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Exam 12: Statement of Cash Flows

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Question 1

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KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a $215,000 note payable. How would this transaction be reported within the cash flow from investing activities section of the cash flow statement?

A) An outflow of $250,000.
B) An outflow of $215,000.
C) An outflow of $35,000.
D) It would not be reported in the investing activities section of the cash flow statement.

E) B) and C)
F) A) and B)

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Question 2

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The financial statements for World Company show the following: Cost of goods sold, $725,000. How much cash was paid to suppliers?

A) $731,000.
B) $736,000.
C) $719,000.
D) $714,000.

E) B) and C)
F) All of the above

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Question 3

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Slipper Company sold a productive asset, a machine, for cash. It originally cost Slipper $20,000. The accumulated depreciation at the date of disposal was $15,000. A gain on the disposal of $2,000 was reported. What was the asset's selling price?

Complete the following statement of cash flows using the indirect method:

A company's 2016 income statement reported total sales revenue of $1,200,000; accounts receivable increased by $25,000 and the unearned sales revenue account decreased $15,000 during 2016. How much cash was collected from customers during 2016?

The difference between the direct and indirect and methods of cash flow statement preparation only affects the determination of cash flows from investing activities.

Which of the following would be a financing activities cash flow?

Marissa Company is preparing a statement of cash flows using the indirect method for the year ended December 31, 2017. The following data are available: Required: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31, 2017.

The following information was reported from the statement of cash flows for Landlover's Restaurants for the years 2015 through 2017 (in millions of dollars): Required: A.Calculate the quality of income ratio for the years 2015 through 2017.Round your answers to two decimal places. B.Interpret the quality of income ratio for Landlover's for the three year period.

A company reported an increase in accounts receivable and an increase in unearned sales revenues during 2016. Which of the following statements is correct?

A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted) . How should this be reported on the statement of cash flows?

Canadian Beer had a capital acquisitions ratio of 7.49, which means its net income exceeded its cash investment in property, plant and equipment by almost 7.5 times.

Use the following information to prepare a statement of cash flows for Stable Equipment Company for the year ended December 31, 2016. Use the indirect method for the operating activities section of the statement. Information: Net income for the year 2016 was $5,000. Accounts receivable decreased $2,000, while inventories increased $4,000, and accounts payable decreased $7,000. Depreciation expense included in net income was $8,000. During the year, a piece of land held for future expansion was sold for its book value of $8,000 and a new service truck was purchased for $14,000. The company borrowed $18,000 on a two-year note from the bank. Dividends of $6,000 were paid in cash. Preferred stock was issued to retire $7,000 of long-term notes payable. The beginning cash balance was $22,000 and the ending balance was $32,000.

Under the indirect method, an increase in prepaid expenses is subtracted from net income, because the cash prepayments exceed the related expenses.

Brice Corporation reported the following information: Compute Brice Corporation's cash collected from customers for 2016.

Free cash flow measures the sufficiency of cash flow from operating activities to cover both capital expenditures for property, plant and equipment as well as the payment of dividends.

Flow Company has provided the following information for the year ended December 31, 2016: • Cash paid for interest, $20,000 • Cash paid for dividends, $6,000 • Cash dividends received, $4,000 • Cash proceeds from bank loan, $29,000 • Cash purchase of treasury stock, $11,000 • Cash paid for equipment purchase, $27,000 • Cash received from issuance of common stock, $37,000 • Cash received from sale of land with a $32,000 book value, $25,000 • Acquisition of land costing $51,000 in exchange for preferred stock issuance • Payment of a $100,000 note payable by exchanging used machinery with a $77,000 book value and $100,000 fair value How much was Flow's net cash flow from investing activities?

Collection of principal on a note receivable is a cash flow from financing activities.

Atkins Corporation has provided the following information for the year ended December 31, 2016: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year. • The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. Which of the following statements is correct with respect to determining cash flow from investing activities? Assume that the equipment purchase and sale resulted in cash flows.

Which of the following items about the statement of cash flows is correct?