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Exam 12: Statement of Cash Flows

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Question 61

True/False

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

A) True
B) False

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Question 62

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Darwin Company, a manufacturer, has provided the following information pertaining to its recent year of operation: • Net income, $200,000 • Accounts receivable increased $18,000 • Prepaid insurance increased $7,000 • Depreciation expense was $25,000 • Loss on sale of a building was $22,000 • Wages payable increased $14,000 • Unearned revenue decreased $21,000 Using the indirect method, how much was Darwin's net cash provided by operating activities?

A) $227,000.
B) $215,000.
C) $171,000.
D) $257,000.

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

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Question 63

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

GJ Company, a manufacturer, has provided the following information pertaining to its recent year of operation: • Net income, $500,000 • Accounts payable decreased $42,000 • Prepaid assets increased $31,000 • Depreciation expense was $53,000 • Accounts receivable decreased $41,000 • Loss on sale of a depreciable asset was $31,000 • Wages payable increased $19,000 • Unearned revenue decreased $31,000 • Patent amortization expense was $5,000 Using the indirect method, how much was GJ's net cash provided by operating activities?

Amortization of a patent reduces cash flows from investing activities.

Canadian Beer reported equipment sold for $222 million cash and new equipment purchased $1,515 million cash. The equipment sold had a net book value of $150 million. Cash flow from investing activities would show:

Bold Company's 2014 income statement reported total sales revenue of $250,000. During 2014, accounts receivable decreased by $20,000 and accounts payable increased $10,000. How much cash was collected from customers during 2014?

Only highly liquid investments with original maturities of less than six months at the date of purchase qualify as cash equivalents.

Cash flows from financing activities include those cash flows with respect to issuing and retiring long-term debt and equity.

Which of the following transactions would be reported in the cash flow statement as a cash flow from financing activities?

A company reported net income of $200,000 during 2014. The company reported depreciation expense of $35,000, patent amortization of $10,000 and a $5,000 loss on the sale of equipment. Using the indirect method, how much is the company's cash flow from operating activities?

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

During 2014, Tommy's Toys reported the following: long-term debt repayments, $503 million; interest paid, $143 million; proceeds from exercise of stock options, $27 million, and issue of common stock in exchange for land costing $10 million. What is the 2014 net cash flow from financing activities?

Which of the following transactions does not result in either a cash inflow or a cash outflow?

Which of the following is reported as a cash flow from investing activities?

Flow Company has provided the following information for the year ended December 31, 2014: • 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?