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Exam 12: Statement of Cash Flows

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Question 71

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Garrity, Incorporated uses the perpetual inventory method. During the year, Garrity purchased $34,500 of inventory on account under the terms 2/10, net 30. After receipt of the merchandise, Garrity discovered some of the merchandise was defective and returned $6,000 of merchandise. Garrity River paid the total liability for the merchandise retained within the discount period. All merchandise was finally sold for $39,000 cash. Required:What is the net cash flow from operating activities resulting from the above transactions?

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Question 72

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Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected. On December 31, Year 1, the Prepaid Insurance account decreased by $4,000 as a result of the recognition of insurance expense in an adjusting entry.

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(D)(NA)(NA)(NA)
Insurance expense decrea...

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Question 73

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Weymouth Company uses the indirect method to prepare the operating activities section of its statement of cash flows. Indicate whether each of the following statements is true or false. a)________ Depreciation expense would be subtracted from net income when determining the amount of cash flow from operating activities.b)________ Losses would be added to net income when determining the amount of cash flow from operating activities.c)________ Cash flow from investing activities would be reported the same as if the direct method were used.d)________ The amount of net cash flow from operating activities will be higher than it would be if the direct method were used.e)________ With the indirect method, a decrease in accounts receivable is added to net income in calculating the amount of cash flows from operating activities.

During Year 1, Mallard Company earned $165,000 of sales revenue on account and accrued $122,500 of operating expenses. The company also earned $26,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $2,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?

On August 1, Year 1, Jackson Company issued a one-year $80,000 face value interest-bearing note with a stated interest rate of 9% to Galaxy Bank. Jackson accrues interest expense on December 31, Year 1, its calendar year-end. What is the cash flow from financing activities that will be reported during the year ending December 31, Year 1?

Flores Corporation uses the indirect method to prepare the operating activities section of its statement of cash flows. The following is a partial list of the company's account balances: Additional information:Net income for Year 2 was $36,900, depreciation expense was $26,700, and equipment with a book value of $20,000 was sold for $18,000 cash. Required:Prepare the operating activities section of the statement of cash flows for Year 2. (Note that a heading is not required.)

The following information is for Cleveland Company: Additional data for the current year: (1) Sales on account for the period were $80,000.(2) Operating expenses for the period were $52,000.Based on this limited information, what was the net cash inflow from operating activities?

What is the name given to the sum of the subtotals of the three sections (operating activities, investing activities, and financing activities) of the statement of cash flows?

Which of the following cash flows would be included in the operating activities section of the statement of cash flows if the direct method is used?

Which of the following is the correct sequence of the three sections that are presented on the statement of cash flows?

On August 1, Year 1, Jackson Company issued a one-year $50,000 face value interest-bearing note with a stated interest rate of 9% to Galaxy Bank. Jackson accrues interest expense on December 31, Year 1, its calendar year-end. What is the cash flow from financing activities that will be reported during the year ending December 31, Year 1?

Mercury Company rents out a portion of its office space to another company. At the beginning of the year, the balance in the Unearned Rent Revenue account was $3,400. During the year, Mercury recognized $16,600 of rent revenue. If the ending balance of Unearned Rent Revenue is $2,600, how much cash was received from the tenant for rent during the year?

PhillipsCompany reported total credit sales of $460,000 for Year 2. Its accounts receivable totaled $70,000 and $100,000 at the beginning and end of the year, respectively. What was the cash collected from customers during Year 2?

Grace Company sold equipment for $40,000 cash. The equipment has cost $70,000 and had accumulated depreciation of $44,000 at the time of the sale. Based on this information alone, which of the following statements is true?

Erie Company reports the following comparative balance sheets and income statement information for the current year. Assuming accounts payable is used for inventory purchases only, what was the amount of cash paid for inventory purchases during the year?

Cash flow from operating activities can be more stable from year to year than the amount of operating income.

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected. Howard Company purchased land by issuing a note payable in the amount of $150,000.

Give an example of a noncash financing and investing activity.

A cash payment to purchase treasury stock is reported on the statement of cash flows as a financing activity.

Which of the following statements best explains the correct handling of depreciation on the statement of cash flows when using the indirect method?