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Exam 12: Statement of Cash Flows

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Question 41

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KJ Company, a manufacturer, uses the indirect method for preparing its statement of cash flows. The company has provided the following information pertaining to its recent year of operation: • Cash flow from operating activities, $136,000 • Accounts payable increased $11,000 • Prepaid assets decreased $8,000 • Depreciation expense was $12,000 • Accounts receivable increased $23,000 • Loss on sale of a depreciable asset was $6,000 • Wages payable decreased $9,000 • Unearned revenue decreased $19,000 • Patent amortization expense was $3,000 How much was KJ's net income?

A) $185,000.
B) $135,000.
C) $147,000.
D) $131,000.

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

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Question 42

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Cash collected from customers is a cash flow from operating activities and is calculated using the indirect method for preparing the statement of cash flows.

A) True
B) False

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Question 43

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Aaron Inc. reported operating expenses during 2015 of $765,000 (including $80,000 of depreciation expense) . Prepaid expenses increased $25,000 while accrued liabilities increased $43,000. How much cash was paid for operating expenses during 2015?

KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 cash and signing a $215,000 note payable. How would this transaction be reported within the cash flow from financing activities section of the cash flow statement?

Under the indirect method, a decrease in inventory is subtracted from net income because inventory purchases are less than cost of goods sold.

A company reported an increase in accounts payable and a decrease in inventory during 2014. Which of the following statements is correct?

Cash flows associated with property, plant, and equipment acquisition and disposition are reported as cash flows from investing activities.

Which of the following statements about the capital acquisitions ratio is incorrect?

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?

Slipper Company sold a productive asset, a machine, for cash. It originally cost Slipper $20,000. The accumulated depreciation at the date of disposal was $15,000. A gain on the disposal of $2,000 was reported. What was the asset's selling price?

Madison Company had sales of $154,000. Additional information from the balance sheet is below: $\begin{array} { c c c } &\text { Beginning Balance } & \text { Ending Balance } \\ \text { Accounts Receivable }&22,000 & \$ 28,000 \\\text { Accounts Payable }&21,000 & 25,000\end{array}$ How much cash was collected from customers?

The capital acquisitions ratio represents the portion of property, plant, and equipment purchases which could have been financed with cash flow from operating activities.

Atkins Corporation has provided the following information for the year ended December 31, 2014: • The equipment account balance increased $200,000. • The equipment accumulated depreciation account increased $35,000. • 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 correct with respect to determining cash flow from investing activities? Assume that the equipment purchase and sale resulted in cash flows.

Cash flows from financing activities include those cash flows with respect to paying previously declared dividends.

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

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 financing activities?

If sales revenue was $1,800,000 and accounts receivable decreased $40,000 while unearned revenue increased $10,000 during the year, then cash collected from customers equals $1,850,000.

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

Wish Corporation acquired a computer for $15,000 and paid for it in full by issuing 1,000 shares of its own common stock, par $10 (current market price $15 share). This transaction should not be reported within the statement of cash flows because cash was neither received nor disbursed.

The payment of interest on a note payable is a cash flow from a financing activity.