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Exam 13: Statement of Cash Flows

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Question 41

Multiple Choice

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When using the spreadsheet (work sheet) method to analyze noncash accounts, it is best to start with

A) cash
B) net income
C) retained earnings
D) revenue

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Question 42

Multiple Choice

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Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of the year and $15,000 at the end of the year. The amount of cash for the payment of dividends during the year is

A) $50,000
B) $40,000
C) $55,000
D) $35,000

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Question 43

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Based on the following, what is free cash flow? $\begin{array}{lc}\text { Net cash flow from operating activities } & \$ 318,000 \\\text { Net cash flow used for investing activities } & (30,000) \\\text { Net cash flow from financing activities } & 30,000\end{array}$ Cash flows from investing include the purchase of a replacement asset for $100,000 and the sale of the one used in production, which is now obsolete, for $70,000. Cash flows from financing include $70,000 of borrowing.

Under the direct method of reporting cash flows from operations, the primary source of cash is cash received from customers.

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

Norris Company declared cash dividends of $60,000 during the year. Cash dividends payable were $20,000 at the beginning of the year and $25,000 at the end of the year. The amount of cash Norris Co. used for payment of dividends during the year was

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the net decrease in inventories from the beginning to the end of the period is added to net income for the period.

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Loss on sale of equipment

Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the issuance of bonds payable.

Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the sale of land.

A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows under

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. -Amortization of intangible assets

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Sale of machinery held for use by the company

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. -Decrease in accounts payable balance

On the basis of the following data for Branch Co. for the current and preceding years ended December 31, prepare a statement of cash flows for the current year using the indirect method. Assume that equipment costing $125,000 was purchased for cash and the land was sold for $15,000. The stock was issued for cash and the only entries in the retained earnings account were for net income of $56,000 and cash dividends declared and paid of $18,000.

Which of the following types of transactions would be reported as a cash flow from investing activity on the statement of cash flows?

Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

The income statement disclosed the following items for the current year: ​ $\begin{array} { | l | r | } \hline \text { Depreciation expense } & \$ 36,000 \\\hline \text { Gain on disposal of equipment } & 21,000 \\\hline \text { Net income } & 317,500 \\\hline\end{array}$ ​ Balances of the current assets and current liabilities accounts changed between December 31, last year, and December 31, this year, as follows: ​ $\begin{array}{|l|r|}\hline \text { Increase in accounts receivable } & \$ 5,600 \\\hline \text { Decrease in inventory } & 3,200 \\\hline \text { Decrease in prepaid insurance } & 1,200 \\\hline \text { Decrease in account payable } & 3,800 \\\hline \text { Increase in income taxes payable } & 1,200 \\\hline \text { Increase in dividends payable } & 850 \\\hline\end{array}$ ​ Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Preferred stock issued in exchange for land would be reported in the statement of cash flows in

The comparative balance sheet of ConnieJo Company, for December 31, Years 1 and 2 ended December 31 appears below in condensed form: ​ Additional data for the current year are as follows: ​ (a) Fully depreci ated equipment costing $\$ 39,000$ was scrapped, no salvage, and equipment was purchased for $\$ 157,000$ . (b) Bonds payable for $\$ 100,000$ were retired by payment at their face amount. (c) 5,000 shares of common stock were issued at $\$ 15$ for cash. (d) Cash dividends declared were paid $\$ 41,400$ . (e) All sales are on account. ​ Prepare a statement of cash flows, using the indirect method of reporting cash flows from operating activities.