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Exam 14: Statement of Cash Flows

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Question 1

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Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000.As a result of this transaction,cash would

A) increase by $48,000
B) decrease by $7,000
C) increase by $55,000
D) decrease by $27,000

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

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A

Question 2

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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) True
B) False

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Question 3

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In preparing the statement of cash flows,the correct order of reporting cash activities is financing,operating,and investing.

A company had net income of $252,000.Depreciation expense is $26,000.During the year,accounts receivable and inventory increased by $15,000 and $40,000,respectively.Prepaid expenses and accounts payable decreased by $2,000 and $4,000,respectively.There was also a loss on the sale of equipment of $3,000.How much was the net cash flow from operating activities on the statement of cash flows using the indirect method?

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of cash receipts and cash payments related to the day-to-day operations of the business.

To determine cash payments for income taxes for the statement of cash flows using the direct method,an increase in income taxes payable is added to the income tax expense.

Sales reported on the income statement were $690,000.The accounts receivable balance declined $39,000 over the year.Determine the amount of cash received from customers.

Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section.

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

Under the indirect method,expenses that do not affect cash are added to net income in the operating activities section of the statement of cash flows.

Net income for the year was $29,500.Accounts receivable increased $2,500,and accounts payable increased $5,400.There were no other changes in noncash current assets and liabilities.Under the indirect method,the cash flow from operations is $32,400.

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

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

Which of the following increases cash?

The net income reported on an income statement for the current year was $63,000. Depreciation recorded on fixed assets for the year was $24,000. Balances of the current asset and current liability accounts at the end and beginning of the year are listed below. Prepare the Cash Flows from Operating Activities section of the statement of cash flows using the indirect method.

The cost of merchandise sold during the year was $50,000.Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year,respectively.Accounts payable were $6,000 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

When using the spreadsheet work sheet method to analyzing noncash accounts,no order of analysis is required,but it is more efficient to start with Retained Earnings and proceed upward in the account listing.

Sales reported on the income statement were $372,000.The accounts receivable balance declined $4,500 over the year.The amount of cash received from customers was $367,500.

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

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