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Exam 12: Statement of Cash Flows

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Question 21

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The quality of income ratio increases when depreciation expense is recorded.

A) True
B) False

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Question 22

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Hill Company reported net income of $10,000 for the year ended December 31, 2016. Additional 2016 information is as follows: Required: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31, 2016.

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Question 23

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The following information has been provided to you by RKJ Company: Using the indirect method, what is the net cash provided by operating activities?

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

The statement of cash flows explains how the cash balance changed during a particular period of time.

When a company sells equipment for cash at a loss, cash flows from investing activities decreases.

Which of the following is correct?

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?

Bold Company's 2016 income statement reported total sales revenue of $250,000. During 2016, accounts receivable decreased by $20,000 and accounts payable increased $10,000. How much cash was collected from customers during 2016?

During the year ended December 31, 2017, Blythe Company paid $2.2 million to purchase stock in another company, $1.0 million to purchase its common stock for treasury shares, $.5 million to buy short-term investments, sold used equipment for $.8 million when its book value was $.6 million, and purchased new equipment for $3.4 million. Required: A.Prepare the investing activities section of Blythe's cash flow statement for the year ended December 31, 2017. B.Is the net cash flow for investing activities a net cash inflow, or a net cash outflow? Briefly describe the reason for your answer.

State the three cash flow classifications that are reported within a statement of cash flows and describe the primary activities included in each.

Which of the following would not be reported as a financing activities cash flow?

Brooks Company reported net income of $40,000, which included depreciation expense and amortization expense of $21,000 and $18,000, respectively. The following changes also occurred during the year ended December 31, 2016: Required: Prepare the operating activities section of the statement of cash flows using the indirect method for the year ended December 31, 2016.

Which of the following transactions increases the quality of income ratio?

The following information was available from the financial statements of Collateral, Inc. for the years 2016 and 2015 (in millions of dollars): Required: A.Calculate the capital acquisitions ratio for each of the two years.Round your answers to two decimal places. B.Calculate the free cash flow for each of the two years. C.Comment on the sufficiency of the capital acquisitions ratio and free cash flow for the two years and implications for future corporate strategy.

During 2016, Eva's Enterprises cash paid for property, plant and equipment was $755 million and cash flow from operating activities was $5,968 million. The average property, plant, and equipment from the comparative balance sheets were $6,094 million. Eva's capital acquisitions ratio for 2016 is closest to:

Atkins Corporation has provided the following information for the year ended December 31, 2016: • The equipment account balance increased by $200,000 from the beginning of the year to the end of the year. • The equipment accumulated depreciation account balance increased by $35,000 from the beginning of the year to the end of the year. • Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. • Depreciation expense recorded on the equipment during the year was $65,000. Which of the following statements is incorrect with respect to preparation of the statement of cash flows? Assume that the equipment purchase and sale resulted in cash flows.

When a company purchases equipment using common stock, the equipment purchase is reported as a financing activity.

Burich Co. reported short-term borrowings of $2.5 million, long-term borrowings of $6.8 million, repayments of long-term borrowings of $3.5 million, interest payments of $780,000, purchase of common stock shares for treasury of $.5 million, and cash dividends declared of $1.1 million. What is the cash flow from financing activities?

While preparing a statement of cash flows, you encountered the following transaction: February 1, 2017: Battles Corporation acquired a small office building in exchange for 50,000 shares of its own common stock; par value $10 per share; market value $15 per share. Required: Should this transaction be shown on the statement of cash flows? Why or why not?