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Exam 12: The Statement of Cash Flows

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Question 91

Multiple Choice

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Which balance sheet accounts are most affected by financing activities?

A) Current assets
B) Current liabilities
C) Long-term assets
D) Long-term liabilities and stockholders' equity

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

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Question 92

Multiple Choice

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The following items were reported on the balance sheets and income statement for the Flying Mullet Company: $\begin{array}{lr}\text { Accounts receivable, December } 31,2016 & \$ 85,000 \\\text { Accounts receivable, December } 31,2017 & 98,000 \\\text { Sales-2017 } & 750,000\end{array}$ How would the change in accounts receivable be reported in the operating activities section of the statement of cash flows under the indirect method?

A) As an addition to sales
B) As a deduction from sales
C) As an addition to net income
D) As a deduction from net income

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

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Question 93

Multiple Choice

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Springdale Co.reported net income of $200,000.Cash from operations

Under certain conditions, an investment in common stock can be considered a cash equivalent.

When using the indirect method, how is the purchase of equipment for cash shown on the statement of cash flows?

Which of the following statements is true?

When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows?

It is not possible for Cash to decrease from Yr.1 to Yr.2 if income rises over this period.

Assuming the indirect method for preparing the statement of cash flows is used, indicate whether these items should be added to net income (A) , deducted from net income (D) , or not be reported in the operating section of the statement under the indirect method (NR) . -Increase in accounts receivable

When using the direct method, how is depreciation expense recorded on the statement of cash flows?

Carson City Saloon purchased a $25,000 truck for catering from its restaurant.It made a down payment of one-fourth of the price.What combination of amounts would affect the income statement and statement of cash flows for the purchase of the truck? ​ $\begin{array}{lc}\text { Income Statement } & \text { Cash Flow Statement } \\\text { a. } \$ 25,000 & \$-0- \\\text { b. } \$-0- & (\$ 25,000) \\\text { c. } \$ 25,000 & (\$ 6,250) \\\text { d. } \$-0- & (\$ 6,250)\end{array}$

Which of the following statements is true?

Under the indirect method, the first line in the operating activities section of the statement of cash flows is the net income or loss for the period.

Use the equation presented below to answer the question that follows: $\begin{array} { l } \text { Cash } = \mathrm { CL } + \mathrm { LTL } + \mathrm { CS } + \mathrm { RE } - \mathrm { NCCA } - \mathrm { LTA } \\\text { where: } \quad \mathrm { CL } = \text { Current liabilities } \\\text { LTL = Long-term liabilities } \\\text { CS } = \text { Common stock } \\\mathrm { RE } = \text { Retained earnings } \\\text { NCCA } = \text { Noncash current assets } \\\text { LTA } = \text { Long-term assets } \\\end{array}$ ? Which of the following activities results in a cash outflow?

The decrease in accounts receivable over a period results in a(n) _________________________ to net income reported in the operating activities section of the statement of cash flows using the indirect method.

___________________________________ is a measure of a company's ability to meet its future debt obligations after paying income taxes and interest costs and making capital expenditures.

Which of the following should be classified as an investing activity on the statement of cash flows?

Use the information below for Dakota Corp.for 2016 and 2017 to answer the following question. $\begin{array}{lr}\text { Bonds payable, December } 31,2016 & \$ 500,000 \\\text { Bonds payable, December } 31,2017 & 800,000 \\\text { Loss on bond retirement-2017 } & 15,000 \\\text { Interest expense on bonds }-2017 & 45,000\end{array}$ At the end of 2017, Dakota issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2016 (before their maturity date) .All interest expense was paid in cash during 2017. How much did Dakota pay to retire the $500,000 bond issue during 2017?

All the information needed to compute the cash flow adequacy ratio is found on the balance sheet.

Which balance sheet accounts are most affected by investing activities?