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Exam 14: Statement of Cash Flows

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Question 61

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The following income statement was drawn from the income statement of Gibbons Company for its first year of operations: Using the direct method, the net cash flow from operating activities equals: $\begin{array} { | l | r | } \hline \text { Cash revenue } & \$ 60,000 \\\hline \text { Depreciation expense } & 20,000 \\\hline \text { Accrued interest expense } & 6,000 \\\hline \text { Cash operating expense } & 24,000 \\\hline \text { Operating income } & 10,000 \\\hline \text { Gain on the sale of equipment } & 1,200 \\\hline \text { Net income } & \$ 11,200 \\\hline\end{array}$

A) $37,200.
B) $26,000.
C) $36,000.
D) $24,800.

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

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Question 62

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Pierce Corporation reported a $3,600 balance in Accounts Receivable on January 1, Year 2. During the year, sales on account in the amount of $24,800 were made. If the ending balance of Accounts Receivable is $3,700, what is the amount of cash received from customers?

A) $21,200
B) $21,500
C) $28,400
D) $24,700

E) None of the above
F) All of the above

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Question 63

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When using the indirect method, the amount of net cash flow from operating activities will be the same as it would be if the direct method were used.

What kinds of cash flows are reported as financing activities on the statement of cash flows?

During the year, Burton Company had cash collections from customers of $100,000, cash paid to employees of $16,000, cash paid to suppliers of $50,000, cash used to retire long-term bonds of $16,000, and cash payments for dividends of $10,000. The net cash flow from operating activities during the year was:

Pace Associates, a small consulting firm, charges all of its expenses on Accounts Payable. Pace's Accounts Payable balance was $1,500 at the beginning of the year. During the year, expenses were incurred on account in the amount of $13,500. The ending Accounts Payable balance was $3,500. What is the amount of cash paid for expenses during the year?

Under the direct method, cash payments to suppliers would be reported in the operating section of a cash flow statement.

What are the two methods used to prepare the statement of cash flows? What section(s) of the statement of cash flows are impacted by the choice of method?

When using the indirect method, a decrease in a current asset (other than cash or cash equivalents) is:

Phibbs Company prepared the following data for the year.What is the net cash flow from investing activities? $\begin{array} { | l | r | } \hline \text { Outflow to purchase treasury stock } & \$ 30,000 \\\hline \text { Inflow from sale of machinery } & 7,500 \\\hline \text { Inflow from sale of marketable securities } & 3,750 \\\hline \text { Outflow to purchase building } & 87,500 \\\hline \text { Outflow to purchase land } & 12,500 \\\hline \text { Outflow to pay dividends } & 7,500 \\\hline \text { Outflow to pay interest } & 37,500 \\\hline\end{array}$

The Duke 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 $1,200. During the year, Duke recognized $6,800 of Rent Revenue. If the ending balance of Unearned Rent Revenue is $700, how much cash was received from the tenant for rent during the year?

The only difference between the cash flow statement prepared under the indirect method as opposed to the direct method is the manner in which the:

A net decrease in the Equipment account indicates that equipment must have been sold at a loss during the year.

In preparing the statement of cash flows by the indirect method, an increase in Accounts Payable would be subtracted from net income.

Which of the following is incorrect regarding the financing activities section of a statement of cash flows?

The indirect method adjusts for the differences between the accrual-based income statement and "cash flows from operating activities."

Frost Company reported a $4,000 increase in Dividends Payable, a $60,000 increase in Retained Earnings, and $64,000 in net income during the year. Based on this information, the company must have paid dividends equal to $4,000 during the year.

When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment for an increase in the Accounts Receivable balance?

In preparing the statement of cash flows by the indirect method, noncash revenues and gains are added to net income.

In preparing the statement of cash flows by the indirect method, which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?