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Exam 13: Statement of Cash Flows

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Question 81

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The net income reported on the income statement for the current year was $250,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000, and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: $\begin{array}{lrr} & \text { End } & \text { Beginning } \\\text { Cash } & \$ 50,000 & \$ 60,000 \\\text { Accounts receivable } & 112,000 & 108,000 \\\text { Inventories } & 105,000 & 93,000 \\\text { Prepaid expenses } & 4,500 & 6,500 \\\text { Accounts payable (merchandise creditors) } & 75,000 & 89,000\end{array}$ What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

A) $271,000
B) $279,000
C) $327,000
D) $256,000

E) A) and C)
F) C) and D)

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Question 82

Multiple Choice

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Cash dividends paid on common stock would be reported in the statement of cash flows in

A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

E) B) and D)
F) C) and D)

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Question 83

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The statement of cash flows shows the effects on cash of a company's operating, investing, and financing activities.

The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form: ​ The income statement for the current year is as follows: ​ Additional data for the current year are as follows: ​ Prepare a statement of cash flow, using the indirect method of reporting cash flows from operating activities.

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

The cost of goods sold during the year was $45,000. Inventories were $13,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable (all owed to merchandise suppliers) were $7,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

Balances of the current asset and current liability accounts at the end and beginning of the year are as follows: ​ Use the direct method to prepare the cash flows from operating activities section of a statement of cash flows.

If a gain of $11,000 is realized in selling (for cash) office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

Free cash flow is cash from operations less cash used for

The following selected account balances appeared on the financial statements of the Washington Company. Use these balances to answer the questions that follow. $\begin{array}{lr}\text { Accounts receivable, Jan. } 1 & \$ 13,000 \\\text { Accounts receivable, Dec. } 31 & 9,000 \\\text { Accounts payable, Jan. 1 } & 4,000 \\\text { Accounts payable, Dec. } 31 & 7,000 \\\text { Inventory, Jan. 1 } & 10,000 \\\text { Inventory, Dec. } 31 & 15,000 \\\text { Sales } & 56,000 \\\text { Cost of goods sold } & 31,000\end{array}$ The Washington Company uses the direct method to calculate net cash flow from operating activities. Assume that all accounts payable are owed to merchandise suppliers. ​ -Cash collections from customers were

Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is

On the statement of cash flows, the cash flows from investing activities section would include

For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Payment of dividends

Which of the following is not one of the four basic financial statements?

On the statement of cash flows, the cash flows from operating activities section would include

A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for $25,000 representing a gain of $4,500. The value in the operating activities section regarding this event would be

The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data are often costly to accumulate.

Cash inflows and outflows are not netted in the investing or financing sections of the statement of cash flows but are separately disclosed to give the reader full information.

Balances of the current asset and current liability accounts at the end and beginning of the year are as follows: $\begin{array}{lrr}&\text { End } & \text { Beginning } \\\text { Cash } & \$ 67,000 & \$ 73,000 \\\text { Accounts receivable (net) } & 73,000 & 60,000 \\\text { Inventories } & 54,000 & 47,000 \\\text { Accounts payable (merchandise creditors) } & 43,000 & 37,000 \\\text { Sal aries payable } & 2,800 & 3,800 \\\text { Sales (on account) } & 210,000 & \\\text { Cost of goods sold } & 70,000 & \\\text { Operating expenses other than depreciation } & 67,000 &\end{array}$ ​ Use the direct method to prepare the cash flows from operating activities section of a statement of cash flows.