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Exam 11: Statement of Cash Flows

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Question 41

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Which of the following is not correct about the statement of cash flows?

A) Paying dividends to investors creates a cash outflow from financing activities.
B) A purchase of equipment is classified as a cash outflow from investing activities.
C) A company with a net loss on the income statement will always have a net cash outflow from operating activities.

D) A) and C)
E) None of the above

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Question 42

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Under what section of the Statement of Cash Flows would you classify the purchase of equipment by issuing a long-term note payable?

A) Operating.
B) Investing.
C) Financing.
D) Noncash activity.

E) A) and D)
F) A) and C)

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Question 43

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Consider the following items: How many of these items would be added to net income when using the indirect method to prepare the operating activities section of the statement of cash flows? $\begin{array}{|l|l|}\hline \text { (a) Decrease in accounts receivable } & \text { (f) Gain on the sale of equipment } \\\hline \text { (b) Issuance of common stock } & \text { (g) Depreciation expense } \\\hline \text { (c) Increase in interest receivable } & \text { (h) Payment of dividends } \\\hline \text { (d) Purchase of land } & \text { (i) Decrease in utilities payable } \\\hline \text { (e) Decrease in accounts payable } & \text { (j) Increase in inventory }\\\hline \end{array}$

The long-term assets section of the balance sheet is the place to look for investing activities.

Wireless Technologies reports operating expenses of $2 million.Operating expenses include rent expense.Prepaid rent at the beginning and end of the year are $20,000 and $70,000,respectively.All other operating expenses were paid in cash as incurred.What is the amount of cash paid for operating expenses?

The balance sheet of Technology World reports total assets of $800,000 and $900,000 at the beginning and end of the year,respectively.The cash return on assets for the year is 20%.What is Technology World's net operating cash flows for the year?

We add an increase in interest payable to interest expense in arriving at cash paid for interest under the direct method.We deduct an increase in interest payable from interest expense in arriving at cash paid for interest under the direct method.

A loss on the sale of long-term assets is added back to net income to arrive at net cash flows from operating activities under the indirect method.

A company's Income Tax Payable account decreased from $14 million to $12 million during the year.If its income tax expense was $80 million,what would be shown as cash paid for income taxes under the direct method?

The balance in Retained Earnings is increased by net income and is decreased by dividends.

If no cash was exchanged in the purchase of equipment financed entirely with a note payable,we represent this as both an investing activity and a financing activity in the statement of cash flows.We represent this as a noncash activity either directly after the cash flow statement or in a note to the financial statements.

Wireless Technologies reports sales of $50 million.Accounts receivable at the beginning and end of the year are $5 million and $7 million,respectively.What is the amount of cash received from customers?

The purchase of land is classified in the statement of cash flows as a(n) :

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

Bad Brad's BBQ had cash flows for the year as follows ($ in millions) : Bad Brad's would report net cash inflows (outflows) from financing activities in the amount of: $\begin{array} { | l | r | } \hline \mathbf { CASH ~RECEIVED~ FROM: } & \\\hline \text { Customers } & \$ 1,800 \\\hline \text { Interest on irwestments } & 200 \\\hline \text { Sale of land } & 100 \\\hline \text { Sale of common stock } & 600 \\\hline \text { Issuance of debt securities } & 2,000 \\\hline \mathbf { CASH ~PAID ~FOR } & \\\hline \text { Interest on debt } & \$ 300 \\\hline \text { Income tax } & 80 \\\hline \text { Debt principal reduction } & 1,500 \\\hline \text { Purchase of equipment } & 4,000 \\\hline \text { Purchase of inventory } & 1,000 \\\hline \text { Dividends on common stock } & 200 \\\hline \text { Operating expenses } & 500 \\\hline\end{array}$

Which of the following is subtracted from net income as an adjustment under the indirect method of preparing the statement of cash flows?

We add a decrease in income tax payable to income tax expense to calculate cash paid for income taxes.

The Statement of Cash Flows:

The sale of a good or service is classified in the statement of cash flows as a(n) :

At the beginning of the period,Utilities Payable equals $500.At the end of the period,Utilities Payable equals $700.If Utilities Expense for the period equals $1,500,what was the cash paid for utilities for the period?