000.
 (4) Depreciation expense for 2011, $5,000.
 
 Calculate the amount of net cash from operating activities during 2011.  
 

 

166. KWB made the following cash outflows during 2011:

 

Cash for dividends on KWB common shares $5,000
Cash for capital assets 50,000
Cash for interest 3,000
Cash loaned to president of KWB 10,000
Cash for purchase of JCK common stock 40,000

Calculate KWB’s cash outflow for investing activities for 2011. 
 

 

167. VJW received the following cash inflows during 2013:

 

Cash dividends received $20,000
Sale of preferred stock 30,000
Proceeds from issuing bonds payable 100,000
Proceeds from sale of securities available for sale 40,000

Calculate cash inflow from financing activities for 2013. 
 

 

168. The records of CDE provided the following information for the period ended December 31, 2011:

 

Merchandise inventory increase $20
Accounts payable increase 30
Decrease in securities available for sale 15
Interest payable decrease 7
Accounts receivable decrease 10
Wages payable increase 4
Depreciation expense 13
Income (as reported on the income statement) 47

Calculate net cash inflow from operating activities for 2011. 
 

 

169. The records of WXY provided the following information for the year ended December 31, 2011:
 
 (1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
 (2) Inventory increased by $4,000.
 (3) Accounts payable decreased by $6,000.
 (4) Declared a cash dividend, $5,000.
 (5) Depreciation expense, $2,000.
 (6) Net income, $19,000.
 (7) Loss on sale of machine, $3,000.
 (8) On December 31, 2001, paid insurance premium on all assets, for 2002 and 2003, $800. There was no prepaid insurance on January 1, 2011.
 
 Calculate the net cash inflow from operating activities for 2011.  
 

 

170. RJB reported sales of $200,000 and an increase in accounts receivable of $30,000 during 2011. Under the direct method, calculate what would be RJB’s cash collected from customers during 2011? 
 

 

171. A firm’s accumulated depreciation account increased $30,000 for the year, and total plant assets at cost increased $200,000. During the year, the firm purchased $350,000 of new equipment for cash, and sold equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale.
Present the complete disclosure of these events in an indirect format Statement of Cash Flows. 
 

 

172. A firm’s dividends payable account increased $10,000 during the year. The firm also declared $35,000 of dividends.
Present the complete disclosure of these events in the direct format Statement of Cash Flows. 
 

 

173. SDB reported sales of $300,000, write-offs of uncollectible accounts of $10,000 against the allowance, and a decrease in net accounts receivable of $40,000 during 2011.
Calculate what would be SDB’s cash collected from customers during 2011. 
 

 

174. If cash collected from customers for 2011 is $780,000 and accounts receivable increased by $20,000 during the year, calculate the amount of sales for 2011. 
 

 

175. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000, and trade accounts payable increased by $12,000.
Calculate the amount of cash paid to suppliers. 
 

 

176. Assume cash paid to suppliers for 2011 is $420,000, that merchandise inventory increased by $20,000 during the year, and that cost of goods sold was $415,000 for 2011.
Calculate the net change in accounts payable during 2011. 
 

 

177. WXY reported sales revenue of $40,000, and expenses of $35,000 during the period ended December 31, 2011. During the year, accounts receivable increased by $1,500; merchandise inventory increased by $1,000; accounts payable increased by $500; dividends payable decreased by $700; and depreciation expense of $2,500 was recorded.
Calculate the amount of net cash flow from operating activities. 
 

 

178. Complete the cash column based on the following data for the Statement of Cash Flows:

 

Cash Inflow
(Outflow)
Revenues (accrual) $188
Increases in accounts receivable 6 $ ____
Expenses (accrual) $116
Depletion expense 12
Inventory increase 8
Accounts payable increase 14 $ ____
Net cash inflow (outflow) $ ____


 

 

179. A corporation started operations on January 1; the reporting period ends December 31. At the end of the year, the company’s records reflected the following amounts after all adjusting entries: Sales revenue, $700,000; Cost of goods sold, $400,000; Expenses (total), $200,000; Accrued wages payable, $5,000; Accounts payable, $10,000 and Accounts receivable, $25,000.

(a) Net income, accrual basis, was $____________________.
(b) Net cash inflow from operating activities was $____________. 
 

 

c5 Key

1. A Statement of Cash Flows using the direct method and one using the indirect method will each produce the same amount of net cash flow from operating activities. 
 
TRUE

 

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Beechy – Chapter 05 #1
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
2. Only the indirect method of preparing the Statement of Cash Flows reports the reconciliation of net income and net operating cash flow. 
 
TRUE

 

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Beechy – Chapter 05 #2
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-14 Direct or Indirect?
3. All investments meeting the definition of cash equivalent must be so classified.  
 
FALSE

 

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Beechy – Chapter 05 #3
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
4. Under IFRS, term preferred shares near their maturity date may be classified as cash equivalents for purposes of the Statement of Cash Flows. 
 
TRUE

 

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Beechy – Chapter 05 #4
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
5. Under ASPE, dividends paid must be classified as a financing activity. 
 
TRUE

 

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Beechy – Chapter 05 #5
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-36 Dividends Paid
6. The write-off of a bad debt (allowance method) during the current period represents an outflow of cash on the Statement of Cash Flows for the current period.  
 
FALSE

 

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Beechy – Chapter 05 #6
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
7. A Statement of Cash Flows is significant in that it presents comprehensive information about the operating, financing, and investing activities of a company. 
 
TRUE

 

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Beechy – Chapter 05 #7
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
Topic: 05-02 Classification and Organization
8. Sale of an asset and issuance of long-term debt will each cause an outflow of cash.  
 
FALSE

 

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Beechy – Chapter 05 #8
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
9. Sale of an asset for less than its book value results in an inflow of cash. 
 
TRUE

 

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Beechy – Chapter 05 #9
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
10. The indirect method of computing operating cash flows effectively converts accrual accounting income to cash basis income as its starting point. 
 
TRUE

 

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Beechy – Chapter 05 #10
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
11. A non-cash exchange is a transaction that involves an exchange of resources without any cash being directly paid or received. 
 
TRUE

 

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Beechy – Chapter 05 #11
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-08 SCF Example
Topic: 05-17 Non-cash Transactions
12. The Statement of Cash Flows is dated at a specific point in time like the balance sheet.  
 
FALSE

 

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Beechy – Chapter 05 #12
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
13. The Statement of Cash Flows can be based on (a) cash only or (b) cash plus cash equivalents. 
 
TRUE

 

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Beechy – Chapter 05 #13
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
14. The Statement of Cash Flows is not a required financial statement in the same sense as the income statement and balance sheet.  
 
FALSE

 

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Beechy – Chapter 05 #14
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
15. In the preparation of the Statement of Cash Flows using the Direct Method, an operating loss would be reported under cash flows from operating activities.  
 
FALSE

 

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Beechy – Chapter 05 #15
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-09 Interpreting the Statement of Cash Flows
16. Assume cash paid to suppliers for 2012 is $350,000, merchandise inventory increased by $5,000 during the year, and accounts payable decreased by $10,000 during the year. The COGS for 2012 is $335,000. 
 
TRUE

 

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Beechy – Chapter 05 #16
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
17. Depreciation expense represents a “flow” of cash during the current period.  
 
FALSE

 

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Beechy – Chapter 05 #17
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
18. Depreciation expense is not a source of cash or cash equivalents. 
 
TRUE

 

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Beechy – Chapter 05 #18
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
19. A Statement of Cash Flows is designed to help investors, creditors, and others to project a company’s future cash flows. 
 
TRUE

 

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Beechy – Chapter 05 #19
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
Topic: 05-09 Interpreting the Statement of Cash Flows
20. Cash equivalents are “short-term, highly liquid investments” that are both: (a) readily convertible to known amounts of cash and (b) so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. 
 
TRUE

 

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Beechy – Chapter 05 #20
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
21. Generally, only investments with original maturities (to the investor) of less than three months qualify as a cash equivalent. 
 
TRUE

 

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Beechy – Chapter 05 #21
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
22. Examples of cash equivalents are treasury bills, money market funds, and commercial paper. 
 
TRUE

 

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Beechy – Chapter 05 #22
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
23. Under ASPE, interest received and paid and dividends received must be classified in the operating activities section of the Statement of Cash Flows. 
 
TRUE

 

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Beechy – Chapter 05 #23
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-39 Dividends and Interest
24. Dividends received may be classified as operating or investing activities under IFRS. 
 
TRUE

 

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Beechy – Chapter 05 #24
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-39 Dividends and Interest
25. Depreciation expense in the Statement of Cash Flows is reported under the investing section.  
 
FALSE

 

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Beechy – Chapter 05 #25
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
26. A change in the company’s policy on defining cash equivalents should be reported as a cumulative effect adjustment.  
 
FALSE

 

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Beechy – Chapter 05 #26
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
27. Cash from customers equals sales plus the increase in accounts receivable for the year.  
 
FALSE

 

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Beechy – Chapter 05 #27
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
28. Accrual based net sales plus a decrease in accounts receivable for the year would equal cash from customers. 
 
TRUE

 

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Beechy – Chapter 05 #28
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
29. Writing off an uncollectible account against the allowance would increase cash from customers.  
 
FALSE

 

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Beechy – Chapter 05 #29
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
30. Cash paid to suppliers is accrual based cost of goods sold plus the increase in inventory plus the increase in accounts payable for the year.  
 
FALSE

 

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Beechy – Chapter 05 #30
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
31. Cost of goods sold plus an increase in inventory minus an increase in accounts payable would equal cash paid to suppliers. 
 
TRUE

 

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Beechy – Chapter 05 #31
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
32. Under IFRS, interest received may be classified as operating or financing activities.  
 
FALSE

 

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Beechy – Chapter 05 #32
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
33. Under IFRS, interest paid may be classified as operating or financing activities. 
 
TRUE

 

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Beechy – Chapter 05 #33
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
34. Under IFRS, dividends received may be classified as operating or financing activities.  
 
FALSE

 

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Beechy – Chapter 05 #34
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
35. Under IFRS, dividends paid may be classified as operating or financing activities. 
 
TRUE

 

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Beechy – Chapter 05 #35
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
36. Sale for cash of a short-term investment at its cost would cause an inflow of cash. 
 
TRUE

 

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Beechy – Chapter 05 #36
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
37. Salary expense plus amortization of deferred compensation expense for the year would equal cash paid for salaries.  
 
FALSE

 

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Beechy – Chapter 05 #37
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
38. If Harris Company issues both a balance sheet and an income statement with comparative figures from last year, a statement of cash flows should be issued for each period for which an income statement is presented. 
 
TRUE

 

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Beechy – Chapter 05 #38
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
39. Cash paid to suppliers plus an increase in inventory minus an increase in accounts payable would equal cost of goods sold.  
 
FALSE

 

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Beechy – Chapter 05 #39
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
40. When a Statement of Cash Flows is prepared using the indirect method, a decrease in the balance of a prepaid expense during the reporting period is an “add back” adjustment to net income to convert it to cash from operating activities.  
 
TRUE

 

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Beechy – Chapter 05 #40
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
41. A corporation has paid $20,000 in cash dividends each year on its common shares. Although during year 1 the company had a cash shortage, it declared the dividend. However, it was stipulated that the $20,000 cash dividend would not be paid until year 2. This dividend will affect the year 1 Statement of Cash Flows by: 
 

A. increasing the cash from operating activities.
B. increasing the cash from financing activities.
C. decreasing the cash from financing activities.
D. decreasing the cash from operating activities.
E. will not affect the Statement of Cash Flows.

 

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Beechy – Chapter 05 #41
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-36 Dividends Paid
42. The main purpose of the Statement of Cash Flows is: 
 

A. determine the change in cash during the period.
B. list the cash inflows and outflows by meaningful cash flow category.
C. disclose the quality of earnings.
D. explain why the balance sheet accounts changed during the year.

 

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Beechy – Chapter 05 #42
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
43. Which of the following is the operating cash flow? 
 

A. rent payments
B. dividend payments
C. payments for the purchase of a building
D. principal payment on a bank loan

 

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Beechy – Chapter 05 #43
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
44. A corporation recorded the following entry:

 

Investment in common shares to be held indefinitely 2,000
Cash 2,000

How would this transaction be shown on a Statement of Cash Flows? 
 

A. Cash outflow for operating activities
B. Cash outflow for investing activities
C. Cash outflow for financing activities
D. Cash inflow for financing activities

 

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Beechy – Chapter 05 #44
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
45. Which method or format for preparing the Statement of Cash Flows reports the major operating cash flows on an individual line-item basis? 
 

A. Only direct method
B. Only indirect method
C. Both direct and indirect
D. Neither direct nor indirect

 

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Beechy – Chapter 05 #45
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-14 Direct or Indirect?
46. Which of the following is a financing cash flow? 
 

A. Purchase of common shares of another company
B. Dividend payments
C. Rental payments
D. Interest received

 

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Beechy – Chapter 05 #46
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
47. How is depreciation expense treated in the Statement of Cash Flows and related disclosures when the statement is prepared using the indirect format? 
 

A. added to net income
B. subtracted from net income
C. placed into the investing section
D. does not appear because it is not a cash flow

 

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Beechy – Chapter 05 #47
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-14 Direct or Indirect?
48. Under IFRS, interest received may be classified as: 
 

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

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Beechy – Chapter 05 #48
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
49. Under IFRS, interest paid may be classified as: 
 

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

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Beechy – Chapter 05 #49
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
50. Under IFRS, dividends received may be classified as: 
 

A. Operating activities.
B. Financing activities.
C. Investing activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

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Beechy – Chapter 05 #50
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
51. Under IFRS, dividends paid may be classified as: 
 

A. Operating activities.
B. Financing Activities.
C. Investing Activities.
D. Operating activities or financing activities.
E. Operating activities or investing activities.

 

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Beechy – Chapter 05 #51
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
52. In a Statement of Cash Flows: 
 

A. net cash flow from operating activities is always the same as net income.
B. net cash flow from operating activities must be the same as net increase in cash during the period.
C. net cash flow from operating activities is always greater than net income.
D. net cash flow from operating activities is always less than net income.
E. net cash flow from operating activities may be less than or greater than net income.

 

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Beechy – Chapter 05 #52
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
53. Which of the following would not be shown in one of the three activity sections of the Statement of Cash Flows prepared using the indirect format? 
 

A. Refinancing a bond issue currently due with a new bond issue
B. A decrease in trade accounts receivable over the period
C. Purchase of a subsidiary corporation
D. A decrease in long-term notes payable over the period

 

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Beechy – Chapter 05 #53
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
54. A corporation paid $4,000 cash for rent. This payment should be reflected on the Statement of Cash Flows as a: 
 

A. cash inflow from operating activities.
B. cash outflow from operating activities.
C. cash outflow from investing activities.
D. cash outflow from financing activities.

 

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Beechy – Chapter 05 #54
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
55. A corporation reported the following information in its income statement:

 

Sales revenue (none on credit) $60,000
Cost of goods sold (paid in cash) 40,000
Gross margin on sales 20,000
Depreciation expense (2,000)
Amortization expense (1,000)
Wage expense (paid in cash) (2,500)
Income before taxes 14,500
Income taxes (20%) (paid in cash) (2,900)
Net income $11,600

The corporation should report the following amount on its Statement of Cash Flows for net cash from operating activities: 
 

A. $11,600.
B. $13,600.
C. $14,600.
D. $17,100.

 

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Beechy – Chapter 05 #55
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
56. The following item is found on the income statement of a corporation: Gain from sale of equipment, $5,000. The equipment sold during the year originally cost $20,000, had accumulated depreciation of $16,000 and was sold for cash. The Statement of Cash Flows should show an inflow of cash from investing activities of: 
 

A. $1,000.
B. $4,000.
C. $5,000.
D. $9,000.

 

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Beechy – Chapter 05 #56
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
57. A company started business on January 1, year 1. At the end of year 1, the financial statements showed the following amounts:

 

Sales $180
Cost of goods sold 112
Expenses 40
Accrued wages payable 4
Accounts receivable 18
Accounts payable 8

Income on the accrual basis and net cash inflow from operating activities were:

Income-accrual basis Cash inflow from operating activities
(A) $28 $22
(B) $68 $22
(C) $28 $28
(D) $68 $62


 

A. Choice A.
B. Choice B.
C. Choice C.
D. Choice D.

 

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Beechy – Chapter 05 #57
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
58. Which one of the following statement does not primarily report changes in amounts or accounts? 
 

A. Statement of Cash Flows
B. Balance sheet
C. Income statement
D. Statement of retained earnings

 

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Beechy – Chapter 05 #58
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
59. Which of the following would cause an inflow of cash? 
 

A. Payment of a long-term bond
B. Sale for cash of a short-term investment at its cost
C. Payment of accounts payable
D. Repurchase of common stock for cash
E. Accrual of a dividend

 

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Beechy – Chapter 05 #59
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
60. Which of the following would cause an outflow of cash? 
 

A. Issuance of long-term debt to finance a construction project
B. Collection on an account receivable
C. Cash purchase of a long-term marketable security
D. Sale of a long-term asset for cash

 

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Beechy – Chapter 05 #60
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
61. Which of the following would cause an inflow of cash? 
 

A. Payment of a long-term debt
B. Purchase of inventory for cash
C. Sale of an asset for cash at less than its book value
D. Issuing common stock in payment for legal services already provided

 

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Beechy – Chapter 05 #61
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
62. If a company issues both a balance sheet and an income statement with comparative figures from last year, Statement of Cash Flows: 
 

A. Should be issued for the current year only.
B. Should be issued for each period for which an income statement is presented.
C. is no longer necessary; but may be used at the company’s option.
D. Should not be issued.

 

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Beechy – Chapter 05 #62
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
63. Which of the following causes a net change in cash? 
 

A. Write-off of a bad debt
B. Payment of a long-term debt by issuing common shares
C. Declaration of a cash dividend
D. Declaration and issuance of a stock dividend
E. Payment of a cash dividend declared in a previous period

 

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Beechy – Chapter 05 #63
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
64. What effect does the write-off of an account receivable have on the Statement of Cash Flows? 
 

A. A decrease to operating cash flows under the direct method.
B. A decrease to operating cash flows under the indirect method.
C. A decrease to financing cash flows.
D. There is no effect.

 

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Beechy – Chapter 05 #64
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
65. Which of the following would not be a cash-paid item using the direct method for reporting operating activities? 
 

A. Depreciation expense
B. Cash paid to suppliers
C. Cash paid for income taxes
D. Cash paid for interest

 

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Beechy – Chapter 05 #65
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-14 Direct or Indirect?
66. Under the direct method, cash from customers would be sales plus a(n): 
 

A. Decrease in accounts payable.
B. Increase in accounts payable.
C. Decrease in accounts receivable.
D. Increase in accounts receivable.

 

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Beechy – Chapter 05 #66
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
67. Cash paid for income taxes under the direct method would be income tax expense minus: 
 

A. An increase in income taxes payable.
B. A decrease in income taxes payable.
C. Beginning income taxes payable.
D. Ending income taxes payable.

 

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Beechy – Chapter 05 #67
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
68. When using the direct method for reporting operating activities, which of the following would represent a cash-paid item? 
 

A. Depreciation expense, adjusted for changes in depreciation methods
B. Patent amortization expense, adjusted for changes in estimates
C. Interest expense, adjusted for changes in interest payable and amortization of bond premiums or discounts
D. Loss on sale of plant assets
E. Gain on sale of plant assets

 

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Beechy – Chapter 05 #68
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-45 Evaluation
69. Under the direct method, cash paid to suppliers can be computed as cost of goods sold for the period: 
 

A. Plus an increase in inventory and minus an increase in accounts payable.
B. Plus a decrease in inventory and minus an increase in accounts payable.
C. Minus an increase in inventory and plus an increase in accounts payable.
D. Minus a decrease in inventory and plus an increase in accounts payable.

 

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Beechy – Chapter 05 #69
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-32 Operating Activities-Direct Method
70. On a reconciliation of net income to cash from operations, depreciation is treated as an adjustment to net income because depreciation: 
 

A. is a direct outflow of cash.
B. reduces net income but does not involve an outflow of cash.
C. reduces net income and involves an outflow of cash.
D. is an outflow of cash to a reserve account for replacement of assets.

 

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Beechy – Chapter 05 #70
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
71. Which of the following is not an inflow of cash? 
 

A. Collection of a short-term receivable
B. Sale of a capital asset for cash
C. Cash borrowed on a short-term note
D. Depreciation expense

 

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Beechy – Chapter 05 #71
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
72. The amortization of bond discount on long-term debt should be presented in a Statement of Cash Flows as a(n): 
 

A. Inflow and outflow of cash.
B. Outflow of cash.
C. Deduction from net income in the adjustments to reconcile net income to cash from operating activities.
D. Addition to net income in the adjustments to reconcile net income to cash from operating activities.

 

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Beechy – Chapter 05 #72
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-16 Offsetting Transactions
73. The amortization of patents should be presented in a Statement of Cash Flows as a(n): 
 

A. inflow and outflow of cash.
B. outflow of cash.
C. addition to net income in the adjustments to reconcile net income to cash from operating activities.
D. deduction from net income in the adjustments to reconcile net income to cash from operating activities.

 

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Beechy – Chapter 05 #73
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
74. Which of the following is not an adjustment to reconcile net income to cash from operating activities? 
 

A. Accrued liability change (increase or decrease)
B. Amortization of premium or discount on bonds payable
C. Cash dividend declared but not yet paid
D. Prepaid expense (increase or decrease)

 

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Beechy – Chapter 05 #74
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
75. Which of the following is a deduction from net income when reconciling to cash flow from operating activities? 
 

A. Amortization of premium on bonds payable
B. Cash dividend declared and paid
C. Collection of an account receivable
D. Bad debt written off (allowance method)

 

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Beechy – Chapter 05 #75
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
76. The gain on the sale of a long-term investment should be disclosed separately in a Statement of Cash Flows of a company with substantial operating profits as a(n): 
 

A. Adjustment to net income in the reconciliation of net income to cash from operating activities.
B. Outflow from operating activities.
C. Outflow from investing activities.
D. Inflow from financing activities.

 

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Beechy – Chapter 05 #76
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
77. A loss on the sale of machinery in the ordinary course of business should be presented in a Statement of Cash Flows as a(n): 
 

A. Adjustment to net income in the reconciliation of net income to cash from operating activities.
B. Inflow from operating activities.
C. Inflow from investing activities.
D. Outflow from investing activities.

 

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Beechy – Chapter 05 #77
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
78. In a Statement of Cash Flows, the amortization of goodwill for a company with substantial operating profits should be presented as a(n): 
 

A. Inflow from operating activities.
B. Inflow from investing activities.
C. Outflow from investing activities.
D. Adjustment to net income in the reconciliation of net income to cash from operating activities.

 

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Beechy – Chapter 05 #78
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
79. When preparing a reconciliation of net income to cash from operations, an increase in the ending inventory over the beginning inventory will result in an adjustment to reported net income because: 
 

A. Cash is increased because inventory is a current asset.
B. Inventory is an expense deducted in computing net earnings, but is not a use of cash.
C. The net increase in inventory is part of the difference between cost of goods sold and cash paid to suppliers.
D. All changes in noncash accounts must be disclosed.

 

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Beechy – Chapter 05 #79
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
80. Which of the following independent transactions would cause net income to be more than cash from operating activities? 
 

A. A decrease in the accounts receivable account
B. An increase in the merchandise inventory account
C. An increase in the accounts payable account
D. An increase in the accrued wages account

 

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Beechy – Chapter 05 #80
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
81. Cash flows from investing activities would include all of these except: 
 

A. Proceeds from sale of operating assets.
B. Proceeds from sale of long-term investments.
C. Interest paid on notes receivable.
D. Proceeds from sale of securities available for sale.
E. Collection of principal amounts of loans made to other parties.

 

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Beechy – Chapter 05 #81
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-02 Classification and Organization
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
82. Cash outflows from investing activities would include payments for all of the following except: 
 

A. Purchase of capital assets.
B. Investments in securities available for sale.
C. Repurchase of common stock.
D. Loans to other parties.

 

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Beechy – Chapter 05 #82
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-02 Classification and Organization
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
83. Which one of the following would not be a cash inflow from financing activities for ABC Company? 
 

A. Cash from issuing ABC common stock
B. Cash from issuing ABC preferred stock
C. Cash from issuing ABC bonds payable
D. Cash from sale of XYZ common stock

 

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Beechy – Chapter 05 #83
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
84. Which one of the following would not be a cash outflow from financing activities for ABC Company? 
 

A. Cash paid for dividends on ABC common stock.
B. Cash paid for purchase of XYZ common stock.
C. Cash paid for dividends on ABC preferred stock.
D. Cash paid for interest on ABC bonds payable.

 

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Beechy – Chapter 05 #84
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
85. A Statement of Cash Flows would not report the effects of: 
 

A. Cash dividends paid.
B. A purchase and immediate retirement of common stock.
C. Stock dividends declared and issued.
D. Common shares issued for cash.

 

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Beechy – Chapter 05 #85
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-09 Interpreting the Statement of Cash Flows
Topic: 05-11 Analyzing Cash Flows
86. The Statement of Cash Flows does not report the effects of: 
 

A. Common shares purchased for cancellation.
B. Cash dividends paid.
C. Common shares issued for cash to pay for assets or to pay debt.
D. Common shares issued as the result of a stock dividend.

 

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Beechy – Chapter 05 #86
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-09 Interpreting the Statement of Cash Flows
Topic: 05-11 Analyzing Cash Flows
87. Which of the following could be a cash equivalent for purposes of reporting in the Statement of Cash Flows? 
 

A. Investment in common shares
B. Cash in a checking account
C. Investment in a treasury bills
D. Investment in redeemable preferred shares

 

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Beechy – Chapter 05 #87
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-05 Cash Equivalents
88. Choose the operating cash flow for Bikk Inc. 
 

A. Principal payment on a note payable to a supplier for inventory purchased by Bikk for resale by Bikk.
B. Dividend paid to Bikk’s shareholders.
C. Principal payment on a loan from a financial institution; Bikk used the proceeds to purchase inventory for resale.
D. Capitalized interest.

 

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Beechy – Chapter 05 #88
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
89. For which of the following accounts would change during the year and that account would not be found in the reconciliation of net income and net operating cash flow? 
 

A. Dividends payable
B. Interest payable
C. Prepaid rent
D. Wages payable
E. Short-term notes payable to supplier

 

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Beechy – Chapter 05 #89
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-30 T-Account Procedures
90. The main purpose of the Statement of Cash Flows is: 
 

A. to determine the change in cash for the period.
B. to disclose information about cash receipts and disbursements during the period.
C. to disclose the changes in long-term asset and liability accounts during the period.
D. to disclose significant noncash investing and financing activities during the period.
E. to explain why net income and net operating cash flows are different.

 

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Beechy – Chapter 05 #90
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-01 Objectives of the SCF
91. In preparing the Statement of Cash Flows, which of the following transactions would be considered an investing activity? 
 

A. sale of equipment at book value
B. Sale of merchandise on credit
C. Declaration of cash dividend
D. Issuance of bonds payable at a discount

 

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Beechy – Chapter 05 #91
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-02 Classification and Organization
Topic: 05-12 A Simple Example
92. Which of the following items involving current trade accounts receivable is most likely to appear in a Statement of Cash Flows? 
 

A. Balance in allowance for uncollectible accounts
B. Write-off of a specific account
C. Sales returns and allowances
D. Collection of an account previously written off
E. Change in net sales

 

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Beechy – Chapter 05 #92
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
93. When preparing the Statement of Cash Flows, which of the following sources of information should be consulted after considering all others? 
 

A. Income statement
B. Comparative balance sheet in general
C. Remaining unexplained balance sheet account changes
D. Retained earnings statement
E. Company records

 

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Beechy – Chapter 05 #93
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
94. Choose the correct statement about preparation of the Statement of Cash Flows: 
 

A. only the indirect method is required; the direct method is optional.
B. a spreadsheet must be used in computerized situations.
C. no particular preparation method is mandated by GAAP.
D. the direct method must be used unless available information does not permit it, in which case the indirect method may be used.

 

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Beechy – Chapter 05 #94
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
95. ABC acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common shares; no market price was quoted). How should this transaction be reported on the Statement of Cash Flows? 
 

A. Reported on the face of the Statement of Cash Flows
B. Report $10,000 as a noncash investing and financing activity on the Statement of Cash Flows
C. Report the $12,000 as an inflow of cash on the Statement of Cash Flows
D. Report the $12,000 as a noncash activity in the notes to the financial statement.

 

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Beechy – Chapter 05 #95
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
96. In the preparation of a Statement of Cash Flows: 
 

A. the statement must include most noncash exchanges.
B. the statement must be prepared using the working capital definition of funds.
C. stock dividends and stock splits must be reported on the statement.
D. the statement must be cumulative over the last two reporting periods.
E. None of these answers are correct.

 

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Beechy – Chapter 05 #96
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-08 SCF Example
Topic: 05-09 Interpreting the Statement of Cash Flows
97. An asset (land) was purchased and payment in full was made by issuing the company’s common shares. No cash was paid. Therefore, this transaction should be reported on the Statement of Cash Flows: 
 

A. as an “Adjustment to reconcile net income to operating activities.”
B. should not be reported on the Statement of Cash Flows but details explained in the disclosure notes.
C. as an outflow of cash.
D. as a non-cash exchange.

 

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Beechy – Chapter 05 #97
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
98. In preparing a Statement of Cash Flows, you encountered the following transaction of February 1, 2013: acquired a small office building in exchange for 5,000 of our common shares; market value $15 per share. How should this transaction be reported on the Statement of Cash Flows? 
 

A. Report as a concurrent inflow and outflow of cash on the Statement of Cash Flows.
B. Report as a noncash investing and financing activity.
C. Not reported on the Statement of Cash Flows because it did not affect cash, but details explained in the disclosure notes.
D. Report on a Statement of Cash Flows as an investing activity.

 

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Beechy – Chapter 05 #98
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
99. The purchase of debt securities to be held to maturity would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

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Beechy – Chapter 05 #99
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
100. The change in short-term payables to suppliers would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

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Beechy – Chapter 05 #100
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-08 SCF Example
Topic: 05-12 A Simple Example
101. XYZ has the following assets:

 

Assets Amount
Treasury bills (Acquired with less than 3 month maturity dates) $80,000
Treasury bills (Acquired with greater than 12 month maturity dates 20,000
Commercial paper 40,000
Investment in marketable equity securities 100,000

What would be the total cash equivalents at year-end for XYZ? 
 

A. $80,000
B. $100,000
C. $120,000
D. $140,000
E. $220,000

 

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Beechy – Chapter 05 #101
Blooms: Apply
Difficulty: 1 Easy
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-05 Cash Equivalents
Topic: 05-12 A Simple Example
102. The following four events affecting property, plant and equipment, and intangible assets, occurred during the current year for a firm:

(i.) Purchased equipment for $50,000.
(ii.) Successfully defended a patent infringement suit costing the firm $60,000 in legal fees this year; as a result, the firm has sole rights to the patent.
(iii.) Capitalized and paid $30,000 of interest on a building under construction which is to house the firm’s new offices.
(iv.) Received $100,000 in casualty insurance proceeds as a result of fire damage to one of the firm’s factories.

What is the net effect on investing cash flow of the above transactions for the current year? 
 

A. $10,000 increase
B. $110,000 decrease
C. $140,000 decrease
D. $40,000 decrease

 

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Beechy – Chapter 05 #102
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-02 Classification and Organization
Topic: 05-11 Analyzing Cash Flows
103. RJB reported sales of $200,000 and an increase in accounts receivable of $30,000 during 2001. Under the direct method, what would be RJB’s cash collected from customers during 2001? 
 

A. $170,000
B. $200,000
C. $230,000
D. Cannot be determined from information given.

 

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Beechy – Chapter 05 #103
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
104. A firm’s accumulated depreciation account increased $30,000 for the year, and total plant assets at cost increased $200,000. During the year, the firm purchased $350,000 of new equipment for cash, and sold equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale. What is the complete disclosure of these events in the indirect method Statement of Cash Flows? 
 

A. $350,000 investing cash outflow; $50,000 investing cash inflow; $70,000 addition reconciling adjustment
B. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment
C. $300,000 investing cash outflow; $130,000 addition reconciling adjustment
D. $350,000 investing cash outflow; $50,000 investing cash inflow; $60,000 addition reconciling adjustment; $70,000 addition reconciling adjustment

 

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Beechy – Chapter 05 #104
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
105. A firm’s dividends payable account increased $10,000 during the year. The firm also declared $35,000 of dividends. What is the complete disclosure in the direct method Statement of Cash Flows for these events? 
 

A. $25,000 financing cash outflow; $10,000 addition reconciling adjustment
B. $45,000 financing cash outflow
C. $25,000 financing cash outflow
D. $35,000 financing cash outflow
E. $25,000 financing cash outflow; $10,000 subtraction reconciling adjustment

 

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Beechy – Chapter 05 #105
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-12 A Simple Example
106. The sale of $3,000 worth of cash equivalents at cost has what effect on the direct method Statement of Cash Flows. 
 

A. add $3,000 in the reconciliation
B. no disclosure
C. $3,000 operating cash inflow
D. $3,000 investing cash inflow
E. $3,000 investing cash outflow

 

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Beechy – Chapter 05 #106
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-05 Cash Equivalents
Topic: 05-12 A Simple Example
107. The sale of $3,000 worth of cash equivalents costing $2,500 has what effect on the indirect method Statement of Cash Flows. 
 

A. $500 operating cash inflow
B. no disclosure
C. $500 operating cash outflow
D. $500 subtraction reconciling adjustment
E. $500 operating cash inflow; $500 subtraction reconciling adjustment

 

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Beechy – Chapter 05 #107
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-05 Cash Equivalents
Topic: 05-12 A Simple Example
108. SDB reported sales of $300,000, write-offs of uncollectible accounts of $10,000 against the allowance, and a decrease in net accounts receivable of $40,000 during 2013. What would be SDB’s cash collected from customers during 2013? 
 

A. $300,000
B. $330,000
C. $340,000
D. $350,000

 

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Beechy – Chapter 05 #108
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
109. If cash collected from customers for 2013 is $780,000 and accounts receivable increased by $20,000 during the year, what were sales for 2013? 
 

A. $600,000
B. $780,000
C. $800,000
D. Cannot be determined from information given.

 

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Beechy – Chapter 05 #109
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
110. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000 during the year and accounts payable decreased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

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Beechy – Chapter 05 #110
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
111. ARI Inc. began 2013 with the following:

 

Accounts receivable $10,000
Allowance for doubtful accounts (800)
Net accounts receivable $9,200

During 2013 the following events occurred:

Accounts written off $1,200
Sales on accounts 30,000
Bad debt expense recognized 2,000

At the end of 2013, ARI showed a balance in gross accounts receivable (before the allowance for doubtful accounts) of $16,800. In the direct method Statement of Cash Flows, what amount would be shown as an operating cash inflow? 
 

A. $21,000
B. $22,000
C. $30,000
D. $28,200

 

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Beechy – Chapter 05 #111
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
112. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000 and trade accounts payable increased by $12,000. The cash paid to suppliers was: 
 

A. $148,000.
B. $98,000.
C. $160,000.
D. $172,000.
E. $102,000.

 

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Beechy – Chapter 05 #112
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
113. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000 during the year, and accounts payable decreased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

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Beechy – Chapter 05 #113
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
114. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory increased by $20,000 during the year, and accounts payable increased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

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Beechy – Chapter 05 #114
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
115. DBB reported cost of goods sold for 2013 of $600,000; merchandise inventory decreased by $20,000 during the year, and accounts payable increased by $30,000 during the year. What would be DBB’s cash paid to suppliers for 2013? 
 

A. $550,000
B. $590,000
C. $600,000
D. $610,000
E. $650,000

 

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Beechy – Chapter 05 #115
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
116. MDB reported sales of $800,000, bad debt expense (allowance method) of $30,000, and an increase in net accounts receivable of $120,000 during 2013. What is MDB’s cash collected from customers for 2013 if MDB did not record any write-offs during the period? 
 

A. $650,000
B. $680,000
C. $710,000
D. $800,000

 

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Beechy – Chapter 05 #116
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
117. Assume cash paid to suppliers for 2011 is $350,000; merchandise inventory increased by $5,000 during the year, and accounts payable decreased by $10,000 during the year. What was cost of goods sold for 2011? 
 

A. $335,000
B. $345,000
C. $355,000
D. $365,000

 

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Beechy – Chapter 05 #117
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
118. Assume cash paid to suppliers for 2011 is $420,000; that merchandise inventory increased by $20,000 during the year, and that cost of goods sold was $415,000 for 2011. During 2011, accounts payable must have: 
 

A. increased by $5,000.
B. decreased by $5,000.
C. increased by $15,000.
D. decreased by $15,000.

 

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Beechy – Chapter 05 #118
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
119. A firm purchased $20,000 worth of investments classified as securities available for sale. At the end of the year, the investments were worth $23,000. What is the correct disclosure of these events in the direct method Statement of Cash Flows? 
 

A. Investing cash outflow, $20,000
B. Add $17,000 in reconciliation of earnings and net operating cash flow
C. Investing cash outflow, $20,000; subtract $3,000 in reconciliation of earnings and net operating cash flow
D. No disclosure is needed

 

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Beechy – Chapter 05 #119
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Topic: 05-02 Classification and Organization
Topic: 05-08 SCF Example
120. The income statement for CBA reported a net loss of $14,000. Also, the statement reported depreciation expense of $12,000 and amortization of patents of $6,000. Assuming no additional “adjustments to reconcile net income to cash from operating activities,” the cash flow from operations would be a: 
 

A. $4,000 inflow.
B. $6,000 inflow.
C. $16,000 inflow.
D. $30,000 inflow.
E. ($4,000) outflow.

 

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Beechy – Chapter 05 #120
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
121. The following information was provided by the records of QRS for the current reporting year:

 

Cost of goods sold (as reported on the income statement) $80,000
Inventory increase 20,000
Accounts payable increase 3,000

The cash paid to suppliers was: 
 

A. $63,000.
B. $77,000.
C. $80,000.
D. $97,000.

 

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Beechy – Chapter 05 #121
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-12 A Simple Example
122. The sale of $3,000 worth of cash equivalents at cost has what effect on the indirect method Statement of Cash Flows. 
 

A. Add $3,000 in the reconciliation
B. No disclosure
C. $3,000 Operating cash inflow
D. $3,000 investing cash inflow
E. $3,000 investing cash outflow

 

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Beechy – Chapter 05 #122
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-05 Cash Equivalents
Topic: 05-12 A Simple Example
123. The net income for a corporation for the current accounting period was $275,000. Changes in various accounts during the period follow:

 

Cash $12,500 increase
Investments in securities available for sale 40,000 decrease
Accounts receivable 19,000 increase
Inventories 8,000 increase
Short-term prepayments 3,000 decrease
Accounts payable 11,500 increase
Accrued liabilities 2,200 decrease
Notes payable to banks (due in nine months) 50,000 increase

The cash provided by operations for the current period is: 
 

A. $275,000.
B. $260,300.
C. $350,300.
D. $309,550.
E. $278,340.

 

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Beechy – Chapter 05 #123
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
124. The following was provided by the records of RST for the current reporting year:

 

Net loss (as reported on the income statement) $40,000
Decrease in inventory 18,000
Increase in accounts receivable 3,000
Depreciation expense 27,000
Increase in accounts payable 9,000
Cash dividend declared and paid 2,000
Decrease in income tax payable 4,000

The cash flow from operating activities was: 
 

A. $40,000 outflow.
B. $7,000 inflow.
C. $5,000 inflow.
D. $4,000 inflow.

 

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Beechy – Chapter 05 #124
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
125. WXY reported sales revenue of $40,000 and expenses of $35,000 during the period ended December 31, 2011. During the year, accounts receivable increased by $1,500; merchandise inventory increased by $1,000; accounts payable increased by $500; dividends payable decreased by $700; and depreciation expense of $2,500 was recorded. What was the amount of net cash flow from operating activities? 
 

A. $4,800
B. $2,500
C. $4,500
D. $5,500
E. $6,000

 

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Beechy – Chapter 05 #125
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
126. ABC reported sales revenue of $100,000 and expenses of $106,000 for the period ended December 31, 2011; accounts receivable decreased by $500; accounts payable increased by $2,500; accrued wages payable decreased by $1,500; short-term loans to banks increased by $600; and depreciation expense of $4,000 was recorded. What was the amount of net cash flow from operating activities for 2011? 
 

A. $500 inflow
B. $1,000 inflow
C. $100 Inflow
D. $500 outflow
E. $1,000 outflow

 

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Beechy – Chapter 05 #126
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-13 Presentation of Operating Activities
127. MNO reported net income of $42,000 for the reporting period ended December 3, 2011. MNO’s records provided the following information:

 

Decrease in accounts payable $5,000
Depreciation expense $6,000
Amortization of premium on bonds payable $500
Declared a cash dividend $2,000
Increase in inventory $3,000
Decrease in accounts receivable $8,000
Increase in income tax payable $1,000
Decrease in long-term debt principal $10,000

The net cash flow from operating activities was: 
 

A. $36,500.
B. $38,500.
C. $46,500.
D. $49,500.

 

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Beechy – Chapter 05 #127
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
128. The following information was provided by the records of RST for the annual reporting period ended December 31, 2011:

 

Cost of goods sold (as reported on the income statement) $170
Depreciation expense $10
Merchandise inventory increase $2
Goodwill amortized $4
Accounts payable decrease $18

The cash paid to suppliers was: 
 

A. $172.
B. $188.
C. $190.
D. $200.

 

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Beechy – Chapter 05 #128
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-32 Operating Activities-Direct Method
129. The records of WXY provided the following information for the year ended December 31, 2011:

(1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
(2) Inventory increased by $4,000.
(3) Accounts payable decreased by $6,000.
(4) Declared a cash dividend, $5,000.
(5) Depreciation expense, $2,000.
(6) Net income, $19,000.
(7) Loss on sale of machine, $3,000.
(8) On December 31, 2011, paid insurance premium on all assets, for 2012 and 2013, $800. There was no prepaid insurance on January 1, 2011.

What was the net cash inflow from operating activities for 2011? 
 

A. $7,200
B. $13,200
C. $16,200
D. $21,200

 

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Beechy – Chapter 05 #129
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
Topic: 05-32 Operating Activities-Direct Method
130. During 2016, ABC Inc. Accounts Receivable balance decreased by $20,000. The company also accrued bad debt expense in the amount of $5,000 on credit sales of $500,000. $2,000 of accounts receivable were written off during the period. The company’s cash collections from sales during 2016 was (assuming that the accrual-basis sales converted to cash basis): 
 

A. $480,000.
B. $520,000.
C. $518,000.
D. $515,000.
E. $525,000.

 

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Beechy – Chapter 05 #130
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
131. During 2016, ABC Inc. Accounts Payable balance decreased by $20,000. The company purchased $100,000 of inventory on account. The company made another inventory purchases of $100,000 (on account) during the year, $10,000 of which was returned to its suppliers for credit. The company’s cash payments to its inventory suppliers during 2016 was: 
 

A. $90,000.
B. $120,000.
C. $210,000.
D. $110,000.
E. $80,000.

 

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Beechy – Chapter 05 #131
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-32 Operating Activities-Direct Method
132. Choose the combination that best reflects the appropriate classification of cash paid for operating, investing, and financing activities.

 

Cash paid for:
Operating Investing Financing
A) Cash to suppliers Interest Dividends
B) Interest Cash to suppliers Income taxes
C) Income taxes Investment securities Dividends
D) Dividends Income taxes Cash to suppliers


 

A. Choice A
B. Choice B
C. Choice C
D. Choice D

 

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Beechy – Chapter 05 #132
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
Topic: 05-32 Operating Activities-Direct Method
133. The purchase of securities available for sale but not considered cash equivalents would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

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Beechy – Chapter 05 #133
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
134. As per ASPE, Dividends received from trading securities would be classified into which of the following categories for purposes of disclosure in the Statement of Cash Flows? 
 

A. Operating cash flow
B. Investing cash flow
C. Financing cash flow
D. Item reconciling earnings and operating cash flow
E. Not a cash flow or reconciling item

 

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Beechy – Chapter 05 #134
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-40 Summary
135. RJB made inventory purchases amounting to $200,000 during 2014. During the year, its accounts payable (all of which arose from inventory purchases) increased by $20,000. The company had sales of $1,000,000 and is subject to a gross profit percentage of 90%. How much cash did RJB pay to its inventory suppliers during 2014? 
 

A. $120,000
B. $180,000
C. $320,000
D. $220,000

 

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Beechy – Chapter 05 #135
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
136. VJC received the following cash inflows during 2012:

 

Dividends received $10,000
Sale of capital assets 50,000
Proceeds of issuing VJC common shares 60,000
Collection of non-operating notes receivable 15,000
Proceeds from mortgaging a building

What would be VJC’s cash inflow from investing and financing activities, respectively, for 2011 under IFRS?
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

Investing: $10,000 + 50,000 = $65,000
Financing: $60,000 + 15,000 + 55,000 = $130,0000

 

Beechy – Chapter 05 #136
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
137. KWB made the following cash outflows during 2011:

 

Cash for dividend payment on KWB common shares $5,000
Cash for capital assets 50,000
Cash for interest 3,000
Cash for purchase of JCK common stock 40,000

What would be KWB’s cash outflows for investing and financing activities for 2011 under IFRS?
Note: Under IFRS, dividends and interest paid may also be classified as operating cash flows. 
 

Investing Cash Outflows: $50,000 + 40,000 = $90,000
Financing Cash Outflows: $5,000 + 3,000 = $8,000

 

Beechy – Chapter 05 #137
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
138. EAE made the following cash outflows during 2012:

 

Cash for EAE common stock dividends $14
Cash for capital assets 100
Cash to retire EAE’s bond principal 60
Cash to purchase common stock 30
Cash to pay interest on EAE’s bonds 8

What would be EAE’s cash outflow for financing activities for 2012 (000s)?
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

Financing Cash Outflows: $14 + 60 + 30 = $104

 

Beechy – Chapter 05 #138
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
139. BWL paid the following cash outflows during 2012:

 

Cash for BWL common stock dividends $20,000
Cash for capital assets 100,000
Cash for common stock 30,000
Cash for interest 5,000
Cash for investment in securities available for sale 80,000

What would be BWL’s cash outflow for investing and financing activities, respectively, for 2012 under IFRS?
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

Investing Cash Outflows: $100,000 + 30,000 + 80,000 = $210,000
Financing Cash Outflows: $20,000 + 5,000 = $25,000

 

Beechy – Chapter 05 #139
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
140. MNO’s books for the period ended December 31, 2012, contained the following data:

 

Net income (net of $15,000 depreciation expense) $20,000
Issued common shares for cash 3,500
Sold capital asset for cash at book values, $3,000; gain 0
Sold long-term investment (cost of $5,000) for $6,000 cash; gain. (Cost method was used) 1,000
Paid a cash dividend (declared earlier) 2,000
Paid long-term debt with cash (principal only) 5,000
Purchased an investment in securities available for sale 4,500

Under IFRS, the net inflow (outflow) in cash from investing and financing activities (respectively) during 2012 was:
Note: Under IFRS, dividends received may also be classified as operating cash flows. 
 

Investing Cash Outflows: $4,500
Financing Cash Outflows: $-3,500 – 2,000 – 5,000 = $10,500

 

Beechy – Chapter 05 #140
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
141. MJC received the following cash inflows during 2012:

 

Cash from customers $600
Sales of investments in securities available for sale 100
Sale of common stock 70
Proceeds from bonds payable 400
Sale of patents 20
Interest received 4

What would be cash inflow from operating, investing, and financing activities, respectively, for 2012?
Note: Under IFRS, interest received may also be an investing activity. 
 

Operating Cash flows: $600 + $4 = $604
Investing Cash flows: $100 + $20 = $120
Financing Cash flows: $400 + $70 = $470

 

Beechy – Chapter 05 #141
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
142. KEC paid the following cash outflows during 2012:

 

Cash for dividends $12,000
Cash loaned to KEC president 20,000
Cash for interest 4,000
Cash for income taxes 25,000
Cash to purchase KEC common stock 40,000
Cash to purchase ABC common stock 43,000

What would be cash outflow for operating, investing, and financing activities, respectively, for 2012?
Note: Under IFRS, interest received may also be an investing activity. 
 

Operating Cash Outflows: $25,000 + $4,000 = $29,000
Investing Cash Outflows: $20,000 + $40,000 + $43,000 = $103,000
Financing Cash Outflows: $12,000

 

Beechy – Chapter 05 #142
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
143. ABC had the following balances on its Statement of Financial Position for Year 1:

Accounts Receivable, Jan 1, Year 1: $500
Accounts Receivable, Dec 31, Year 1: $400
Allowance for Doubtful Accounts, Jan 1, Year 1: $50cr
Allowance for Doubtful Accounts, Dec 31st, Year 1: $140cr
All sales during Year 1 were made on credit, in the amount of $1,000. Bad debt expense for the year was $100.
What were ABC’s cash collections for Year1? 
 

$500 + $1,000 – $400 – $(50 + 100 – 140) = $1,090

 

Beechy – Chapter 05 #143
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
144. VJW received the following cash inflows during 2012:

 

Cash dividends received $20,000
Sale of preferred stock 30,000
Proceeds from issuing bonds payable 100,000
Proceeds from sale of securities available for sale 40,000

What would be cash inflow from financing activities for 2012? 
 

$30,000 + $100,000 = $130,000

 

Beechy – Chapter 05 #144
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
145. The records of CDE provided the following information for the period ended December 31, 2012:

 

Merchandise inventory increase $20
Accounts payable increase 30
Decrease in securities available for sale 15
Interest payable decrease 7
Accounts receivable decrease 10
Wages payable increase 4
Depreciation expense 13
Income (as reported on the income statement) 47

Compute CDE’s cash flow from Operating activities for 2012. 
 

Income (as reported on the income statement) 47
Add: Depreciation expense 13
Merchandise inventory increase (20)
Accounts payable increase 30
Decrease in securities available for sale 15
Interest payable decrease (7)
Accounts receivable decrease 10
Wages payable increase 4

Cash flow from Operating Activities: 92

 

Beechy – Chapter 05 #145
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
146. RLN received the following cash inflows during 2012.

 

Cash from customers $200,000
Sale of capital assets 50,000
Interest on loan receivable 10,000
Proceeds from sale of investments 40,000

What would be cash inflow from investing activities for 2012? 
 

$50,000 + $40,000 = $90,000
Note: Under IFRS, interest received may qualify as an operating cash inflow.

 

Beechy – Chapter 05 #146
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
147. Given the following data, answer the questions that follow.

Income Statement
For the Year Ended 12/31/Year 2

 

Net Sales $1,500,000
Cost of goods sold (800,000)
Cash operating expenses (400,000)
Depreciation and amortization expense (100,000)
Gain on sale of equipment 60,000
Net income $260,000

Additional Information:

1. Increase in accounts receivable during Year 2 $40,000
2. Decrease in inventory during Year 2 30,000
3. Increase in accounts payable 44,000
4. Sale of old equipment for cash 130,000
5. Dividends declared – $90,000; Dividends paid 80,000
6. New building acquired by issuing common shares 84,000
7. Sold bonds for cash – proceeds of 150,000

1) What was cash from customers during year 2?
2) What was cash paid to suppliers during year 2?
3) What was net cash inflow from operating activities during year 2?
4) What was net cash inflow (outflow) from investing activities during year 2?
5) What was net cash inflow (outflow) from financing activities during year 2? 
 

1) Cash from customers $1,500,000 – 40,000 = $1,460,000
2) Cash to suppliers $800,000 – 30,000 – 44,000 = (726,000)
Cash for operating expenses (400,000)
3) Net cash inflow from operating activities $334,000
4) Net cash inflow from investing activities:
Sale of old equipment $130,000
5) Cash from sale of bonds $150,000
Cash paid for dividends (80,000)
Net cash inflow from financing activities $70,000

 

Beechy – Chapter 05 #147
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
148. For each transaction, enter a check mark to indicate its effect on cash flow. If there is no effect, do not mark either blank.

 

Cash Transaction
Inflow Outflow
(a) Purchased common stock, paid cash ____ ____
(b) Amortization of goodwill ____ ____
(c) Sale of a capital asset at a loss; collected no cash; received a 1-year note receivable ____ ____
(d) Purchased a patent; paid cash ____ ____
(e) Purchased land; gave a 5-year note (paid no cash) ____ ____
(f) Paid a short-term note receivable ____ ____
(g) Paid a long-term note receivable ____ ____
(h) Collected a short-term note payable ____ ____
(i) Collected a long-term note payable ____ ____
(j) Traded three used trucks for one new truck (fixed asset) ____ ____
(k) Sustained a $5,000 fire loss to the plant, will collect this amount of insurance proceeds during coming year. ____ ____
(l) Declared a cash dividend in 19×1; payable in 19×2 ____ ____
(m) Issued a 2 for 1 stock split ____ ____
(n) Issued bonds for land ____ ____
(o) Paid a cash dividend that was declared in prior year ____ ____
(p) Redemption of bonds payable from bond sinking fund ____ ____


 

Inflow Outflow
(a) X
(b)
(c)
(d) X
(e)
(f) X
(g) X
(h)
(i)
(j)
(k)
(l)
(m)
(n)
(o) X
(p)

 

Beechy – Chapter 05 #148
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
149. Place a check mark in the appropriate column(s) with respect to each item listed below which indicates where the item would be reported on the Statement of Cash Flows.

 

Investing Financing Operating Noncash None
Item

(a) Made periodic transfer of cash to bond sinking fund.
(b) Collected accounts receivable from trade customers.
(c) Paid for extraordinary repairs and debited accum. Depreciation.
(d) Sold securities carried as short-term investment at book value.
(e) Declared cash dividend on common stock to be paid in first month of the next fiscal year.
(f) Increased allowance for doubtful accounts at the end of the fiscal period.
(g) Purchased new equip. by issuing a note due in six months.
(h) Sold unissued common stock at par. Used the cash for working capital purposes.
(i) Bonds covered by a sinking fund matured. The fund was used to pay them in full.
(j) Building acquired; paid no cash but issued a long-term mortgage note payable. 
 

Item: Investing Financing Operating Noncash None
(a) X
(b) X
(c) X
(d) X
(e) X
(f) X
(g) X
(h) X
(i) X
(j) X

 

Beechy – Chapter 05 #149
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
150. Given the following data:
 
 Income Statement
For the Year Ended DeC. 31, 2011
 
  

Net sales $750,000
Cost of goods sold (400,000)
Cash operating expenses (200,000)
Depreciation and amortization expense (50,000)
Gain on sale of equipment 30,000
Net income $130,000


 
 
 Additional information:
 
 1. Increase in accounts receivable during 2011 – $25,000
 2. Decrease in inventory during 2011 – $13,000
 3. Decrease in accounts payable during 2001 – $28,000
 4. Sale of old equipment for cash – $65,000
 5. Dividends declared – $45,000; dividends paid – $40,000
 6. New building acquired by issuing common shares – $42,000
 7. Sold bonds for cash – proceeds of $75,000
 
 What was net cash inflow (outflow) from operating activities during 2011?  
 

Cash from customers (750,000 – 25,000) $725,000
Cash paid to suppliers (400,000 – 13,000 + 28,000) (415,000)
Cash operating expenses (200,000)
Cash inflow (outflow) from operating activities $110,000

 

Beechy – Chapter 05 #150
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
151. JCB, Inc. has completed the Dec. 31, 2012 income statement, balance sheet, and retained earnings statement. The spreadsheet for the Statement of Cash Flows (direct method) has been started below. Complete the spreadsheet.

 

2011 Debit Credit 2012
Sales 800
Cost of goods sold 500
Salary expense 100
Depreciation expense 80
Gain on sale of operation asset 20
Net Income 140
Cash 200 490
Accounts Receivable 300 350
Inventory 400 360
Capital Asset 900 780
Acc. Depreciation – O.A. (100) (110)
Total Assets $1,700 $1,870
Accounts Payable 300 270
Salary Payable 100 120
L-T Notes payable 600 550
C/S – $10 Par 400 500
Contr. Cap. – Excess over Par 100 150
Retained Earnings 200 280
Total Liabilities and Owner Equity $1,700 $1,870

Additional data:

1. Purchased capital asset for $80 cash.
2. Sold capital asset for $150 cash (cost- $200; Acc. Depr.- $70).
3. Issued 10 common shares (MV – $15/share) to retire L-T notes payable.
4. Issued L-T notes payable for $100 cash.
5. Declared and paid cash dividends of $60.

Operating Activities:
Investing Activities:

Financing Activities:
Noncash Exchanges:
Incr. (Decr) in cash 
 

JCB, Inc. Spreadsheet for Statement of Cash Flows

2011 Debit Credit 2012
Sales a) 800
Cost of goods sold b) 500
Salary expense c) 100
Depreciation expense d) 80
Gain on sale of operation asset k) 20
Net Income e) 140
Cash 200 o) 290 490
Accounts Receivable 300 f) 50 350
Inventory 400 g) 40 360
Capital Asset 900 j) 80 k) 200 780
Acc. Depreciation – O.A. (100) k) 70 d) 80 (110)
Total Assets $1,700 $1,870
Accounts Payable 300 h) 30 270
Salary Payable 100 i) 20 120
L-T Notes payable 600 l) 150 m) 100 550
C/S – $10 Par 400 l) 100 500
Contr. Cap. – Excess over Par 100 l) 50 150
Retained Earnings 200 n) 60 e) 140 280
Total Liabilities and Owner Equity $1,700 $1,870

Operating Activities:

2011 Debit Credit 2012
Cash from Customers a) 800 f) 50 750
Cash paid to suppliers g) 40 b) 500
Cash paid to employees h) 30 (490)
Net Cash from Operating Activities c) 20 c) 100 (80)
$180

Investing Activities:

2011 Debit Credit 2012
Purchase of capital assets j) 80
Sale of capital asset k) 150
Net Cash from Investing activities 70

Financing Activities:

2011 Debit Credit 2012
Issues L-T notes payable m) 100
Paid cash dividends n) 60
Net Cash from Financing activities 40

Noncash Exchanges:
Issued common stock to retire

2011 Debit Credit 2012
L-T notes 1) 150 1) 150
Increase (decrease) in cash o) 290
Totals $2,810 $2,810 $290

 

Beechy – Chapter 05 #151
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
152. Reported net income for ABC for 2013 was $20,000. Additional information is as follows:

 

(a) Expenditures for capital assets $6,000
(b) Depreciation of capital assets 2,000
(c) Cash dividends declared and paid on common shares 900
(d) Net increase in accounts payable 400
(e) Net decrease in inventory 200
(f) Amortization of goodwill 70
(g) Decrease in accrued wages payable 30
(h) Loss on sale of capital asset (book value $2,500) 500
(i) Increase in accounts receivable 3,000
(j) Increase in prepaid insurance 130

The Statement of Cash Flows, indirect method, would report cash flow from operations of
$_______________________. 
 

Net income, $20,000 + (b) $2,000 + (d) $400 + (e) $200 + (f) $70 – (g) $30 + (h) $500 – (i) $3,000 – (j) $130 = $20,010.

 

Beechy – Chapter 05 #152
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
153. Complete the following Statement of Cash Flows schedule to determine cash inflow (outflow) from operations:
 
 Statement of Cash Flows
 Operating Activities:
 Net income………………….$100,000
 Adjustments to convert net income to cash from
 operating activities:
 
 (a) Inventory increase, $3,000
 (b) Accounts payable decrease, $7,000
 (c) Depreciation expense, $12,000
 (d) Gain on sale of land, $4,000
 (e) Accounts receivable decrease, $5,000
 (f) Amortization of discount on bonds payable, $1,000
 (g) Loss on sale of investments in SAS, $2,000
 (h) Correction of prior years’ errors, loss, $11,000
 Cash inflow (outflow) from operating activities…  
 

$100,000 – (a) $3,000 – (b) $7,000 + (c) $12,000 – (d) $4,000 + (e) $5,000 + (f) $1,000 + (g) $2,000 = $106,000; (h) not applicable 

 

Beechy – Chapter 05 #153
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
154. A corporation is preparing a Statement of Cash Flows. Complete the following part of it in the spaces provided (be sure to indicate + or -):

 

Operating Activities Amount
Net income (accrual), $45,000 $ ____
Adjustments to convert net income to cash from operating activities:
Depreciation Expense, $6,000 ____
Decrease in Accounts Receivable balance, $2,000 ____
Decrease in Accrued wages payable balance, $1,000 ____
Amortization of patent, $500 ____
Increase in Inventory balance, $4,000 ____
Decrease in Accounts Payable balance, $1,500 ____
Net cash inflow (outflow) from operations $ ____


 

Operating Activities:

Net income $45,000
Adjustments to convert net income to cash from operating activities:
Depreciation Expense +6,000
Decrease in Accounts Receivable +2,000
Decrease in Accrued wages payable -1,000
Amortization of patent +500
Increase in Inventory -4,000
Decrease in Accounts Payable -1,500
Net cash inflow (outflow) from operating activities $47,000

 

Beechy – Chapter 05 #154
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
155. Complete the following Statement of Cash Flows, indirect method, schedule to determine cash inflow (outflow) from operating activities:
Statement of Cash Flows, Indirect Method
Operating Activities:

Net income = $150,000

Adjustments to convert net income to cash from operating activities:

 

Depreciation expense, $12,000 ____
Gain on sale of capital assets, $7,000 ____
Loss on sale of long-term investments, $4,000 ____
Amortization of discount on bonds payable, $3,000 ____
Increase in Inventory, $6,000 ____
Gain on retirement of long-term debt, $8,000 ____
Decrease in Accounts Receivable, $5,000 ____
Correction of prior years’ errors, loss $11,000 ____
Cash inflow (outflow) from operating activities $ ____


 

Operating Activities:

Net income = $150,000

Adjustments to convert net income:

Depreciation expense 12,000
Gain on sale of capital assets (7,000)
Loss on sale of L-T investments 4,000
Amortization of discount on bonds payable 3,000
Increase in Inventory (6,000)
Gain on retirement of L-T debt (8,000)
Decrease in Accounts Receivable 5,000
Net inflow (outflow) of cash from operating activities $153,000

 

Beechy – Chapter 05 #155
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
156. You are preparing a Statement of Cash Flows. Complete the following schedule to compute cash flow from operating activities:
Statement of Cash Flows

 

Net Income (accrual basis), $50,000 $ ____
Adjustments to reconcile net income to cash from operating activities:
(a) Depreciation expense, $8,000 ____
(b) Inventory increase, $5,000 ____
(c) Wages payable decrease, $6,000 ____
(d) Accounts receivable decrease, $10,000 ____
(e) Accounts payable increase, $7,000 ____
(f) Cash dividends declared and paid, $4,000 ____
(g) Increase in income tax payable, $3,000 ____
(h) Gain on sale of capital assets, $1,000; book value, $7,500 ____
(i) Payment on long-term note, $20,000 ____
Cash flow from operating activities $ ____


 

Operating Activities

Net income = $50,000

Adjustments to convert net income to cash from operating activities:

Depreciation expense 8,000
Increase in inventory (5,000)
Decrease in wages payable (6,000)
Decrease in accounts receivable 10,000
Increase in accounts payable 7,000
Increase in income tax payable 3,000
Gain on sale of capital assets (1,000)
Net cash inflow (outflow) of cash from operating activities $66,000

 

Beechy – Chapter 05 #156
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
157. ABC Company has just completed the December 31, 2001, financial statements except for the Statement of Cash Flows. Information on changes in accounts appears in tabular format below. Additional information for 2001:

a. Net income, $16,000.
b. Depreciation expense, $5,000.
c. Cash dividend declared and paid, $4,000.
d. Declared and issued a $10,000 stock dividend, recorded at par.
e. December 30, 2001, purchased a machine (a capital asset) for $10,000; paid half cash and issued a one year, 18%, interest-bearing note of $5,000 for the balance.
f. Sold 20 shares of unissued shares at $26 per share, collected cash in full.
g. Repurchased 10 shares of their ABC shares at $25 per share (assume the single-transaction method is used for common stock), paid cash in full.
h. Purchased a tract of land and paid for it in full by exchanging for it all of the investment in X Corporation shares. The shares were quoted on the market at $12,000 (any gain or loss is included in income as an “ordinary” item).
i. Sold an idle plant for $6,000 cash.
j. Extraordinary gain of $2,000 (net of income tax) due to an earthquake (infrequent and unusual), which caused the loss of capital assets that originally cost $12,000 when they were two-thirds, depreciated; received $6,000 cash settlement from the insurance company.

 

Debits Balance Balance
12-31-2000 Debit Credit 12-31-2001
Cash $31,000 $58,770
Accounts receivable (net) 14,000 12,000
Inventory 40,000 43,000
LT investment, stock of X Corp. (at cost) 12,000 0
Capital assets (cost) 70,000 68,000
Idle plant (at cost) 85,000 0
Land 12,000
Common stock (at cost) 250
Total $252,000 $194,020


 

ABC Company
Statement of Cash Flow
For the Year Ended December 31, 2001

Operating Activities

Net income $16,000
Reconciling items:
Depreciation expense 5,000
Extraordinary gain (2,000)
Accounts receivable decrease 2,000
Inventory increase (3,000)
Accounts payable increase 3,200
Loss on sale of idle plant 4,000
Income taxes payable decrease (700)
Net cash inflow from operating activities $24,500

Investing Activities

Sale of plant assets $6,000
Insurance settlement on extraordinary loss 6,000
Down payment on plant asset purchase (5,000)
Net cash inflow from investing activities 7,000

Financing Activities

Dividends paid $(4,000)
Share issuance 520
Common stock purchase (250)
Net cash outflow from financing activities (3,730)
Net increase in cash 27,770
Cash, Jan. 1/2001 31,000
Cash, Dec. 31, 2001 $58,770

Noncash Activity Schedule
Purchased equipment for $10,000, paid $5,000 down and issued a $5,000 note for the balance
Purchased land by exchanging investment in X corp. shares, $12,000.

 

Beechy – Chapter 05 #157
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-10 Basic Approach to Preparation
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
158. Data for XOC for 2013 were as follows:

(a) On December 31, 2013, sold a capital asset with a carrying value of $5,000 for $2,000 cash.
(b) Depreciation expense for 2001, $4,000.
(c) Sold 500 common shares at $10 cash per share.
(d) Paid $1,000 on a long-term note payable.
(e) Sold a long term investment costing $400 for $500 cash.
(f) Inventory increased $2,500.
(g) Amortized $30 of patent costs.
(h) Net income, $23,000.

Required:

1. What was net cash inflow (outflow) from investing activities for 2013? Show computations.
2. What was net cash inflow (outflow) from financing activities for 2013? Show computations. 
 

1. Sale of capital asset $2,000
Sold L-T investment 500
Net cash inflow from investing activities $2,500
2. Sale of common shares $5,000
Paid L-T note payable (1,000)
Net cash inflow from financing activities $4,000

 

Beechy – Chapter 05 #158
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes.
Topic: 05-11 Analyzing Cash Flows
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX
159. The following income statement and additional information for MDB, Inc. is relevant to the statement of changes in financial position.

 

Income Statement Additional Information
Sales $500,000 Increase in Acct/Rec $10,000
Cost of goods sold (300,000) Increase in Inventory $5,000
Operating expenses (140,000) Decrease in Acct/Pay $8,000
Net income 60,000 Increase in Accrued Oper. Exps $6,000

Required:

1. Prepare a schedule showing cash from operations (direct method).
2. Prepare a schedule showing cash from operations (indirect method). 
 

1. Cash from customers (500,000 – 10,000) $490,000
Less:
Cash paid to suppliers (300,000 + 5,000 + 8,000) (313,000)
Cash paid for operating expenses (140,000 – 6,000) (134,000)
Cash from operations (direct method) $43,000
2. Net Income $60,000
Less: Accounts Receivable increase (10,000)
Inventory increase (5,000)
Accounts Payable decrease (8,000)
Plus: Accrued operating expense increase 6,000
Cash from operations (indirect method) $43,000

 

Beechy – Chapter 05 #159
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
Topic: 05-32 Operating Activities-Direct Method
160. The following data is provided:
 
 Income Statement
For the Year Ended Dec. 31, 2011
 
  

Net sales $375,000
Cost of goods sold (200,000)
Cash operating expenses (100,000)
Depreciation and amortization expense (25,000)
Gain on sale of equipment 15,000
Net income $65,000


 
 
 Additional information:
  

1. Increase in accounts receivable during2011 $10,000
2. Decrease in inventory during 2011 $7,500
3. Increase in accounts payable during 2011 $11,000
4. Sale of old equipment for cash $32,500
5. Dividends declared – $22,500; dividends paid $20,000
6. New building acquired by issuing common shares $21,000
7. Sold bonds for cash – proceeds of $37,500


 
 
 Required:
 
 Prepare a Statement of Cash Flows, direct method. Include a reconciliation of earnings and net operating cash flow.  
 

Cash from customers (375,000 – 10,000). $365,000
Cash paid to suppliers

(200,000 – 7,500 – 11,000) (181,500)  
Cash operating expenses (given) (100,000)  
Net cash inflow from operating activities   $83,500
Sale of Equipment $32,500  
Net cash inflow from investing activities   32,500
Dividends Paid $(20,000)  
Sale of Bonds payable 37,500  
Net cash inflow from financing activities   17,500
Net increase in Cash during 2011   $133,500

Note: New building was acquired by issuing common shares for $21,000
Reconciliation of earnings and net operating cash flow:

Net income $65,000
Depreciation, amortization 25,000
Gain on equipment sale (15,000)
Accounts receivable increase (10,000)
Inventory decrease 7,500
Accounts payable increase 11,000
Net operating cash flow $83,500

 

Beechy – Chapter 05 #160
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-32 Operating Activities-Direct Method
161. A firm reported the following in its 2011 financial statements:

 

Balance sheet Dec. 31/2010 Dec. 31.2011
Unearned rent $10,000 $17,000

Income statement

Rent revenue = $92,000

(a) Describe the required disclosure implied by the above information for the indirect method Statement of Cash Flows for 2001, including the reconciliation of net income and net operating cash flow.
(b) Explain as completely as possible the reasoning for your response in (a).
(c) Describe the required disclosure implied by the above information for the direct method Statement of Cash Flows for 2011, omitting any reference to the reconciliation of net income and net operating cash flow.  
 

(a) Add increase in unearned rent $7,000 in reconciliation.
(b) $7,000 more cash rent was received than recognized as revenue because unearned rent increased that much. But net income which begins the reconciliation reflects rent revenue only. Therefore, to include the total rent cash inflow in net operating cash flow, the $7,000 difference must be added to net income in the reconciliation.
(c) Operating cash inflow: rent received $99,000. 

 

Beechy – Chapter 05 #161
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
162. The adjusted trial balances for a firm, at December 31, 2011 and 2010 are as follows:
Additional information:
No plant assets were sold in 2011. The firm allocates depreciation expense to other operating expense accounts.

 

December 31
2011 2010
Debits:
Cash $35,000 $32,000
Accounts receivable 33,000 30,000
Inventory 31,000 47,000
Property, plant and equipment 100,000 95,000
Unamortized bond discount 4,500 5,000
Cost of goods sold 250,000 380,000
Selling expenses 141,500 172,000
General and administrative expense 137,000 151,300
Interest expense 4,300 2,600
Income tax expense 20,400 61,200
$756,700 $976,100
Credits:
Allowance for doubtful accounts $1,300 $1,100
Accumulated depreciation 16,500 15,000
Trade accounts payable 25,000 17,500
Income taxes payable 21,000 27,100
Future income tax liability 5,300 4,600
8% callable bonds payable 45,000 20,000
Common shares 50,000 40,000
Other contributed capital 9,100 7,500
Retained earnings 44,700 64,600
Sales 538,800 778,700
$756,700 $976,100

Required:

Determine the firm’s 2011 net cash flow from operating activities using the indirect method. 
 

Net income $(14,400)
Net accounts receivable increase (2,800)
Inventory decrease 16,000
Bond discount amortization 500
Depreciation expense 1,500
Accounts payable increase 7,500
Income tax payable decrease (6,100)
Future income tax increase 700
Net cash inflow from operations $2,900

 

Beechy – Chapter 05 #162
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
163. A firm’s recent comparative balance sheets and income statements follow:

 

Balance sheets, December 31 2011 2010
Assets:
Cash $29,500 $30,000
Accounts receivable 17,000 12,000
Capital assets 138,500 123,500
Accumulated depreciation (89,000) (83,500)
Total assets $96,000 $82,000
Liabilities and shareholders’ equity
Bonds payable $24,500 $23,000
Dividends payable 4,000 2,500
Common shares 11,000 9,500
Additional paid-in capital 4,500 1,500
Retained earnings 52,000 45,500
Total liabilities and stockholders’ equity $96,000 $82,000

Income statement for year ended December 31, 2011

Sales revenue $77,500
Cost of goods sold (53,500)
Gross margin 24,000
Depreciation expense (16,500)
Gain on sale of equipment 6,500
Net income $14,000

Additional information:

1. During 2011, equipment costing $20,000 was sold for cash.
2. During 2011, $10,000 of bonds payable were issued in exchange for capital assets. There was no amortization of bond discount or premium.

Required:

Prepare the 2011 Statement of Cash Flows using the indirect method. 
 

Statement of Cash Flows
For the Year Ended December 31, 2011
Operating activities

Net income $14,000
Depreciation expense 16,500
Accounts receivable increase (5,000)
Gain on sale of equipment (6,500)
Net operating cash inflow $19,000

Investing activities

Proceeds from sale of equipment $15,500
Purchase of equipment (25,000)
Net investing cash outflow (9,500)

Financing activities

Retirement of bonds $(8,500)
Dividends paid (6,000)
Issuance of common shares 4,500
Net financing cash outflow (10,000)
Net decrease in cash (500)
Cash at beginning of year 30,000
Cash at end of year $29,500

Non cash activity schedule:

Acquisition of plant assets through bond issuance = $10,0000

 

Beechy – Chapter 05 #163
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
164. Two formats of presenting the Statement of Cash Flows are allowed under ASPE and IFRS. Describe the two formats and provide your own opinion on which results in a more complete picture of a firm’s cash flows. 
 

The direct and indirect formats are two acceptable ways to present a Statement of Cash Flows. Each has three activity sections into which are placed descriptions of cash flows, aggregated by type. The last two sections, the investing and financing sections, are identical for each format. However, the direct format discloses the actual operating cash flows such as collections from customers and payments to employees.
The indirect format shows the reconciliation of net income and net operating cash flow and includes such items as depreciation, amortization, gains and losses, and changes in operating working capital accounts. The direct format presents the reconciliation as a supplemental schedule.
Therefore, the direct format Statement of Cash Flows for a firm contains all the information included in the indirect format statement, as well as the operating cash flows. As a result, the direct format provides more cash flow information and is more consistent with the purpose of the Statement of Cash Flows (i.e. to present cash flow information in meaningful categories).
The individual operating cash flows are important for assessing the sources of cash from various operating and repetitive sources. For example, are collections from customers sufficient to cover operating cash demands? Only the direct format provides this information. The reconciliation also provides important information. Assessments about the quality of earnings are enhanced by this schedule which essentially explains why accrual earnings and cash-basis earnings are not the same. The reconciliation is required for both formats.

 

Beechy – Chapter 05 #164
Blooms: Remember
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-10 Basic Approach to Preparation
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
165. The records of BCD provided the following information for the year ended December 31, 2011:
 
 (1)
 
  

Balance sheet: 2011 2010
Cash $18,000 $20,000
Accounts receivable (net) 26,000 22,000
Inventory 30,000 27,000
Capital assets (net) 75,000 76,000
Payable (short term) 41,000 40,000
Bonds payable 60,000 60,000
Common stock 30,000 30,000
Retained earnings 18,000 ?


 
 
 (2) Cash dividends of $5,000 were declared in 2010 and paid in 2011, and cash dividends of $2,000 were declared and paid in 2011.
 (3) Net loss in 2011, $1,000.
 (4) Depreciation expense for 2011, $5,000.
 
 Calculate the amount of net cash from operating activities during 2011.  
 

Net Loss (1,000)
Decrease in accounts receivable 4,000
Decrease in inventory 3,000
Decrease in short term payables (1,000)
Depreciation expense 5,000
Cash flows from operating activities $10,000

 

Beechy – Chapter 05 #165
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
166. KWB made the following cash outflows during 2011:

 

Cash for dividends on KWB common shares $5,000
Cash for capital assets 50,000
Cash for interest 3,000
Cash loaned to president of KWB 10,000
Cash for purchase of JCK common stock 40,000

Calculate KWB’s cash outflow for investing activities for 2011. 
 

Cash for capital assets $(50,000)
Cash loaned to president of KWB (10,000)
Cash for purchase of JCK common stock (40,000)
Cash outflows from investing activities $(100,000)

 

Beechy – Chapter 05 #166
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
167. VJW received the following cash inflows during 2013:

 

Cash dividends received $20,000
Sale of preferred stock 30,000
Proceeds from issuing bonds payable 100,000
Proceeds from sale of securities available for sale 40,000

Calculate cash inflow from financing activities for 2013. 
 

Sale of preferred stock $30,000
Proceeds from issuing bonds payable 100,000
Cash inflows from financing activities $130,000

 

Beechy – Chapter 05 #167
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
168. The records of CDE provided the following information for the period ended December 31, 2011:

 

Merchandise inventory increase $20
Accounts payable increase 30
Decrease in securities available for sale 15
Interest payable decrease 7
Accounts receivable decrease 10
Wages payable increase 4
Depreciation expense 13
Income (as reported on the income statement) 47

Calculate net cash inflow from operating activities for 2011. 
 

Income (as reported on the income statement) $47
Merchandise inventory increase (20)
Accounts payable increase 30
Interest payable decrease (7)
Accounts receivable decrease 10
Wages payables increase 4
Depreciation expense 13
Net cash flows from operating activities $77

 

Beechy – Chapter 05 #168
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
169. The records of WXY provided the following information for the year ended December 31, 2011:
 
 (1) Purchased a warehouse and paid for it by issuing 1,000 common shares; market value was $35 per share.
 (2) Inventory increased by $4,000.
 (3) Accounts payable decreased by $6,000.
 (4) Declared a cash dividend, $5,000.
 (5) Depreciation expense, $2,000.
 (6) Net income, $19,000.
 (7) Loss on sale of machine, $3,000.
 (8) On December 31, 2001, paid insurance premium on all assets, for 2002 and 2003, $800. There was no prepaid insurance on January 1, 2011.
 
 Calculate the net cash inflow from operating activities for 2011.  
 

Net Income $19,000
Increase in inventory (4,000)
Decrease in accounts payable (6,000)
Depreciation expense 2,000
Loss on sale of machine 3,000
Increase in prepaid insurance (800)

Cash flows for operating

Activities = $13,200 

 

Beechy – Chapter 05 #169
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
170. RJB reported sales of $200,000 and an increase in accounts receivable of $30,000 during 2011. Under the direct method, calculate what would be RJB’s cash collected from customers during 2011? 
 

Sales $200,000
Increase in accounts receivable (30,000)
Cash collections from customers $170,000

 

Beechy – Chapter 05 #170
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-10 Basic Approach to Preparation
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS
171. A firm’s accumulated depreciation account increased $30,000 for the year, and total plant assets at cost increased $200,000. During the year, the firm purchased $350,000 of new equipment for cash, and sold equipment for $50,000 cash. This equipment had been depreciated $30,000 at the time of sale.
Present the complete disclosure of these events in an indirect format Statement of Cash Flows. 
 

Operating activities:

Depreciation expense (net increase plus 30,000 disposal) = $60,000

Loss on disposal (original cost 100,000 less 30,000

Accumulated depreciation less proceeds of 50,000 70,000
Net cash flows from operating activities 130,000

Cash flows from investing activities:

Purchase of equipment (350,000)
Proceeds from the sale of equipment 50,000
Net cash flows from investing activities $(300,000)

 

Beechy – Chapter 05 #171
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-31 Statement of Cash Flows-Indirect Method
172. A firm’s dividends payable account increased $10,000 during the year. The firm also declared $35,000 of dividends.
Present the complete disclosure of these events in the direct format Statement of Cash Flows. 
 

Increase in dividends payable account from declaration $35,000
Net increase in dividends payable account 10,000
Difference represents cash payments for dividends $25,000

This is an outflow from financing activities

 

Beechy – Chapter 05 #172
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-32 Operating Activities-Direct Method
173. SDB reported sales of $300,000, write-offs of uncollectible accounts of $10,000 against the allowance, and a decrease in net accounts receivable of $40,000 during 2011.
Calculate what would be SDB’s cash collected from customers during 2011. 
 

Sales $300,000
Net decrease in accounts receivable 40,000
Cash collections from customers $340,000

 

Beechy – Chapter 05 #173
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
174. If cash collected from customers for 2011 is $780,000 and accounts receivable increased by $20,000 during the year, calculate the amount of sales for 2011. 
 

Cash collections from customers $780,000
Add increase in accounts receivable 20,000
Total sales for 2011 $800,000

 

Beechy – Chapter 05 #174
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
175. Net income was $50,000 and cost of goods sold was $150,000. Inventories increased by $10,000, and trade accounts payable increased by $12,000.
Calculate the amount of cash paid to suppliers. 
 

Cost of goods sold $150,000
Increase in inventories 10,000
Increase in accounts payable (12,000)
Cash payments to suppliers $148,000

 

Beechy – Chapter 05 #175
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
176. Assume cash paid to suppliers for 2011 is $420,000, that merchandise inventory increased by $20,000 during the year, and that cost of goods sold was $415,000 for 2011.
Calculate the net change in accounts payable during 2011. 
 

Cash payments to suppliers $420,000
Cost of goods sold (415,000)
Increase in inventory (20,000)
Net increase in accounts payable $15,000

 

Beechy – Chapter 05 #176
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Topic: 05-10 Basic Approach to Preparation
177. WXY reported sales revenue of $40,000, and expenses of $35,000 during the period ended December 31, 2011. During the year, accounts receivable increased by $1,500; merchandise inventory increased by $1,000; accounts payable increased by $500; dividends payable decreased by $700; and depreciation expense of $2,500 was recorded.
Calculate the amount of net cash flow from operating activities. 
 

Net income (40,000 – 35,000) $5,000
Depreciation expense 2,500
Increase in accounts receivable (1,500)
Increase in inventory (1,000)
Increase in accounts payable 500
Net cash flows from operating activities $5,500

 

Beechy – Chapter 05 #177
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
178. Complete the cash column based on the following data for the Statement of Cash Flows:

 

Cash Inflow
(Outflow)
Revenues (accrual) $188
Increases in accounts receivable 6 $ ____
Expenses (accrual) $116
Depletion expense 12
Inventory increase 8
Accounts payable increase 14 $ ____
Net cash inflow (outflow) $ ____


 

Cash from customers $188 – $6 $182
Cash for expenses $116 + $8 – $14 110
Net cash inflow $72

 

Beechy – Chapter 05 #178
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-09 Interpreting the Statement of Cash Flows
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method
179. A corporation started operations on January 1; the reporting period ends December 31. At the end of the year, the company’s records reflected the following amounts after all adjusting entries: Sales revenue, $700,000; Cost of goods sold, $400,000; Expenses (total), $200,000; Accrued wages payable, $5,000; Accounts payable, $10,000 and Accounts receivable, $25,000.

(a) Net income, accrual basis, was $____________________.
(b) Net cash inflow from operating activities was $____________. 
 

a)

Sales Revenue $700,000
Cost of goods sold (400,000)
Expenses (200,000)
Net income $100,000

b) Net cash inflow from operating activities:

Cash from customers $700,000 – 25,000 = $675,000
Cash paid to suppliers 400,000 – 10,000. = (390,000)
Cash for expenses 200,000 – 5,000 = (195,000)
Net cash inflow from operating activities $90,000

 

Beechy – Chapter 05 #179
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF).
Learning Objective: 05-02 Prepare a SCF in proper format.
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows.
Topic: 05-09 Interpreting the Statement of Cash Flows
Topic: 05-13 Presentation of Operating Activities
Topic: 05-31 Statement of Cash Flows-Indirect Method

c5 Summary

Category # of Questions
Accessibility: Keyboard Navigation 135
Beechy – Chapter 05 179
Blooms: Apply 43
Blooms: Remember 136
Difficulty: 1 Easy 93
Difficulty: 2 Medium 53
Difficulty: 3 Hard 33
Learning Objective: 05-01 Understand the structure, purpose and interpretation of the statement of cash flow (SCF). 41
Learning Objective: 05-02 Prepare a SCF in proper format. 125
Learning Objective: 05-03 Analyzing more complex situations to determine the related cash flows. 52
Learning Objective: 05-04 Understand the classification choices allowed in preparing the SCF for interest, dividends and income taxes. 25
Topic: 05-01 Objectives of the SCF 7
Topic: 05-02 Classification and Organization 12
Topic: 05-05 Cash Equivalents 11
Topic: 05-08 SCF Example 10
Topic: 05-09 Interpreting the Statement of Cash Flows 7
Topic: 05-10 Basic Approach to Preparation 10
Topic: 05-11 Analyzing Cash Flows 42
Topic: 05-12 A Simple Example 45
Topic: 05-13 Presentation of Operating Activities 35
Topic: 05-14 Direct or Indirect? 4
Topic: 05-16 Offsetting Transactions 1
Topic: 05-17 Non-cash Transactions 1
Topic: 05-27 ANALYZING MORE COMPLEX SITUATIONS 20
Topic: 05-30 T-Account Procedures 1
Topic: 05-31 Statement of Cash Flows-Indirect Method 26
Topic: 05-32 Operating Activities-Direct Method 8
Topic: 05-33 DISCLOSURE OF CASH FLOWS FOR INTEREST, DIVIDENDS, AND INCOME TAX 11
Topic: 05-36 Dividends Paid 2
Topic: 05-39 Dividends and Interest 2
Topic: 05-40 Summary 9
Topic: 05-45 Evaluation 1

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