#statementofcashflow

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A cashflow statement is a key financial statement, which consists of all the expenses and earnings of an organisation within a specific period of time. A cash flow statement is used to asses the liquidity and solvency of a company.

Statement of cash flow acts as a tool for investors to analyse the financial position of the company. On the basis of this statement, they decide, if they want to invest in that particular company. This is a major use of the cash flow statement.

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ACC 206 Week 9 Quiz – Strayer New

Click on the Link Below to Purchase A+ Graded Course Material

 http://budapp.net/ACC-206-Accounting-Principles-II-Week-9-Quiz-Strayer-267.htm

 Quiz 7 Chapter17

  THESTATEMENTOFCASHFLOWS

  CHAPTERSTUDYOBJECTIVES

 1.Indicatetheusefulnessofthestatementofcashflows.

 2.Distinguishamongoperating,investing,andfinancingactivities.

 3.Prepareastatementofcashflowsusingtheindirectmethod.

 4.Analyzethestatementofcashflows.

 5.Explainhowtouseaworksheettopreparethestatementofcashflowsusingtheindirectmethod.

 6.Prepareastatementofcashflowsusingthedirectmethod.

    TRUE-FALSESTATEMENTS

 1.     Thestatementofcashflowsisarequiredstatementthatmustbepreparedalongwithan income statement,balancesheet,andretainedearningsstatement.

 2.     Forexternalreporting,acompanymustprepareeitheranincomestatementora statementof cashflows,but notboth.

 3.     Aprimaryobjectiveofthestatementofcashflowsistoshowtheincomeorlosson investingandfinancingtransactions.

 4.     A statementofcashflows indicatesthe sourcesanduses of cashduringaperiod.

 5.     Inpreparingastatementofcashflows,cashequivalentsaresubtractedfrom cashinorder tocomputethenetchangeincashduring a period.

 6.     Cashequivalentsarehighly-liquidinvestmentsthathavematuritiesoflessthanthree months.

 7.     The useofcashtopurchasehighlyliquidshort-terminvestments(cashequivalents)would be reportedonthestatement of cashflowsasaninvestingactivity.

 8.     Inpreparingastatementofcashflows,theissuanceofdebtshouldbereported separately from theretirementof debt.

 9.     Noncashinvestingandfinancingactivitiesmustbereportedinthebodyofastatementof cashflows.

 10.     Thestatementofcashflowsclassifiescashreceiptsandpaymentsasoperating, nonoperating, financial,andextraordinaryactivities.

 11.     Thesaleof landfor cashwouldbeclassifiedasacashinflowfroman investingactivity.

 12.     Cashflowfrominvestingactivitiesisconsideredthemostimportantcategoryonthe statementof cashflowsbecauseit isconsideredthebestmeasureof expectedincome.

 13.     Thereceiptofdividends fromlong-term investments instockisclassified asacashinflow frominvestingactivities.

TheStatementof Cash Flows       17-5

   14.     Thepaymentofinterestonbondspayableisclassifiedasacashoutflowfromoperating activities.

 15.     Anyitemthatappearsontheincomestatementwouldbeconsideredaseitheracash inflowor cashoutflowfromoperatingactivities.

 16.     Theacquisitionofabuildingbyissuingbondswouldbeconsideredaninvestingand financing activity thatdidnot affectcash.

 17.     Allmajorfinancingandinvestingactivitiesaffectcash.

 18.     Cashprovidedbyoperationsisgenerallyequaltooperatingincome.

 19.     Usingtheindirectmethod,anincrease inaccountsreceivable duringaperiod isdeducted fromnetincomeincalculatingcashprovidedbyoperations.

 20.     Usingtheindirectmethod,anincreaseinaccountspayableduringaperiodisdeducted from netincomeincalculatingcashprovidedbyoperations.

 21.     Alossonsaleofequipmentisaddedtonetincomeindeterminingcashprovidedby operationsundertheindirectmethod.

 22.     Inpreparingastatementofcashflows,anincreaseintheCommonStockandTreasury Stockaccountsduringaperiodwouldbe an investingactivity.

 23.     Cashprovidedby operatingactivitiesfailsto take intoaccountthatacompanymust invest in newfixedassetsjusttomaintainits currentlevelofoperations.

 24.     Freecashflowequalscashprovidedbyoperationslesscapitalexpendituresandcash dividends.

 a25.     Theuseof aworksheetto prepareastatementofcashflowsis optional.

 a26.    Duringtheyear,IncomeTaxExpenseamountedto$30,000andIncomeTaxesPayable increasedby$3,000;therefore,thecashpaidforincometaxeswas$27,000.

 a27.     Inpreparingnetcashflowfromoperatingactivitiesusingthedirectmethod,eachitemin theincomestatementisadjustedfromtheaccrualbasistothecashbasis.

 a28.    Usingthedirectmethod,majorclassesofinvestingandfinancingactivitiesarelistedin theoperatingactivitiessection.

 a29.    Duringaperiod,costofgoodssold+anincreaseininventory+anincreaseinaccounts payable =cashpaidtosuppliers.

 a30.     Operatingexpenses+anincreaseinprepaidexpenses–adecreaseinaccrued expensespayable=cashpaymentsfor operatingexpenses.

17-6        

 Additional True-FalseQuestions

 31.     Thestatementofcashflowsclassifiescashreceiptsandcashpaymentsintotwo categories:operatingactivitiesand nonoperatingactivities.

 32.     Financingactivitiesincludetheobtainingofcashfromissuingdebtandrepayingthe amounts borrowed.

 33.     TheadjustedtrialbalanceistheonlyitemneededtopreparetheStatementofCash Flows.

 34.     Undertheindirectmethod,retainedearningsisadjustedforitemsthataffectedreported netincomebutdidnot affect cash.

 a35.    ThereconcilingentryfordepreciationexpenseinaworksheetisacredittoAccumulated DepreciationandadebittoOperating-DepreciationExpense.

 a36.    Underthedirectmethod,theformulaforcomputingcashcollectionsfromcustomersis salesrevenuesplustheincreaseinaccountsreceivableorminusthedecreasein accounts receivable.

     MULTIPLECHOICEQUESTIONS

  37.     Thestatementofcashflowsshouldhelpinvestorsandcreditorsassesseachofthe followingexceptthe

a.entity'sabilitytogeneratefutureincome. b.entity'sabilityto paydividends.

c.reasonsforthedifferencebetweennetincomeandnetcashprovidedbyoperating activities.

d.cashinvestingandfinancingtransactionsduringtheperiod.

 38.     Thestatementof cashflows

a.mustbepreparedona dailybasis.

b.summarizesthe operating,financing,andinvestingactivitiesofanentity. c.is anothernamefortheincomestatement.

d.isaspecialsectionof the incomestatement.

TheStatementof Cash Flows       17-7

 39.     Whichoneofthefollowingitemsisnotgenerallyusedinpreparingastatementofcash flows?

a.Adjustedtrialbalance

b.Comparativebalancesheets c.Currentincomestatementd.Additionalinformation

 40.     Theprimarypurposeofthestatementof cashflows is to

a.provideinformationabouttheinvestingandfinancingactivitiesduringaperiod. b.prove thatrevenuesexceedexpensesifthereis anetincome.

c.provideinformationaboutthecashreceiptsandcashpaymentsduringa period. d.facilitatebanking relationships.

 41.     Ifa companyreportsanet loss,it

a.maystillhavea netincreasein cash. b.willnotbe abletopaycashdividends. c.will not beabletogeta loan.

d.willnotbeable tomakecapitalexpenditures.

 42.     Inadditionto the three basicfinancialstatements,which ofthe following isalso arequired financialstatement?

a.the"CashBudget"

b.theStatementof CashFlows

c.theStatementof CashInflowsandOutflows d.the"CashReconciliation"

 43.     Thestatementof cashflowswillnotreportthe

a.amountof checksoutstanding atthe endof theperiod. b.sourcesofcashinthecurrentperiod.

c.uses of cashin thecurrentperiod.

d.changeinthecash balanceforthecurrentperiod.

 44.     Cashequivalentsdonotinclude a.short-termcorporatenotes. b.treasurybills.

c.moneymarketfunds.

d.2-yearcertificatesofdeposit.

 45.     Whichofthefollowing characteristicsdoesnotapplyto cashequivalents? a.Short-term

b.Highly-liquid

c.Readilyconvertibleintocash

d.Sensitiveto interestratechanges

 46.     Cashequivalentsaregenerally investmentswithmaturitiesof a.$1,000ormore.

b.threemonthsor less. c.atleastsixmonths.

d.oneyearorthe operatingcycle, whicheveris less.

17-8        

 47.     The bestmeasureof acompany'sabilitytogeneratesufficientcashtocontinueasagoing concern is netcashprovidedby

a.financingactivities. b.       investingactivities. c.operatingactivities. d.processingactivities.

 48.     Theacquisitionof landbyissuingcommonstockis

a.a noncashtransactionwhich is notreported inthebodyofastatementofcashflows. b.acashtransactionandwouldbereportedinthebodyof astatementofcashflows.

c.a noncashtransactionandwouldbereportedinthebodyofastatementof cashflows. d.onlyreportedif thestatement of cashflowsisprepared usingthedirectmethod.

 49.     Theorderof presentationofactivitiesonthestatement of cashflowsis a.operating,investing,andfinancing.

b.operating,financing,andinvesting. c.financing, operating,andinvesting. d.financing,investing,andoperating.

 50.     Financingactivitiesinvolve a.lendingmoney.

b.acquiringinvestments. c.issuingdebt.

d.acquiringlong-lived assets.

 51.     Investingactivitiesinclude

a.collecting cash on loansmade. b.obtainingcashfromcreditors. c.obtainingcapitalfromowners.

d.repayingmoneypreviouslyborrowed.

 52.     Generally,themostimportantcategoryonthestatementofcashflowsiscashflowsfrom a.operatingactivities.

b.investingactivities. c.financingactivities.

d.significantnoncash activities.

 53.     Thecategorythat isgenerally consideredtobe thebestmeasure ofacompany'sability to continue asagoingconcernis

a.cashflowsfromoperatingactivities. b.cashflowsfrominvestingactivities. c.cashflowsfromfinancingactivities. d.usuallydifferentfromyear to year.

 54.     Cashreceiptsfrom interestanddividendsareclassifiedas a.financingactivities.

b.investingactivities. c.operatingactivities.

d.eitherfinancingorinvestingactivities.

TheStatementof Cash Flows       17-9

 55.     Eachof thefollowingisanexampleof asignificantnoncashactivityexcept a.conversionofbonds intocommonstock.

b.exchangesof plantassets.

c.issuanceof debtto purchaseassets. d.stockdividends.

 56.     Ifacompanyhasbothaninflowandoutflowofcashrelatedtoproperty,plant,and equipment, the

a.twocasheffectscanbenettedandpresentedasoneitemintheinvestingactivities section.

b.cashinflowandcashoutflowshouldbereportedseparatelyintheinvestingactivities section.

c.twocasheffectscanbenettedandpresentedasoneiteminthefinancingactivities section.

d.cashinflowandcashoutflowshouldbereportedseparatelyinthefinancingactivities section.

 57.     Of theitemsbelow,theonethatappearsfirst onthestatementof cashflows is a.noncashinvesting andfinancingactivities.

b.netincrease(decrease)incash. c.cash attheendof theperiod.

d.cash atthebeginningoftheperiod.

 58.     Whichof thefollowingtransactionsdoesnotaffectcashduring aperiod? a.Write-offofanuncollectibleaccount

b.Collectionofanaccounts receivable c.Saleof treasurystock

d.Exerciseofthecalloptiononbondspayable

 59.    Significantnoncashtransactionswouldnotinclude a.conversionofbonds intocommonstock.b.assetacquisitionthroughbondissuance.

c.treasurystockacquisition. d.exchangeof plantassets.

 60.     Inpreparingastatementofcashflows,aconversionofbondsintocommonstockwillbe reported in

a.thefinancingsection.

b.the"extraordinary"section.

c.a separatescheduleornote tothefinancial statements. d.thestockholders'equitysection.

 Usethefollowing informationforquestions61–64.

 Foreachofthefollowingtransactions,indicatewhere,ifatall,itwouldbeclassifiedonthe statement of cashflows.Assumetheindirectmethodisused.

 61.     Paidincometaxes.

a.Operatingactivitiessection b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

17-10

 62.     Issuedcommonstockfor cash. a.Operatingactivitiessection b.Investingactivitiessectionc.Financingactivities section

d.Doesnotrepresentacashflow

 63.     Purchasedlandforcash.

a.Operatingactivitiessection b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

 64.     Purchasedlandandbuildingwithamortgage. a.Operatingactivitiessection

b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

 Usethefollowing informationforquestions65–66.

 JoyElle’sVegetableMarkethadthefollowingtransactionsduring 2008:

 1.Issued$25,000of par valuecommonstockforcash.

2.Repaida 6yearnotepayableintheamountof$11,000.

3.Acquiredlandbyissuingcommonstockof parvalue$50,000. 4.Declaredandpaidacashdividendof$1,000.

5.Solda long-terminvestment(cost$3,000)forcashof$3,000. 6.Acquiredan investmentinIBMstockforcashof $6,000.

 65.     Whatisthenetcash providedbyfinancingactivities? a.$13,000

b.$25,000 c.$14,000 d.$9,000

 66.     Whatisthenetcash providedbyinvestingactivities? a.$6,000

b.$16,000 c.($3,000) d.$3,000

 67.     MillerCompanypurchasedtreasurystockwithacostof$15,000during2008.Duringthe year,thecompanypaiddividendsof$20,000andissuedbondspayableforproceedsof $816,000.Cashflowsfromfinancingactivitiesfor2008total

a.$796,000net cashinflow. b.$811,000net cashinflow. c.$5,000netcashoutflow. d.$781,000net cashinflow.

TheStatementof Cash Flows       17-11

 68.     ClineCompanyissuedcommonstockforproceedsof$186,000during2008.The companypaiddividendsof$33,000andissuedalong-termnotepayablefor$45,000in exchangeforequipment duringtheyear.Thecompanyalsopurchased treasurystockthat hadacostof$7,000.Thefinancingsectionofthestatementofcashflowswillreportnet cash inflowsof

a.$146,000. b.$202,000. c.$153,000. d.$179,000.

 69.     InGentryCompany,landdecreased$120,000becauseofacashsalefor$120,000,the equipmentaccountincreased$40,000asaresultofacashpurchase,andBonds Payable increased$130,000fromissuanceforcashatfacevalue.Thenetcashprovidedby investingactivities is

a.$120,000. b.$210,000. c.$80,000. d.$90,000.

 70.     Accounts receivablearisingfromsalestocustomersamountedto$80,000and$70,000at thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$240,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement of cashflowsis

a.$240,000. b.$250,000. c.$310,000. d.$230,000.

 71.     Accounts receivablearisingfromsalestocustomersamountedto$35,000and$40,000at thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$120,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement of cashflowsis

a.$120,000. b.$125,000. c.$155,000. d.$115,000.

 72.     WiltonCompanyreportednetincomeof$40,000fortheyear.Duringtheyear,accounts receivabledecreasedby$7,000,accountspayableincreasedby$3,000anddepreciation expense of $5,000wasrecorded.Netcashprovidedbyoperatingactivitiesfortheyearisa.$30,000.

b.$55,000. c.$39,000. d.$35,000.

 73.     BusterCompanyreportedanetlossof$3,000fortheyearendedDecember31,2008. Duringtheyear,accountsreceivableincreased$7,000, merchandiseinventorydecreased $5,000,accountspayabledecreasedby$10,000,anddepreciationexpenseof$5,000 was recorded.During2007,operatingactivities

a.usednetcashof $10,000. b.usednetcashof $14,000.

c.providednetcash of$14,000. d.providednetcash of$9,000.

17-12

 74.     Thenetincomereportedontheincomestatementforthecurrentyearwas$205,000. Depreciationrecordedonplantassetswas$38,000.Accountsreceivableandinventories increasedby$2,000and$8,000,respectively.Prepaidexpensesandaccountspayable decreasedby$1,000and$11,000respectively.Howmuchcashwasprovidedby operatingactivities?

a.$185,000 b.$223,000 c.$205,000 d.$239,000

 75.     Thenetincomereportedontheincomestatementforthecurrentyearwas$220,000. Depreciationwas $50,000.Accountreceivableand inventoriesdecreasedby $10,000 and $30,000,respectively.Prepaidexpensesandaccountspayableincreased,respectively, by$1,000and$8,000.Howmuchcash wasprovidedbyoperating activities?

a.$281,000 b.$317,000 c.$301,000 d.$309,000

 76.     Ifagainof$10,000isincurredinselling(forcash)officeequipmenthavingabookvalue of$100,000,thetotalamount reportedinthecashflows frominvestingactivitiessectionof thestatementof cashflows is

a.$90,000. b.$110,000. c.$100,000. d.$10,000.

 77.     Ifa lossof $12,500 is incurred inselling(forcash)office equipmenthavinga bookvalueof $50,000,thetotalamountreportedinthecashflowsfrominvestingactivities sectionof the statement of cashflowsis

a.$37,500. b.$50,000. c.$62,500. d.$12,500.

 78.     HarborCompanyreportednetincomeof$60,000 fortheyearended December31,2008. Duringtheyear,inventoriesdecreasedby$12,000,accountspayabledecreasedby $18,000,depreciationexpensewas$20,000andagainondisposalofequipmentof $9,000wasrecorded.Netcashprovidedbyoperating activitiesin2008usingtheindirect methodwas

a.$119,000. b.$65,000. c.$77,000. d.$55,000.

 79.     Thethird(final)stepinpreparingthestatementofcashflowsisto a.analyzechanges innoncurrentassetandliabilityaccounts.

b.comparethenetchangeincashwiththechangeinthecashaccountreportedonthe balance sheet.

c.determinenet cashprovidedbyoperatingactivities. d.listthenoncashactivities.

TheStatementof Cash Flows       17-13

 80.     Whichoneof thefollowingitemsisnot necessaryinpreparinga statementofcashflows? a.Determinethechangeincash

b.Determinethecashprovidedbyoperations

c.Determinecashfromfinancingandinvestingactivities d.Determinethe cashin all bankaccounts

 81.     Ifaccountsreceivablehave increasedduringtheperiod,

a.revenuesonanaccrualbasisarelessthanrevenuesonacashbasis.

b.revenuesonanaccrualbasisaregreaterthanrevenuesonacashbasis. c.revenues onanaccrual basisarethesameasrevenues onacashbasis. d.expensesonanaccrualbasisaregreater thanexpensesonacashbasis.

 82.     Ifaccountspayablehaveincreasedduringaperiod,

a.revenuesonanaccrualbasisarelessthanrevenuesonacashbasis. b.expensesonanaccrualbasisarelessthanexpensesonacashbasis.

c.expensesonanaccrualbasisaregreater thanexpensesonacashbasis. d.expensesonanaccrualbasisarethesameasexpensesonacashbasis.

 83.     Whichoneof thefollowing affectscashduringaperiod? a.Recordingdepreciationexpense

b.Declarationof acashdividend

c.Write-offof anuncollectibleaccountreceivable d.Paymentof anaccountspayable

 84.     Incalculatingcashflowsfromoperatingactivitiesusingtheindirectmethod,againonthe sale ofequipmentis

a.addedtonet income.

b.deductedfrom netincome.

c.ignoredbecauseit doesnotaffectcash.d.notreportedonastatementof cashflows.

 85.     MeyerCompanyreportednetincomeof$50,000fortheyear.Duringtheyear,accounts receivableincreasedby$7,000,accountspayabledecreasedby$3,000anddepreciation expense of $5,000wasrecorded.Netcashprovidedbyoperatingactivitiesfortheyearisa.$45,000.

b.$65,000. c.$49,000. d.$50,000.

 86.     FlynnCompanyreportedanetlossof$20,000fortheyearendedDecember31,2008. Duringtheyear,accountsreceivabledecreased$10,000,merchandiseinventory increased$16,000,accountspayableincreasedby$20,000,anddepreciationexpense of $10,000wasrecorded.During2008,operatingactivities

a.usednetcashof $4,000. b.usednetcashof $16,000.

c.providednetcash of$4,000.d.providednetcash of$16,000.

17-14

 87.     Startingwithnetincomeandadjustingitforitemsthataffectedreportednetincomebut which didnot affect cashis calledthe

a.directmethod.b.indirectmethod.

c.workingcapitalmethod. d.cost-benefitmethod.

 88.     Incalculatingnetcashprovidedbyoperatingactivitiesusingtheindirectmethod,an increase inprepaidexpensesduringaperiodis

a.deductedfromnetincome. b.addedtonetincome.

c.ignoredbecauseit doesnotaffectincome.d.ignoredbecauseitdoesnotaffectexpenses.

 89.     Usingtheindirectmethod,patentamortizationexpenseforthe period a.isdeductedfromnetincome.

b.causescashto increase. c.causescashto decrease. d.is addedtonetincome.

 90.     Indevelopingthecashflowsfromoperatingactivities,mostcompaniesin theU.S. a.use thedirectmethod.

b.usetheindirectmethod.

c.presentboththeindirectanddirectmethodsintheirfinancialreports. d.preparetheoperatingactivitiessectionontheaccrualbasis.

 91.     Eachofthefollowingisaddedtonetincome incomputing netcashprovidedbyoperating activitiesexcept

a.amortizationexpense.

b.an increaseinaccruedexpensespayable. c.a gainon sale of equipment.

d.a decreaseininventory.

 92.     Whichofthefollowingwouldbesubtractedfromnet incomeusingtheindirect method? a.Depreciationexpense

b.An increaseinaccountsreceivable c.An increaseinaccountspayabled.Adecreaseinprepaidexpenses

 93.     Whichofthefollowingwouldbeaddedto netincomeusingthe indirectmethod? a.An increaseinaccountsreceivable

b.Anincreaseinprepaidexpenses c.Depreciationexpense

d.Adecreaseinaccountspayable

 94.     Whichofthefollowingwouldnotbeanadjustmenttonetincomeusingtheindirect method?

a.DepreciationExpense

b.An increaseinPrepaidInsurance c.AmortizationExpense

d.An increaseinLand

TheStatementof Cash Flows       17-15

 95.     Incalculatingcash flowsfromoperatingactivitiesusingtheindirect method,alossonthe sale ofequipmentwill appearasa(n)

a.subtractionfromnetincome. b.additiontonet income.

c.additiontocashflowfrominvestingactivities.

d.subtractionfromcashflowfrominvesting activities.

 96.     Whichofthefollowingadjustmentstoconvertnetincometonetcashprovidedby operatingactivitiesiscorrect?

  a.AccountsReceivable b.PrepaidExpenses

c.Inventory

d.TaxesPayable

Add to NetIncomeincrease increase decrease decrease

DeductfromNetIncome decrease decrease increaseincrease

 97.     Whichofthefollowingadjustmentstoconvertnetincometonetcashprovidedby operatingactivitiesisincorrect?

  a.AccountsReceivable b.PrepaidExpenses

c.Inventory

d.AccountsPayable

Add to NetIncome decrease increase decrease increase

DeductfromNetIncomeincreasedecreaseincreasedecrease

  98.     Whichofthefollowingadjustmentstoconvertnetincometonetcashprovidedby operatingactivitiesis notaddedto net income?

a.GainonSaleofEquipment b.DepreciationExpense

c.PatentAmortizationExpense d.DepletionExpense

 99.     Usingtheindirectmethod,ifequipmentissoldatagain,the

a.saleproceedsreceivedaredeductedinthe operatingactivitiessection. b.saleproceedsreceivedareaddedintheoperatingactivitiessection.

c.amountof thegainisadded intheoperating activitiessection.

d.amountofthegainis deducted intheoperatingactivitiessection.

 100.     Acompanyhadnetincomeof$180,000.Depreciationexpenseis$26,000.Duringthe year,AccountsReceivableandInventoryincreased$15,000and$40,000,respectively. PrepaidExpensesandAccountsPayabledecreased$2,000and$4,000,respectively. Therewasalsoalossonthesaleofequipmentof$3,000.Howmuchcashwasprovided byoperatingactivities?

a.$146,000 b.$152,000 c.$226,000 d.$238,000

 101.     Onthestatementofcashflowsusingthe indirectmethod,patentamortizationexpensewill a.beaddedtonetincomeintheoperatingsection.

b.be deductedfromnetincomeintheoperatingsection. c.appearasaninflowofcashintheinvesting section.d.appearasanoutflowofcashintheinvestingsection.

17-16

 102.     Theindirectanddirectmethodsofpreparingthestatementofcashflowsareidentical exceptforthe

a.significantnoncashactivitysection. b.operatingactivitiessection.

c.investingactivitiessection. d.financingactivitiessection.

 103.     Landacquiredfromtheissuanceofcommonstockisreported a.asafinancingactivity.

b.as aninvestingactivity. c.as anoperating activity.

d.inaseparatescheduleatthebottom ofthestatement.

 104.     If$250,000ofbondsareissuedduringtheyearbut$150,000ofoldbondsareretired during theyear,thestatementof cashflows willshowa(n)

a.netincreaseincashof$100,000. b.netdecreaseincashof$100,000.

c.increaseincash of $250,000 andadecreaseincashof $150,000. d.net gainonretirementof bonds of $100,000.

 105.     Whichof the followingchanges inretainedearningsduring aperiod willbereported in the financing activitiessectionofthe statementof cashflows?

 1.Declarationofacashdividendpaidduringtheperiod. 2.Net incomefortheperiod.

a.1 b.2

c.Neither1nor2. d.Both1and2.

 106.     Thestatementof cashflows

a.ispreparedinsteadofanincomestatementundergenerallyacceptedaccounting principles.

b.isusedtoassessanentity's abilityto paydividendsandmeetobligations. c.ispreparedfromcomparativeincomestatements.

d.reflectsearningspersharefiguresonacashbasisandonanaccrualbasisinthe bodyof thestatement.

 107.   �� Inpreparingthestatementof cashflows,determiningthenetincreaseor decreaseincash requirestheuseof

a.theadjustedtrialbalance.

b.thecurrentperiod'sbalancesheet. c.acomparativebalancesheet.

d.a comparativeincomestatement.

 108.     Todeterminethenetcashprovided(used)byoperatingactivities,it isnecessarytoanalyze a.thecurrentyear'sincomestatement.

b.a comparativebalancesheet. c.additionalinformation.

d.all ofthese.

TheStatementof Cash Flows       17-17

 109.     Whichofthefollowingwouldnotbeneededtodeterminenetcashprovidedbyoperating activities?

a.Depreciationexpense

b.Changeinaccountsreceivable c.Paymentof cashdividends

d.Changeinprepaidexpenses

 110.     Whenequipmentissoldforcash,the amountreceivedis reflectedasacash a.inflowintheoperatingsection.

b.inflowinthefinancingsection. c.inflowintheinvestingsection. d.outflowintheoperatingsection.

 111.      Thestatementof cashflowswillnotprovideinsightinto a.whydividends werenot increased.

b.whethercashflowis greaterthannet income. c.theexactproceedsof afuturebondissue.

d.howtheretirementof debtwasaccomplished.

 112.     Whichofthefollowingtransactionswouldnotbeclassifiedasafinancingactivity? a.Purchaseoftreasurystock

b.Paymentof dividends

c.Issuanceof bonds ata discount

d.Purchaseofalong-terminvestmentinbonds

 113.     Ameasurethatdescribesthecashremainingfromoperationsafteradjustmentforcapital expendituresand dividendsis

a.adjustedcashfromoperations. b.cashprovidedbyoperations.c.freecashflow.

d.netcashprovided byoperating activities.

 114.     Freecashflowequalscashprovidedby

a.operationslesscapitalexpenditures andcashdividends. b.operationslesscashdividends.

c.investingactivities lesscapitalexpendituresandcashdividends. d.operationslesscapitalexpenditures.

 115.     DV’sPestControlProductshasthefollowinginformationavailable:

 NetIncome

CashProvidedbyOperations CashSales

CapitalExpenditures DividendsPaid

 Whatis DV’sfreecashflow? a.$18,000

$15,000 21,000 65,000 11,000 3,000

 b.$10,000 c.$7,000 d.$1,000

17-18

 a116.Whenlistingaccountsinthestatementofcashflowsworksheet,theaccumulated depreciation accountisshown

a.withaccountsthathavecreditbalances. b.withaccountsthathavedebitbalances. c.as acreditunderthereconcilingitems. d.asadebit underthereconcilingitems.

 a117.Inthebottomportionof the statementof cashflowsworksheet, a.inflows ofcasharedebitsinthereconciling columns.

b.outflowsof casharedebitsinthereconcilingcolumns.

c.informationpertainingtoinvestingandfinancingactivitiesonly isentered. d.onlysignificantnoncashtransactionsareentered.

 a118.Onthe statementof cashflowsworksheet,

a.significant noncashinvestingand financingactivities arenotenteredinthereconciling columns.

b.adecreaseincashwillbeoffsetbyadebitinthereconcilingitemscolumnsatthe bottomoftheworksheet.

c.anincreaseincashwillbeoffsetbyadebitinthereconcilingitemscolumnatthe bottomoftheworksheet.

d.incomestatementaccountsarelistedafterbalancesheetaccountsinthetophalfof theworksheetundertheindirectmethod.

 a119.Eachof thefollowingwouldbereportedunderoperatingactivitiesexceptcashreceipts a.from sales of goods.

b.fromsalesofinvestments. c.of interestonloans.

d.of dividendsfrominvestments.

 a120.Whichofthefollowing statements concerningthestatementof cashflowsistrue?

a.Thestatementof cashflows isusuallymoreaccuratewhenusingtheindirect method. b.Ifthedirectmethodisused,asupplementaryschedulereconciling the netincometoa

netcashfrom operatingactivitiesmuststillbe provided.

c.Thestatementof cashflows reflectsbothearningspershareandcashper share.

d.Thestatementofcashflowsisanoptionalfinancialstatementforexternalreporting purposes.

 a121.CarterCompanyreportsthefollowing:

  Inventory AccountsPayable

End ofYear $25,000

30,000

Beginning of Year $40,000

10,000

 Ifcostofgoodssoldforthe yearis$170,000,theamountof cashpaidtosuppliersis a.$175,000.

b.$165,000. c.$135,000. d.$205,000.

TheStatementof Cash Flows       17-19

 a122.Duringtheyear,SalariesPayabledecreasedby$6,000.IfSalaryExpenseamountedto $190,000fortheyear,thecashpaidtoemployees(includingdeductionsfromgrosspay)is a.$196,000.

b.$190,000. c.$184,000. d.$202,000.

 a123.GaryCompanyreportsa$15,000 increaseininventoryanda$5,000increaseinaccounts payableduringtheyear.CostofGoodsSoldfortheyearwas$180,000.Thecash payments madeto supplierswere

a.$180,000. b.$190,000. c.$160,000. d.$175,000.

 a124.RaderCompanyhadcreditsalesof$600,000. Thebeginningaccountsreceivablebalance was$40,000andtheendingaccountsreceivablebalancewas$140,000.Whatwerethe cash collectionsfromcustomersduringtheperiod?

a.$700,000 b.$600,000 c.$500,000 d.$640,000

 a125.GorenInc.hadcashsalesof$300,000andcreditsalesof$1,150,000.Theaccounts receivablebalanceincreased$15,000duringtheyear.HowmuchcashdidGorenreceive fromits customers duringtheyear?

a.$1,435,000 b.$1,465,000 c.$1,135,000 d.$1,165,000

 a126.StineCompanyhadacostofpurchasesof$220,000.Thecomparativebalancesheet analysisrevealeda$10,000decreaseininventoryanda$20,000increaseinaccounts payable.WhatwereStine'scashpaymentsto suppliers?

a.$200,000 b.$190,000 c.$230,000 d.$250,000

 a127.WayneCompanyhadanincreaseininventoryof$40,000.Thecostofgoodssoldwas $80,000.Therewasa$5,000decreaseinaccountspayablefromthepriorperiod.What wereWayne'scashpaymentstosuppliers?

a.$125,000 b.$75,000c.$115,000 d.$85,000

 a128.Whichofthefollowingitemsdoesnotappearinthestatementofcashflowsunderthe direct method?

a.Cashpaymentstosuppliers

b.Cashcollectionsfromcustomers c.DepreciationExpense

d.Cashfromthesaleof equipment

17-20

 a129.NixonCompanyhasotheroperatingexpensesof$90,000.Therehasbeenadecreasein prepaidexpensesof$4,000duringtheyear,andaccruedliabilitiesare$6,000largerthan in thepriorperiod.WhatwereNixon'scashpaymentsfor operatingexpenses?

a.$92,000 b.$88,000 c.$80,000 d.$90,000

 a130.CarsenCorporationshowsincometaxexpenseof$90,000.Therehasbeena$5,000 decreaseinfederalincometaxespayableanda$7,000increaseinstateincometaxes payable duringtheyear.What wasCarsen'scashpaymentforincometaxes?

a.$90,000 b.$88,000 c.$85,000 d.$92,000

 a131.Whichofthefollowingwouldnotappearintheoperatingactivitiessectionofastatement ofcashflowspreparedunderthedirectmethod?

a.Cashreceiptsfromcustomers b.Cashpaidfor incometaxes

c.Gainonsaleof equipment d.Cashpaidto employees

 a132.Thecostofgoodssoldduringtheyearwas$165,000.Merchandiseinventorydecreased by$6,000duringtheyearandaccountspayabledecreasedby$3,000duringtheyear. Usingthedirectmethodofreportingcashflowsfromoperatingactivities,cashpayments formerchandisetotal

a.$168,000. b.$162,000. c.$156,000. d.$174,000.

 a133.BentCompanyreportsa$20,000increaseininventoryanda$5,000decreasein accountspayableduringtheyear.CostofGoodsSoldfortheyearwas$150,000.Using thedirectmethodofreportingcashflowsfromoperatingactivities,cashpaymentsmade tosupplierswere

a.$150,000. b.$165,000. c.$175,000. d.$135,000.

 a134.During2008,UnruhCompanyhad $160,000incashsalesand$1,400,000increditsales. Theaccounts receivable balances were$180,000 and$212,000atDecember31,2007 and2008,respectively.Usingthedirectmethodofreportingcash flowsfromoperating activities,whatwasthe totalcashcollectedfromallcustomersduring2008?

a.$1,368,000 b.$1,592,000 c.$1,560,000 d.$1,528,000

TheStatementof Cash Flows       17-21

 a135.LoganCompanyhasotheroperatingexpensesof$260,000.Therehasbeenanincrease inprepaidexpensesof$16,000duringtheyear,andaccruedliabilitiesare$24,000lower thaninthepriorperiod.Usingthedirectmethodofreportingcashflowsfromoperating activities,whatwereLogan'scashpaymentsforoperatingexpenses?

a.$248,000 b.$252,000 c.$220,000 d.$300,000

 Additional MultipleChoiceQuestions

 136.     Whichof thefollowing steps isnotrequired inpreparingthestatement of cashflows? a.Determinethechangeincash.

b.Determinethenetcashprovidedbyoperatingactivities. c.Determinecashfrominvestingandfinancingactivities. d.Determinethechangeincurrentassets.

 137.     Financingactivitiesinvolve

a.lendingmoneytootherentitiesandcollectingonthoseloans. b.cash receiptsfromsalesof goodsandservices.

c.acquiringanddisposingof productivelong-livedassets. d.long-termliabilityand owners'equityitems.

 138.     Theinformationtopreparethestatementofcashflowsusuallycomesfromeachofthe followingexcept

a.thecomparativebalancesheet. b.theretainedearningsstatement. c.additionalinformation.

d.thecurrentincomestatement.

 139.     Thestatementof cashflows ispreparedfromallofthefollowing except a.theadjustedtrialbalance.

b.comparativebalancesheets. c.selectedtransactiondata.

d.thecurrentincomestatement.

 140.     Theinformationinastatementofcashflowswillnothelpinvestorstoassesstheentity's abilityto

a.generatefuture cashflows.

b.obtainfavorableborrowingterms at abank. c.paydividends.

d.payits obligations whentheybecomedue.

 141.     Inconvertingnetincometonetcashprovidedbyoperatingactivities,undertheindirect method:

a.decreasesinaccountsreceivable and increasesinprepaidexpensesare added. b.decreasesininventoryandincreasesinaccruedliabilitiesareadded.

c.decreasesinaccountspayableanddecreasesin inventoryarededucted.

d.increasesinaccountsreceivable and increasesin accruedliabilitiesarededucted.

17-22

 142.     IntheFreyfogleCompany,landdecreased$60,000becauseofacashsalefor$60,000, theequipmentaccountincreased$20,000asaresultofacashpurchase,andBonds Payableincreased$70,000fromanissuanceforcashatfacevalue.Thenetcash provided by investingactivities is

a.$60,000.b.$110,000. c.$40,000. d.$50,000.

 a143.CribbetsCompanyusesthedirectmethodindeterminingnetcashprovidedbyoperating activities,Duringtheyear,operatingexpenseswere$260,000,prepaidexpenses increased$20,000,andaccruedexpensespayableincreased$30,000.Cashpayments for operatingexpenseswere

a.$210,000. b.$310,000. c.$270,000. d.$250,000.

 a144.BainbridgeCompanyusesthedirectmethodindeterminingnetcashprovidedby operatingactivities.Theincomestatementshowsincometaxexpense$60,000.Income taxespayablewere$25,000atthebeginningoftheyearand$18,000attheendofthe year.Cashpaymentsforincometaxesare

a.$53,000. b.$60,000. c.$67,000. d.$78,000.

 a145.Whena worksheetisused, all butoneof thefollowingstatementsiscorrect.The incorrect statementis

a.Reconcilingitemsontheworksheetarenotjournalizedor posted.

b.Thebottomportionof theworksheetshowsthestatementof cashflowseffects.

c.Thebalancesheetaccounts portion of the worksheetisdivided intotwo parts:assets, and liabilitiesandstockholders'equity.

d.Eachline pertainingtoabalancesheetaccountshouldfootacross.

      BRIEFEXERCISES

BE146

Selectedtransactionsfor the EldonCompanyarelistedbelow.

 1.Collectedaccountsreceivable.

2.Declaredandpaiddividends oncommonstock. 3.Soldlong-terminvestmentsforcash.

4.Issuedstockforequipment.

5.Repaidfiveyearnotepayable. 6.Paidemployeewages.

7.Convertedbonds payabletocommon stock. 8.Acquiredlong-term investmentwithcash.

9.Soldbuildingsand equipmentforcash. 10.Soldmerchandiseto customers.

 Instructions

 Classifyeachtransactionaseither(a)anoperatingactivity,(b)aninvestingactivity,(c)a financing activity,or(d) a noncashinvestingandfinancingactivity.

    BE147

 BertucciCompanyhadnetincomeof$204,000in2008.Depreciationexpensefortheyearis $45,000.Duringtheyear,AccountsReceivableincreased$9,000andPrepaidExpenses decreased$1,000.The companyalsosoldequipmentatalossof $2,000.

 Instructions

Calculatenet cashflowsfromoperatingactivitiesusingtheindirect method.

    BE148

 During2008,BaxterCompanysoldabuildingwithabookvalueof$145,000forproceedsof $132,000.Thecompanyalsosoldlong-terminvestmentsforproceedsof$45,000.Thecompany purchasedlandandanewbuildingfor$320,000bysigningalong-termnotepayable.Noother transactions impactedlong-term assetaccountsduring2008.

 Instructions

Computenet cashflowsfrom investingactivities.

    BE149

 MoverCompanyissuedcommonstockforproceedsof$14,000during2008.Thecompanypaid dividendsof$2,000.Thecompany alsoissued along-termnotepayable for$30,000inexchange forequipmentduringtheyear.Thecompanysoldtreasurystockthathadacostof$2,000for $4,000.

 Instructions

Computenet cashflowsfromfinancingactivities.

   BE150

 AtJanuary1,2008,BergmanEnterprisesreportedabalanceintheEquipmentaccountof $45,000.Duringtheyearthecompanypurchasedequipmentwithacostof$60,000andsold equipmentwithabookvalueof$30,000.Thecompany reportedalossonthesaleofequipment of$2,000. Assumethe indirectmethodisused.

 Instructions

 Determinewhatamountwillbereportedin(a)theoperatingactivitiessectionand(b)the investingactivitiessection withregardto thepurchaseandsaleof equipment.

      BE151

 Assumetheindirectmethodisusedtocomputecashflowsfromoperations.Foreachitemlisted below,indicatetheeffectonnetincomeinarrivingatcashflowsfromoperationsbychoosingone of thefollowingcodeletters.

CodeCashFlowsFromOperatingActivities

Addto NetIncome                                                     A DeductfromNetIncome                                             D

 1.     Increaseinaccountsreceivable 2.    Increaseininventory

3.     Decreaseinprepaidexpenses 4.        Decreaseinaccountspayable 5.        Increaseinaccruedliabilities

6.     Increaseinincometaxespayable 7.    Depreciationexpense

8.     Losson sale of investment

9.     Gainondisposalof equipment 10.    Amortizationexpense

   BE152

 DuttonCompanypreparedthetabulationbelowat December31,2008.

 NetIncome..............................................................................................................         $275,000

 Adjustmentstoreconcilenet incometonetcashprovidedbyoperatingactivities:

 Depreciationexpense,$25,000......................................................................

 Decreaseinaccountsreceivable,$55,000.....................................................

 Increase ininventory,$12,000.......................................................................

 Decreaseinaccountspayable,$6,600..........................................................

 Increase inincometaxespayable,$1,500.....................................................

 Loss onsaleofland,$5,000...........................................................................

 Netcashprovided(used)byoperatingactivities............................................

 Instructions

 Showhoweachitemshouldbereportedinthestatementofcashflows.Useparenthesesfor deductions.

  BE153

 Daimler Enterprisesreportedcash flowfromoperationsof$342,000. Thecompanymadecapital expendituresof $112,000andpaiddividends of $34,000.

 InstructionsComputefreecashflow.

 BE154

 SchickCompanyreportedcostofgoodssoldof$192,000onits2008incomestatement.The company’sbeginninginventorywas$35,000.Theendinginventorywasvaluedat$40,000.The AccountsPayablebalanceatJanuary1was$25,000.TheDecember31balanceinAccounts Payablewas $22,000.

 Instructions

Computecashpaymentstosuppliers.

   BE155

 HillerCompanyhadtotaloperatingexpensesof$135,000in2008,whichincludedDepreciation Expenseof$25,000.Alsoduring2008,prepaidexpensesdecreasedby$9,000andaccrued expenses increasedby$5,500.

 Instructions

 Calculatetheamountofcashpaymentsforoperatingexpensesin2008usingthedirectmethod.

   EXERCISES

Ex.156

Classifyeach ofthefollowing asa(n):

 A.OperatingActivity B.InvestingActivity C.FinancingActivity

 1Issuanceof bonds. 2.Saleofequipment.

3.Amortizationexpense.

 4.Purchaseof treasurystock.

 5.Receiptof dividendsoninvestment. 6.Purchaseof land.

   Ex.157

 SelectedtransactionsofEllerCompanyare listedbelow.

 1.Commonstockissoldforcashabove parvalue. 2.Bondspayableare issuedforcashatadiscount.

3.Interestreceivable onashort-termnotereceivableis collected. 4.Landis soldfor cashatbookvalue.

5.Accountspayable are paidincash.

6.Equipmentispurchasedbysigninga 3-year,10%notepayable. 7.Cashdividendsoncommonstockaredeclaredandpaid.

8.100sharesof XYZcommon stockarepurchasedforcash. 9.Merchandiseis soldtocustomersforcash.

10.Bondspayableareconvertedinto commonstock.

 Instructions

 Classifyeachtransactionaseither(a)anoperatingactivity,(b)aninvestingactivity,(c)a financing activity,or(d) anoncashinvestingandfinancingactivity.

   Ex.158

 (a)Identifyseveralalternativesforpresentingsignificantnoncashactivitiesinfinancial statements.

 (b)Givethreeexamplesof significantnoncashtransactions.

    Ex.159

 Thefollowinginformationis availableforSniderCompany:

 Receiptsfromcustomers Dividendsfrom stockinvestments Proceedsfrom saleofequipment Proceedsfrom issuanceofstock PaymentsforgoodsPaymentsforoperatingexpenses Interestpaid

Taxespaid Dividendspaid

$180,000 3,000 18,000 90,000 100,000 70,000 5,000 4,000 20,000

  Instructions

Basedonthe precedinginformation,computethenetcashprovided byoperating activities.

   Ex.160

 PierceCompanyreportednetincomeof$200,000forthecurrentyear.Depreciationrecordedon buildingsandequipmentamountedto$80,000fortheyear.Balancesofthecurrentassetand currentliability accountsat thebeginning andend of the year are asfollows:

  Cash Accountsreceivable Inventories

Prepaidexpenses Accountspayable Incometaxes payable

End ofYear $20,000

24,000 50,000 7,500 12,000 1,600

Beginning of Year $15,000

32,000 65,000 5,000 18,000 1,200

 Instructions

Preparethecashflowsfrom theoperatingactivitiessectionofthestatementof cashflowsusing theindirectmethod.

    Ex.161

 NealCompanyreportednetincomeof$120,000.For2008,depreciationwas$30,000,andthe companyreportedagainonsaleofinvestmentsof$10,000.Accountsreceivableincreased $25,000andaccountspayabledecreased$15,000.

 Instructions

 Computenet cashprovidedbyoperatingactivitiesusingtheindirectmethod.

    Ex.162

 Assumingastatementofcashflowsisprepared,indicatethereportingofthetransactionsand eventslistedbelow bymajorcategoriesonthestatement.Usethefollowingcodeletterstoindicate theappropriatecategoryunderwhichtheitemwould appearonthestatementof cashflows.

 CodeCashFlowsFromOperatingActivities

Addto NetIncome                                       A DeductfromNetIncome                              D CashFlowsFromInvestingActivities                IA

CashFlowsFromFinancingActivities                   FA

Category

 1.     Commonstockisissuedforcashat anamountaboveparvalue. 2.   Merchandiseinventoryincreasedduring theperiod.

3.     Depreciationexpenserecordedfortheperiod. 4.        Building waspurchasedforcash.

5.     Bondspayablewereacquiredandretiredattheircarryingvalue. 6.    Accountspayable decreasedduringtheperiod.

7.     Prepaidexpensesdecreasedduringtheperiod. 8.        Treasurystockwasacquiredfor cash.

9.     Landis soldfor cashatanamountequalto bookvalue. 10.    Patentamortizationexpense recordedfor aperiod.

  Ex.163

 AcomparativebalancesheetforLyonCompanyappearsbelow:

 LYONCOMPANY ComparativeBalanceSheet

  AssetsCash

Accountsreceivable Inventory

PrepaidexpensesLong-terminvestments Equipment

Accumulateddepreciation—equipment Totalassets

Dec.31, 2008

 $23,000 18,000 27,000 6,000

-0-60,000

(18,000) $116,000

Dec.31, 2007

 $10,000 14,000 18,000 9,000 18,000 32,000

(14,000) $87,000

  Liabilities and Stockholders'Equity

 Accountspayable Bondspayable Commonstock Retainedearnings

Totalliabilitiesandstockholders'equity

$17,000 37,000 40,000

   22,000$116,000

$7,000 47,000 23,000

10,000$87,000

  Additional information:

1.Netincomeforthe yearendingDecember31,2008was$24,000.2.Cashdividendsof $12,000weredeclaredandpaidduringthe year.

3.Long-terminvestmentsthathadacostof$18,000 weresoldfor$16,000. 4.Salesfor 2008were$120,000.

 Instructions

PrepareastatementofcashflowsfortheyearendedDecember31,2008,usingtheindirect method.

  Ex.164

 AcomparativebalancesheetforJenner Corporationis presentedbelow:

      CashAccountsreceivable (net) Prepaidinsurance

Land Equipment

Accumulateddepreciation TotalAssets

JENNER CORPORATION ComparativeBalanceSheet

  Assets

       2008                      2007    

 $36,000                 $31,000 80,000                  60,000 25,000                  17,000 18,000                 40,000 70,000                  60,000

(20,000)                 (13,000) $209,000 $195,000

  Liabilities and Stockholders'Equity Accountspayable        $11,000 Bondspayable                                                                                   27,000 Commonstock                                                                               140,000 Retainedearnings                                                                                                                   31,000

Totalliabilitiesandstockholders'equity                                     $209,000

 $6,000 19,000 115,000

   55,000$195,000

 Ex

164               (cont.) Additional information:

1.Netlossfor2008is$15,000.

 2.Cashdividendsof $9,000weredeclaredand paidin2008.

 3.Landwassoldforcashatalossof $7,000.Thiswasthe onlylandtransactionduringtheyear.

 4.Equipmentwithacostof$15,000andaccumulateddepreciationof$10,000wassoldfor $5,000cash.

 5.$12,000of bondswereretiredduringtheyearat carrying(book)value.

 6.Equipmentwasacquiredforcommonstock.Thefairmarketvalueofthestockatthetimeof theexchangewas$25,000.

 Instructions

 Prepareastatementofcashflowsfor the yearended2008,usingtheindirect method.

   Ex.165

 ThefollowinginformationisavailableforFryerCorporationfortheyearendedDecember31, 2008:

 Collectionof principalonlong-termloantoasupplier Acquisitionof equipmentforcash

Proceedsfrom thesale of long-terminvestmentatbookvalue Issuanceof commonstockfor cash

Depreciationexpense

Redemptionof bondspayable at carrying(book)value Paymentof cashdividends

Netincome

Purchaseof landbyissuing bondspayable

$15,000 10,000 27,000 20,000 35,000 24,000 14,000 30,000 40,000

  Inaddition, thefollowinginformationisavailablefromthecomparativebalancesheetforFryerat the endof 2007 and2008:

  CashAccountsreceivable (net) Prepaidinsurance

Totalcurrentassets

 Accountspayable SalariespayableTotalcurrentliabilities

   2008    

$87,000 20,000

   17,000$124,000

 $25,000

     4,000$29,000

   2007

$14,000 15,000

13,000$42,000

 $19,000

   7,000$26,000

 Instructions

PrepareFryer'sstatementofcashflowsfortheyearendedDecember31,2008usingtheindirect method.

17-36

  Ex.166

 TrentCompanypreparedthetabulationbelowat December31,2008.

 NetIncome..............................................................................................................         $300,000 Adjustmentstoreconcilenet incometonetcashprovidedbyoperatingactivities:

Depreciationexpense,$35,000...................................................................... Increaseinaccountsreceivable,$60,000...................................................... Decreaseininventory,$13,000...................................................................... Amortizationofpatent,$4,000........................................................................ Increaseinaccountspayable,$5,600............................................................ Decreaseininterestreceivable,$4,000......................................................... Increaseinprepaidexpenses,$6,000............................................................ Decreaseinincometaxespayable,$1,500.................................................... Gainonsaleofland,$5,000........................................................................... Netcashprovided (used)byoperatingactivities............................................

 Instructions

Showhoweachitemshouldbereportedinthestatementofcashflows.Useparenthesesfor deductions.

 Ex.167

 Thefollowinginformationis availableforVisserCorporation:

 Capitalexpenditures Cashdividends

Cashprovidedbyoperations Netincome

Sales

$115,000 65,000 200,000 130,000 500,000

 Instructions

ComputeVisser Corporation'sfreecashflow.

  Ex.168

 LeiterCompanyhasbegunaworksheetforpreparingastatementofcashflows.Thefollowing additionalinformation isprovided:

1.Cashdividendsof$15,000werepaidduringthe year.

2.Landwhichoriginallycost $60,000wassoldfor $55,000. 3.Commonstockwasissuedat par valuefor cash.

 Instructions

Completethe worksheetfor LeiterCompany.

 aEx.168       (cont.)

 LEITERCOMPANY Worksheet

StatementofCashFlows

FortheYearEndedDecember31,2008

  Balance SheetAccountsDebits

Cash Accountsreceivable Inventory

Land Equipment

Total

 Credits Accountspayable Bondspayable

Accumulateddepreciation— equipment

Commonstock Retainedearnings

Total

 Statement ofCashFlows Effects Operatingactivities

Netincome

Balance 12/31/07

 30,000 40,000 90,000 60,000 131,000351,000

  15,000 25,000

 81,000 170,000

60,000351,000

ReconcilingItems Debits    Credits

                   21,000

Balance 12/31/08

 55,000 58,000 110,000

-0-145,000368,000

  12,000 10,000

 95,000 180,000

71,000368,000

   Ex.169

 DolanCompany'sincomestatementshowedrevenuesof$250,000andoperatingexpensesof $160,000.Accountsreceivabledecreasedby$60,000andaccountspayableincreasedby $40,000duringtheyear.

 Instructions

Compute(a)cashreceiptsfromcustomersand(b)cashpayments foroperatingexpensesusing thedirect method.

  Ex.170

 Banner Company hadtotaloperatingexpenses of$140,000in2008,whichincludedDepreciation Expenseof$20,000.Also,during2008,prepaidexpensesincreasedby$5,000andaccrued expenses decreasedby$6,700.

 Instructions

Calculatetheamountofcashpaymentsforoperatingexpensesin2008usingthedirectmethod.

  Ex.171

 Thegeneralledgerof Lopez Companyprovidesthefollowinginformation:

  AccountsReceivable Inventory AccountsPayable

End ofYear $55,000

350,000 40,000

Beginning of Year $94,000

210,000 65,000

 Thecompany'snetsalesfortheyearwas$2,100,000andcostofgoodssoldamountedto $1,500,000.

 InstructionsComputethe following:

(a)     Cashreceiptsfromcustomers. (b)         Cashpaymentstosuppliers.

  Ex.172

 TheincomestatementofRedmanInc.fortheyearendedDecember31,2008,reportedthe following condensedinformation:

 Servicerevenue Operatingexpenses Incomefromoperations IncometaxexpenseNetincome

$600,000

360,000 240,000

   60,000$180,000

  Redman'sbalancesheetcontainedthefollowingcomparativedataat December31:

  Accountsreceivable Accountspayable Incometaxespayable

2008

$50,000 35,000 6,000

2007

$40,000 50,000 3,000

 Redmanhasnodepreciableassets.Accountspayable pertainstooperatingexpenses.

 Instructions

 Preparetheoperatingactivitiessectionof the statementof cashflowsusingthedirectmethod.

   Ex.173

 Theincomestatementof HaslettCompanyis shownbelow:

 HASLETT COMPANY IncomeStatement

FortheYearEndedDecember31,2008

 Sales

Costof goodssold Grossprofit Operatingexpenses

Sellingexpenses Administrativeexpense Depreciationexpense Amortizationexpense

Netincome

     $500,000 700,000 90,000

   30,000

$8,000,000

5,400,000 2,600,000

     1,320,000$1,280,000

 Ex.173         (cont.)

 Additionalinformation:

1.Accountsreceivable increased$500,000duringtheyear. 2.Inventoryincreased$250,000duringtheyear.

3.Prepaidexpensesincreased$200,000duringthe year.

4.Accountspayable tomerchandisesuppliers increased$150,000duringtheyear. 5.Accruedexpensespayableincreased$180,000duringthe year.

 Instructions

Preparetheoperatingactivitiessectionofthestatementofcashflowsfortheyearended December31, 2008,forHaslettCompany,usingthedirectmethod.

  Ex.174

 ThefinancialstatementsofLarkinCompanyappear below:

       Cash Accountsreceivable Merchandiseinventory

Property,plant,andequipment Accumulateddepreciation

Total

LARKINCOMPANY ComparativeBalanceSheet December31

 Assets

        2008                   2007    

 $43,000              $23,000 26,000               34,000 25,000               15,000 50,000               78,000

(20,000)              (24,000) $124,000    $126,000

   Accountspayable Incometaxespayable Bondspayable Commonstock Retainedearnings

Total

Liabilities and Stockholders'Equity

 $17,000 13,000 7,000 41,000

   46,000$124,000

  $23,000 8,000 33,000 24,000

   38,000$126,000

  LARKINCOMPANY Income Statement

FortheYearEndedDecember31,2008

 Sales

Costofgoodssold GrossprofitSellingexpenses

Administrativeexpenses Incomefromoperations Interestexpense Incomebeforeincometaxes Incometaxexpense

Netincome

    $20,000

16,000

$360,000

280,000 80,000

     36,000 44,000

   4,000 40,000

   12,000$28,000

 Thefollowingadditionaldatawereprovided:

1.Dividendsdeclaredandpaidwere$20,000.

2.Duringtheyear,equipmentwassoldfor$12,000cash.Thisequipmentcost$28,000 originallyand hadabook valueof $12,000at thetime of sale.

3.Alldepreciationexpenseis inthesellingexpensecategory. 4.Allsalesandpurchasesareonaccount.

5.Accountspayable pertaintomerchandisesuppliers.

6.Alloperatingexpensesexceptfordepreciationwerepaidincash.

 Instructions

Prepareastatementofcashflowsfor LarkinCompanyusingthedirectmethod.

  Ex.175

 CondensedfinancialdataofStiner Companyappear below:

       Cash Accountsreceivable Inventories

Prepaidexpenses Investments

Plantassets Accumulateddepreciation

Total

STINER COMPANY ComparativeBalanceSheet December31

 Assets

    2008                      2007

 $71,000           $35,000 85,000               53,000 120,000             132,000 19,000               25,000 90,000               75,000 315,000             250,000

(65,000)              (60,000) $635,000$510,000

    Accountspayable Accruedexpensespayable Bondspayable Commonstock Retainedearnings

Total

Liabilities and Stockholders'Equity

 $93,000 29,000 130,000 245,000

138,000$635,000

  $75,000 24,000 160,000 170,000

   81,000$510,000

  STINERCOMPANY Income Statement

FortheYearEndedDecember31,2008

 Sales Less:

Costofgoodssold

Operatingexpenses(excludingdepreciation) Depreciationexpense

Incometaxes Interestexpense

Lossonsaleof plantassets Netincome

   $280,000 60,000 17,000 15,000 18,000

     3,000

$470,000

       393,000$77,000

  Additionalinformation:

1.Newplantassetscosting$90,000werepurchasedfor cashin2008.

2.Oldplantassetscosting$25,000weresoldfor$10,000cashwhenbookvaluewas$13,000. 3.Bondswithafacevalueof $30,000wereconvertedinto$30,000of commonstock.

4.Acashdividendof $20,000wasdeclaredandpaidduringtheyear. 5.Accountspayable pertaintomerchandisepurchases.

 Instructions

 Prepareastatementofcashflowsfor the yearusingthedirectmethod.

  Ex.176

 TheincomestatementforJavierCompanyshowedcostofgoodssoldof$95,000andoperating expensesof$50,000.Thecomparativebalancesheetsfortheyearshowthatinventory decreased$3,000,prepaidexpensesincreased$7,000,accountspayableincreased$4,000,and accrued expensespayable decreased$5,000.

 Instructions

 Compute(a)cashpayments tosuppliersand(b)cashpaymentsforoperatingexpensesusingthe direct method.

  COMPLETIONSTATEMENTS

  177.Astatementofcashflowssummarizestheoperating,                                      ,and activitiesof anentity.

 178.Thecasheffectsofsellinggoodsandservicesappearsinthe                                                 activities section of astatementofcashflows.

 179.Theoperatingactivities sectionofthestatement ofcash flowsmaybepreparedusingthe

                               methodorthe                                 method.

 180.Netincomefromoperationsisgenerallynotthesameascashprovidedfromoperations becauserevenuesandexpensesarerecognizedintheincomestatementonthe

                             basis.

 181.Usingtheindirectapproach,noncashchargesintheincomestatementare

                                                             tonetincomeandnoncashcreditsare                                           tocompute cash providedbyoperations.

 182.Ifaccountsreceivableincreaseduringaperiod,revenuesonanaccrualbasisare

                               thanrevenuesonacashbasis.

 183.Thesaleofequipmentatlessthanitsbookvalueisa(n)                                                 ofcashthatis reported inthe                                                       activitiessection.

 184.Free                                    equalscashprovidedbyoperationslesscapitalexpendituresand cash dividends.

 a185.Underthedirectmethod,noncashcharges,suchasdepreciation,are                                                  

 inthestatementof cashflows.

 a186.Underthedirectmethod,thetwo largestclassesof itemsintheoperating activitiessection foramerchandisingcompanyarecash                                                                         andcash

                                                  .

 a187.Costofgoodssoldfortheyearamountedto$150,000,andduringtheyear,accounts payable                                           by$8,000andinventory                                   by$7,000resulting in cashpaidtosuppliersof$135,000.

 a188.Incomputingcashpaymentsforoperatingexpenses,adecreaseinprepaidexpensesis

                                                           andanincreaseinaccruedexpensespayableis                                              to (from)operatingexpenses,exclusiveof depreciation.

 a189.Incomputingcashpaymentsforincometaxes,adecreaseinincometaxespayableis

                               to(from)incometaxexpense.

   MATCHING

 Set1—IndirectMethod

 190.Foreachofthefollowingitems,indicatebyusingtheappropriate codeletter,howtheitem should be reported inthestatementof cashflows,usingtheindirect method.

 A.    Addedtonetincome

B.    Deductedfromnetincome

C.     Cashoutflow—investingactivity D.        Cashinflow—investingactivity E.    Cash outflow—financingactivity F.    Cash inflow—financingactivity

G.    Significantnoncashinvestingandfinancing activity

  1.Decreaseinaccountspayable duringaperiod

 2.Declarationandpaymentofacashdividend.

 3.Lossonsaleof land.

 4.Decreaseinaccountsreceivable duringaperiod.

 5.Redemptionof bondsforcash.

 6.Proceedsfrom saleofequipmentatbookvalue.

 7.Issuanceof commonstockfor cash.

 8.Purchaseofa buildingfor cash.

 9.Acquisitionof landinexchangeforcommonstock.

 10.Increaseinmerchandiseinventoryduringa period.

    Set2—DirectMethod

  a191.For eachof thefollowingitems, indicatebyusingthe appropriatecode letter, howtheitem should be reported inthestatementof cashflows,usingthedirectmethod.

 A.    Addedindeterminingcashreceiptsfromcustomers

B.    Deductedindeterminingcashreceiptsfromcustomers C.        Addedindeterminingcashpaymentstosuppliers

D.    Deductedindeterminingcashpaymentstosuppliers E.        Cashoutflow—investingactivity

F.     Cashinflow—investingactivityG.    Cash outflow—financingactivity H.    Cash inflow—financingactivity

I.    Significantnoncashinvestingandfinancing activity J.       Isnotshown

  1.Decreaseinaccountspayable duringaperiod.

 2.Declarationandpaymentofa cashdividend.

 3.Decreaseinaccountsreceivable duringaperiod.

 4.Depreciationexpense.

 5.Conversionof bondspayable intocommonstock.

 6.Decreaseinmerchandiseinventoryduringa period.

 7.Saleofequipmentforcashat bookvalue.

 8.Issuanceofpreferredstockfor cash.

 9.Purchaseof landfor cash.

         10.Lossonsale of aplant asset.

     SHORT-ANSWERESSAYQUESTIONS

S-AE192

Thestatementofcashflowsistheonlyrequiredfinancialstatementthatisnotpreparedfroman adjustedtrialbalance.Whatarethesourcesofinformationforpreparingastatementofcash flows? Explainhowtheaccrualbasis of accounting affectsthestatementof cashflows.

    S-AE193

 Cashflowsfromoperatingactivitiescanbecalculatedusingtheindirectordirectmethod.Briefly describehowthetwomethodsdifferyetarriveatthesameinformationaboutthenetcashflows fromoperatingactivities.

    S-AE194

 Howisitpossibleforacompanytosufferanetlossforagivenyear,yetproduceapositivenet cashflowfrom operatingactivities?

  S-AE195(Ethics)

 FlintHillsCompany'smostrecentfinancialstatementsshoweddismalperformance.Therewasa netlossof$10,000andthestatementofcashflowsshowedanetcashdecreaseinall categories.Thecompanypresidentcalledallthemanagerstogetherandaskedthemtodoall theycouldtomakesurethenextquarter'sperformance wasbetter.

 MelLaw,managerofthemanufacturingdivision,soldoffoldmanufacturingequipment.Healso reclassifiedseveralworkerstoparttime(30hoursperweek)andhiredadditionaltemporary workerstotakeuptheslack.Thissavedthecompanymoney,sincepart-timeworkersdonot havethe same insuranceandotherbenefitsasfull-timeworkers.

 JohnReed,financialmanager,immediatelysuspendedpaymentsonallaccountsexceptthose on which interest wouldaccrue.Healsoinstitutedaggressivecollectionprocedures.

 Required:

1.Were MelLaw'sactionsethical?Explain.

2.WereJohnReed'sactionsethical?Explain.

3.Werethecompanypresident's actionsethical?Explain.

    S-AE196(Communication)

 Youaretheaccountant forasmallmanufacturingfirm.Yourcompany isprivatelyheld,sothereis nocurrentrequirementtoissuefinancialstatementsusingGAAP.Youwerehiredfouryearsago, andatthattimeyouinstitutedacashbudgetingsystem.Presently,youpresentascheduleof predictedcashsourcesand cashneedsattheendof eachweekforthefollowingweek.

TheStatementof Cash Flows       17-53

 S-AE196(cont.)

 KenHarmon, thecompany'spresident,hasaskedwhetherastatementofcashflowswouldalso be useful.

 Required:

Preparea shortmemorandumtothepresident indicatingwhether youbelieve suchanadditionto thefinancialstatementstobeuseful.Includeinyourmemothebenefitsthatmightbeexpected fromastatementofcashflowsandwhetherthosearedifferentfromthebenefitsofacash sourcesandcashneedslisting.

[waywardbelieverdaze-blog]

ACC 206 Week 9 Quiz – Strayer New

ACC 206 Week 9 Quiz – Strayer New

 Click on the Link Below to Purchase A+ Graded Course Material

 http://budapp.net/ACC-206-Accounting-Principles-II-Week-9-Quiz-Strayer-267.htm

 Quiz 7 Chapter17

  THESTATEMENTOFCASHFLOWS

  CHAPTERSTUDYOBJECTIVES

 1.Indicatetheusefulnessofthestatementofcashflows.

 2.Distinguishamongoperating,investing,andfinancingactivities.

 3.Prepareastatementofcashflowsusingtheindirectmethod.

 4.Analyzethestatementofcashflows.

 5.Explainhowtouseaworksheettopreparethestatementofcashflowsusingtheindirectmethod.

 6.Prepareastatementofcashflowsusingthedirectmethod.

    TRUE-FALSESTATEMENTS

 1.     Thestatementofcashflowsisarequiredstatementthatmustbepreparedalongwithan income statement,balancesheet,andretainedearningsstatement.

 2.     Forexternalreporting,acompanymustprepareeitheranincomestatementora statementof cashflows,but notboth.

 3.     Aprimaryobjectiveofthestatementofcashflowsistoshowtheincomeorlosson investingandfinancingtransactions.

 4.     A statementofcashflows indicatesthe sourcesanduses of cashduringaperiod.

 5.     Inpreparingastatementofcashflows,cashequivalentsaresubtractedfrom cashinorder tocomputethenetchangeincashduring a period.

 6.     Cashequivalentsarehighly-liquidinvestmentsthathavematuritiesoflessthanthree months.

 7.     The useofcashtopurchasehighlyliquidshort-terminvestments(cashequivalents)would be reportedonthestatement of cashflowsasaninvestingactivity.

 8.     Inpreparingastatementofcashflows,theissuanceofdebtshouldbereported separately from theretirementof debt.

 9.     Noncashinvestingandfinancingactivitiesmustbereportedinthebodyofastatementof cashflows.

 10.     Thestatementofcashflowsclassifiescashreceiptsandpaymentsasoperating, nonoperating, financial,andextraordinaryactivities.

 11.     Thesaleof landfor cashwouldbeclassifiedasacashinflowfroman investingactivity.

 12.     Cashflowfrominvestingactivitiesisconsideredthemostimportantcategoryonthe statementof cashflowsbecauseit isconsideredthebestmeasureof expectedincome.

 13.     Thereceiptofdividends fromlong-term investments instockisclassified asacashinflow frominvestingactivities.

TheStatementof Cash Flows       17-5

   14.     Thepaymentofinterestonbondspayableisclassifiedasacashoutflowfromoperating activities.

 15.     Anyitemthatappearsontheincomestatementwouldbeconsideredaseitheracash inflowor cashoutflowfromoperatingactivities.

 16.     Theacquisitionofabuildingbyissuingbondswouldbeconsideredaninvestingand financing activity thatdidnot affectcash.

 17.     Allmajorfinancingandinvestingactivitiesaffectcash.

 18.     Cashprovidedbyoperationsisgenerallyequaltooperatingincome.

 19.     Usingtheindirectmethod,anincrease inaccountsreceivable duringaperiod isdeducted fromnetincomeincalculatingcashprovidedbyoperations.

 20.     Usingtheindirectmethod,anincreaseinaccountspayableduringaperiodisdeducted from netincomeincalculatingcashprovidedbyoperations.

 21.     Alossonsaleofequipmentisaddedtonetincomeindeterminingcashprovidedby operationsundertheindirectmethod.

 22.     Inpreparingastatementofcashflows,anincreaseintheCommonStockandTreasury Stockaccountsduringaperiodwouldbe an investingactivity.

 23.     Cashprovidedby operatingactivitiesfailsto take intoaccountthatacompanymust invest in newfixedassetsjusttomaintainits currentlevelofoperations.

 24.     Freecashflowequalscashprovidedbyoperationslesscapitalexpendituresandcash dividends.

 a25.     Theuseof aworksheetto prepareastatementofcashflowsis optional.

 a26.    Duringtheyear,IncomeTaxExpenseamountedto$30,000andIncomeTaxesPayable increasedby$3,000;therefore,thecashpaidforincometaxeswas$27,000.

 a27.     Inpreparingnetcashflowfromoperatingactivitiesusingthedirectmethod,eachitemin theincomestatementisadjustedfromtheaccrualbasistothecashbasis.

 a28.    Usingthedirectmethod,majorclassesofinvestingandfinancingactivitiesarelistedin theoperatingactivitiessection.

 a29.    Duringaperiod,costofgoodssold+anincreaseininventory+anincreaseinaccounts payable =cashpaidtosuppliers.

 a30.     Operatingexpenses+anincreaseinprepaidexpenses–adecreaseinaccrued expensespayable=cashpaymentsfor operatingexpenses.

17-6        

 Additional True-FalseQuestions

 31.     Thestatementofcashflowsclassifiescashreceiptsandcashpaymentsintotwo categories:operatingactivitiesand nonoperatingactivities.

 32.     Financingactivitiesincludetheobtainingofcashfromissuingdebtandrepayingthe amounts borrowed.

 33.     TheadjustedtrialbalanceistheonlyitemneededtopreparetheStatementofCash Flows.

 34.     Undertheindirectmethod,retainedearningsisadjustedforitemsthataffectedreported netincomebutdidnot affect cash.

 a35.    ThereconcilingentryfordepreciationexpenseinaworksheetisacredittoAccumulated DepreciationandadebittoOperating-DepreciationExpense.

 a36.    Underthedirectmethod,theformulaforcomputingcashcollectionsfromcustomersis salesrevenuesplustheincreaseinaccountsreceivableorminusthedecreasein accounts receivable.

     MULTIPLECHOICEQUESTIONS

  37.     Thestatementofcashflowsshouldhelpinvestorsandcreditorsassesseachofthe followingexceptthe

a.entity'sabilitytogeneratefutureincome. b.entity'sabilityto paydividends.

c.reasonsforthedifferencebetweennetincomeandnetcashprovidedbyoperating activities.

d.cashinvestingandfinancingtransactionsduringtheperiod.

 38.     Thestatementof cashflows

a.mustbepreparedona dailybasis.

b.summarizesthe operating,financing,andinvestingactivitiesofanentity. c.is anothernamefortheincomestatement.

d.isaspecialsectionof the incomestatement.

TheStatementof Cash Flows       17-7

 39.     Whichoneofthefollowingitemsisnotgenerallyusedinpreparingastatementofcash flows?

a.Adjustedtrialbalance

b.Comparativebalancesheets c.Currentincomestatementd.Additionalinformation

 40.     Theprimarypurposeofthestatementof cashflows is to

a.provideinformationabouttheinvestingandfinancingactivitiesduringaperiod. b.prove thatrevenuesexceedexpensesifthereis anetincome.

c.provideinformationaboutthecashreceiptsandcashpaymentsduringa period. d.facilitatebanking relationships.

 41.     Ifa companyreportsanet loss,it

a.maystillhavea netincreasein cash. b.willnotbe abletopaycashdividends. c.will not beabletogeta loan.

d.willnotbeable tomakecapitalexpenditures.

 42.     Inadditionto the three basicfinancialstatements,which ofthe following isalso arequired financialstatement?

a.the"CashBudget"

b.theStatementof CashFlows

c.theStatementof CashInflowsandOutflows d.the"CashReconciliation"

 43.     Thestatementof cashflowswillnotreportthe

a.amountof checksoutstanding atthe endof theperiod. b.sourcesofcashinthecurrentperiod.

c.uses of cashin thecurrentperiod.

d.changeinthecash balanceforthecurrentperiod.

 44.     Cashequivalentsdonotinclude a.short-termcorporatenotes. b.treasurybills.

c.moneymarketfunds.

d.2-yearcertificatesofdeposit.

 45.     Whichofthefollowing characteristicsdoesnotapplyto cashequivalents? a.Short-term

b.Highly-liquid

c.Readilyconvertibleintocash

d.Sensitiveto interestratechanges

 46.     Cashequivalentsaregenerally investmentswithmaturitiesof a.$1,000ormore.

b.threemonthsor less. c.atleastsixmonths.

d.oneyearorthe operatingcycle, whicheveris less.

17-8        

 47.     The bestmeasureof acompany'sabilitytogeneratesufficientcashtocontinueasagoing concern is netcashprovidedby

a.financingactivities. b.       investingactivities. c.operatingactivities. d.processingactivities.

 48.     Theacquisitionof landbyissuingcommonstockis

a.a noncashtransactionwhich is notreported inthebodyofastatementofcashflows. b.acashtransactionandwouldbereportedinthebodyof astatementofcashflows.

c.a noncashtransactionandwouldbereportedinthebodyofastatementof cashflows. d.onlyreportedif thestatement of cashflowsisprepared usingthedirectmethod.

 49.     Theorderof presentationofactivitiesonthestatement of cashflowsis a.operating,investing,andfinancing.

b.operating,financing,andinvesting. c.financing, operating,andinvesting. d.financing,investing,andoperating.

 50.     Financingactivitiesinvolve a.lendingmoney.

b.acquiringinvestments. c.issuingdebt.

d.acquiringlong-lived assets.

 51.     Investingactivitiesinclude

a.collecting cash on loansmade. b.obtainingcashfromcreditors. c.obtainingcapitalfromowners.

d.repayingmoneypreviouslyborrowed.

 52.     Generally,themostimportantcategoryonthestatementofcashflowsiscashflowsfrom a.operatingactivities.

b.investingactivities. c.financingactivities.

d.significantnoncash activities.

 53.     Thecategorythat isgenerally consideredtobe thebestmeasure ofacompany'sability to continue asagoingconcernis

a.cashflowsfromoperatingactivities. b.cashflowsfrominvestingactivities. c.cashflowsfromfinancingactivities. d.usuallydifferentfromyear to year.

 54.     Cashreceiptsfrom interestanddividendsareclassifiedas a.financingactivities.

b.investingactivities. c.operatingactivities.

d.eitherfinancingorinvestingactivities.

TheStatementof Cash Flows       17-9

 55.     Eachof thefollowingisanexampleof asignificantnoncashactivityexcept a.conversionofbonds intocommonstock.

b.exchangesof plantassets.

c.issuanceof debtto purchaseassets. d.stockdividends.

 56.     Ifacompanyhasbothaninflowandoutflowofcashrelatedtoproperty,plant,and equipment, the

a.twocasheffectscanbenettedandpresentedasoneitemintheinvestingactivities section.

b.cashinflowandcashoutflowshouldbereportedseparatelyintheinvestingactivities section.

c.twocasheffectscanbenettedandpresentedasoneiteminthefinancingactivities section.

d.cashinflowandcashoutflowshouldbereportedseparatelyinthefinancingactivities section.

 57.     Of theitemsbelow,theonethatappearsfirst onthestatementof cashflows is a.noncashinvesting andfinancingactivities.

b.netincrease(decrease)incash. c.cash attheendof theperiod.

d.cash atthebeginningoftheperiod.

 58.     Whichof thefollowingtransactionsdoesnotaffectcashduring aperiod? a.Write-offofanuncollectibleaccount

b.Collectionofanaccounts receivable c.Saleof treasurystock

d.Exerciseofthecalloptiononbondspayable

 59.    Significantnoncashtransactionswouldnotinclude a.conversionofbonds intocommonstock.b.assetacquisitionthroughbondissuance.

c.treasurystockacquisition. d.exchangeof plantassets.

 60.     Inpreparingastatementofcashflows,aconversionofbondsintocommonstockwillbe reported in

a.thefinancingsection.

b.the"extraordinary"section.

c.a separatescheduleornote tothefinancial statements. d.thestockholders'equitysection.

 Usethefollowing informationforquestions61–64.

 Foreachofthefollowingtransactions,indicatewhere,ifatall,itwouldbeclassifiedonthe statement of cashflows.Assumetheindirectmethodisused.

 61.     Paidincometaxes.

a.Operatingactivitiessection b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

17-10

 62.     Issuedcommonstockfor cash. a.Operatingactivitiessection b.Investingactivitiessectionc.Financingactivities section

d.Doesnotrepresentacashflow

 63.     Purchasedlandforcash.

a.Operatingactivitiessection b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

 64.     Purchasedlandandbuildingwithamortgage. a.Operatingactivitiessection

b.Investingactivitiessection c.Financingactivities section

d.Doesnotrepresentacashflow

 Usethefollowing informationforquestions65–66.

 JoyElle’sVegetableMarkethadthefollowingtransactionsduring 2008:

 1.Issued$25,000of par valuecommonstockforcash.

2.Repaida 6yearnotepayableintheamountof$11,000.

3.Acquiredlandbyissuingcommonstockof parvalue$50,000. 4.Declaredandpaidacashdividendof$1,000.

5.Solda long-terminvestment(cost$3,000)forcashof$3,000. 6.Acquiredan investmentinIBMstockforcashof $6,000.

 65.     Whatisthenetcash providedbyfinancingactivities? a.$13,000

b.$25,000 c.$14,000 d.$9,000

 66.     Whatisthenetcash providedbyinvestingactivities? a.$6,000

b.$16,000 c.($3,000) d.$3,000

 67.     MillerCompanypurchasedtreasurystockwithacostof$15,000during2008.Duringthe year,thecompanypaiddividendsof$20,000andissuedbondspayableforproceedsof $816,000.Cashflowsfromfinancingactivitiesfor2008total

a.$796,000net cashinflow. b.$811,000net cashinflow. c.$5,000netcashoutflow. d.$781,000net cashinflow.

TheStatementof Cash Flows       17-11

 68.     ClineCompanyissuedcommonstockforproceedsof$186,000during2008.The companypaiddividendsof$33,000andissuedalong-termnotepayablefor$45,000in exchangeforequipment duringtheyear.Thecompanyalsopurchased treasurystockthat hadacostof$7,000.Thefinancingsectionofthestatementofcashflowswillreportnet cash inflowsof

a.$146,000. b.$202,000. c.$153,000. d.$179,000.

 69.     InGentryCompany,landdecreased$120,000becauseofacashsalefor$120,000,the equipmentaccountincreased$40,000asaresultofacashpurchase,andBonds Payable increased$130,000fromissuanceforcashatfacevalue.Thenetcashprovidedby investingactivities is

a.$120,000. b.$210,000. c.$80,000. d.$90,000.

 70.     Accounts receivablearisingfromsalestocustomersamountedto$80,000and$70,000at thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$240,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement of cashflowsis

a.$240,000. b.$250,000. c.$310,000. d.$230,000.

 71.     Accounts receivablearisingfromsalestocustomersamountedto$35,000and$40,000at thebeginningandendoftheyear,respectively.Incomereported ontheincomestatement fortheyearwas$120,000.Exclusiveoftheeffectofotheradjustments,thecashflows fromoperatingactivitiestobereportedonthestatement of cashflowsis

a.$120,000. b.$125,000. c.$155,000. d.$115,000.

 72.     WiltonCompanyreportednetincomeof$40,000fortheyear.Duringtheyear,accounts receivabledecreasedby$7,000,accountspayableincreasedby$3,000anddepreciation expense of $5,000wasrecorded.Netcashprovidedbyoperatingactivitiesfortheyearisa.$30,000.

b.$55,000. c.$39,000. d.$35,000.

 73.     BusterCompanyreportedanetlossof$3,000fortheyearendedDecember31,2008. Duringtheyear,accountsreceivableincreased$7,000, merchandiseinventorydecreased $5,000,accountspayabledecreasedby$10,000,anddepreciationexpenseof$5,000 was recorded.During2007,operatingactivities

a.usednetcashof $10,000. b.usednetcashof $14,000.

c.providednetcash of$14,000. d.providednetcash of$9,000.

17-12

 74.     Thenetincomereportedontheincomestatementforthecurrentyearwas$205,000. Depreciationrecordedonplantassetswas$38,000.Accountsreceivableandinventories increasedby$2,000and$8,000,respectively.Prepaidexpensesandaccountspayable decreasedby$1,000and$11,000respectively.Howmuchcashwasprovidedby operatingactivities?

a.$185,000 b.$223,000 c.$205,000 d.$239,000

 75.     Thenetincomereportedontheincomestatementforthecurrentyearwas$220,000. Depreciationwas $50,000.Accountreceivableand inventoriesdecreasedby $10,000 and $30,000,respectively.Prepaidexpensesandaccountspayableincreased,respectively, by$1,000and$8,000.Howmuchcash wasprovidedbyoperating activities?

a.$281,000 b.$317,000 c.$301,000 d.$309,000

 76.     Ifagainof$10,000isincurredinselling(forcash)officeequipmenthavingabookvalue of$100,000,thetotalamount reportedinthecashflows frominvestingactivitiessectionof thestatementof cashflows is

a.$90,000. b.$110,000. c.$100,000. d.$10,000.

 77.     Ifa lossof $12,500 is incurred inselling(forcash)office equipmenthavinga bookvalueof $50,000,thetotalamountreportedinthecashflowsfrominvestingactivities sectionof the statement of cashflowsis

a.$37,500. b.$50,000. c.$62,500. d.$12,500.

 78.     HarborCompanyreportednetincomeof$60,000 fortheyearended December31,2008. Duringtheyear,inventoriesdecreasedby$12,000,accountspayabledecreasedby $18,000,depreciationexpensewas$20,000andagainondisposalofequipmentof $9,000wasrecorded.Netcashprovidedbyoperating activitiesin2008usingtheindirect methodwas

a.$119,000. b.$65,000. c.$77,000. d.$55,000.

 79.     Thethird(final)stepinpreparingthestatementofcashflowsisto a.analyzechanges innoncurrentassetandliabilityaccounts.

b.comparethenetchangeincashwiththechangeinthecashaccountreportedonthe balance sheet.

c.determinenet cashprovidedbyoperatingactivities. d.listthenoncashactivities.

TheStatementof Cash Flows       17-13

 80.     Whichoneof thefollowingitemsisnot necessaryinpreparinga statementofcashflows? a.Determinethechangeincash

b.Determinethecashprovidedbyoperations

c.Determinecashfromfinancingandinvestingactivities d.Determinethe cashin all bankaccounts

 81.     Ifaccountsreceivablehave increasedduringtheperiod,

a.revenuesonanaccrualbasisarelessthanrevenuesonacashbasis.

b.revenuesonanaccrualbasisaregreaterthanrevenuesonacashbasis. c.revenues onanaccrual basisarethesameasrevenues onacashbasis. d.expensesonanaccrualbasisaregreater thanexpensesonacashbasis.

 82.     Ifaccountspayablehaveincreasedduringaperiod,

a.revenuesonanaccrualbasisarelessthanrevenuesonacashbasis. b.expensesonanaccrualbasisarelessthanexpensesonacashbasis.

c.expensesonanaccrualbasisaregreater thanexpensesonacashbasis. d.expensesonanaccrualbasisarethesameasexpensesonacashbasis.

 83.     Whichoneof thefollowing affectscashduringaperiod? a.Recordingdepreciationexpense

b.Declarationof acashdividend

c.Write-offof anuncollectibleaccountreceivable d.Paymentof anaccountspayable

 84.     Incalculatingcashflowsfromoperatingactivitiesusingtheindirectmethod,againonthe sale ofequipmentis

a.addedtonet income.

b.deductedfrom netincome.

c.ignoredbecauseit doesnotaffectcash.d.notreportedonastatementof cashflows.

 85.     MeyerCompanyreportednetincomeof$50,000fortheyear.Duringtheyear,accounts receivableincreasedby$7,000,accountspayabledecreasedby$3,000anddepreciation expense of $5,000wasrecorded.Netcashprovidedbyoperatingactivitiesfortheyearisa.$45,000.

b.$65,000. c.$49,000. d.$50,000.

 86.     FlynnCompanyreportedanetlossof$20,000fortheyearendedDecember31,2008. Duringtheyear,accountsreceivabledecreased$10,000,merchandiseinventory increased$16,000,accountspayableincreasedby$20,000,anddepreciationexpense of $10,000wasrecorded.During2008,operatingactivities

a.usednetcashof $4,000. b.usednetcashof $16,000.

c.providednetcash of$4,000.d.providednetcash of$16,000.

17-14

 87.     Startingwithnetincomeandadjustingitforitemsthataffectedreportednetincomebut which didnot affect cashis calledthe

a.directmethod.b.indirectmethod.

c.workingcapitalmethod. d.cost-benefitmethod.

 88.     Incalculatingnetcashprovidedbyoperatingactivitiesusingtheindirectmethod,an increase inprepaidexpensesduringaperiodis

a.deductedfromnetincome. b.addedtonetincome.

c.ignoredbecauseit doesnotaffectincome.d.ignoredbecauseitdoesnotaffectexpenses.

 89.     Usingtheindirectmethod,patentamortizationexpenseforthe period a.isdeductedfromnetincome.

b.causescashto increase. c.causescashto decrease. d.is addedtonetincome.

 90.     Indevelopingthecashflowsfromoperatingactivities,mostcompaniesin theU.S. a.use thedirectmethod.

b.usetheindirectmethod.

c.presentboththeindirectanddirectmethodsintheirfinancialreports. d.preparetheoperatingactivitiessectionontheaccrualbasis.

 91.     Eachofthefollowingisaddedtonetincome incomputing netcashprovidedbyoperating activitiesexcept

a.amortizationexpense.

b.an increaseinaccruedexpensespayable. c.a gainon sale of equipment.

d.a decreaseininventory.

 92.     Whichofthefollowingwouldbesubtractedfromnet incomeusingtheindirect method? a.Depreciationexpense

b.An increaseinaccountsreceivable c.An increaseinaccountspayabled.Adecreaseinprepaidexpenses

 93.     Whichofthefollowingwouldbeaddedto netincomeusingthe indirectmethod? a.An increaseinaccountsreceivable

b.Anincreaseinprepaidexpenses c.Depreciationexpense

d.Adecreaseinaccountspayable

 94.     Whichofthefollowingwouldnotbeanadjustmenttonetincomeusingtheindirect method?

a.DepreciationExpense

b.An increaseinPrepaidInsurance c.AmortizationExpense

d.An increaseinLand

TheStatementof Cash Flows       17-15

 95.     Incalculatingcash flowsfromoperatingactivitiesusingtheindirect method,alossonthe sale ofequipmentwill appearasa(n)

a.subtractionfromnetincome. b.additiontonet income.

c.additiontocashflowfrominvestingactivities.

d.subtractionfromcashflowfrominvesting activities.

 96.     Whichofthefollowingadjustmentstoconvertnetincometonetcashprovidedby operatingactivitiesiscorrect?

  a.AccountsReceivable b.PrepaidExpenses

c.Inventory

d.TaxesPayable

Add to NetIncomeincrease increase decrease decrease

DeductfromNetIncome decrease decrease increaseincrease

 97.     Whichofthefollowingadjustmentstoconvertnetincometonetcashprovidedby operatingactivitiesisincorrect?

  a.AccountsReceivable b.PrepaidExpenses

c.Inventory

d.AccountsPayable

Add to NetIncome decrease increase decrease increase

DeductfromNetIncomeincreasedecreaseincreasedecrease

  98.     Whichofthefollowingadjustmentstoconvertnetincometonetcashprovidedby operatingactivitiesis notaddedto net income?

a.GainonSaleofEquipment b.DepreciationExpense

c.PatentAmortizationExpense d.DepletionExpense

 99.     Usingtheindirectmethod,ifequipmentissoldatagain,the

a.saleproceedsreceivedaredeductedinthe operatingactivitiessection. b.saleproceedsreceivedareaddedintheoperatingactivitiessection.

c.amountof thegainisadded intheoperating activitiessection.

d.amountofthegainis deducted intheoperatingactivitiessection.

 100.     Acompanyhadnetincomeof$180,000.Depreciationexpenseis$26,000.Duringthe year,AccountsReceivableandInventoryincreased$15,000and$40,000,respectively. PrepaidExpensesandAccountsPayabledecreased$2,000and$4,000,respectively. Therewasalsoalossonthesaleofequipmentof$3,000.Howmuchcashwasprovided byoperatingactivities?

a.$146,000 b.$152,000 c.$226,000 d.$238,000

 101.     Onthestatementofcashflowsusingthe indirectmethod,patentamortizationexpensewill a.beaddedtonetincomeintheoperatingsection.

b.be deductedfromnetincomeintheoperatingsection. c.appearasaninflowofcashintheinvesting section.d.appearasanoutflowofcashintheinvestingsection.

17-16

 102.     Theindirectanddirectmethodsofpreparingthestatementofcashflowsareidentical exceptforthe

a.significantnoncashactivitysection. b.operatingactivitiessection.

c.investingactivitiessection. d.financingactivitiessection.

 103.     Landacquiredfromtheissuanceofcommonstockisreported a.asafinancingactivity.

b.as aninvestingactivity. c.as anoperating activity.

d.inaseparatescheduleatthebottom ofthestatement.

 104.     If$250,000ofbondsareissuedduringtheyearbut$150,000ofoldbondsareretired during theyear,thestatementof cashflows willshowa(n)

a.netincreaseincashof$100,000. b.netdecreaseincashof$100,000.

c.increaseincash of $250,000 andadecreaseincashof $150,000. d.net gainonretirementof bonds of $100,000.

 105.     Whichof the followingchanges inretainedearningsduring aperiod willbereported in the financing activitiessectionofthe statementof cashflows?

 1.Declarationofacashdividendpaidduringtheperiod. 2.Net incomefortheperiod.

a.1 b.2

c.Neither1nor2. d.Both1and2.

 106.     Thestatementof cashflows

a.ispreparedinsteadofanincomestatementundergenerallyacceptedaccounting principles.

b.isusedtoassessanentity's abilityto paydividendsandmeetobligations. c.ispreparedfromcomparativeincomestatements.

d.reflectsearningspersharefiguresonacashbasisandonanaccrualbasisinthe bodyof thestatement.

 107.     Inpreparingthestatementof cashflows,determiningthenetincreaseor decreaseincash requirestheuseof

a.theadjustedtrialbalance.

b.thecurrentperiod'sbalancesheet. c.acomparativebalancesheet.

d.a comparativeincomestatement.

 108.     Todeterminethenetcashprovided(used)byoperatingactivities,it isnecessarytoanalyze a.thecurrentyear'sincomestatement.

b.a comparativebalancesheet. c.additionalinformation.

d.all ofthese.

TheStatementof Cash Flows       17-17

 109.     Whichofthefollowingwouldnotbeneededtodeterminenetcashprovidedbyoperating activities?

a.Depreciationexpense

b.Changeinaccountsreceivable c.Paymentof cashdividends

d.Changeinprepaidexpenses

 110.     Whenequipmentissoldforcash,the amountreceivedis reflectedasacash a.inflowintheoperatingsection.

b.inflowinthefinancingsection. c.inflowintheinvestingsection. d.outflowintheoperatingsection.

 111.      Thestatementof cashflowswillnotprovideinsightinto a.whydividends werenot increased.

b.whethercashflowis greaterthannet income. c.theexactproceedsof afuturebondissue.

d.howtheretirementof debtwasaccomplished.

 112.     Whichofthefollowingtransactionswouldnotbeclassifiedasafinancingactivity? a.Purchaseoftreasurystock

b.Paymentof dividends

c.Issuanceof bonds ata discount

d.Purchaseofalong-terminvestmentinbonds

 113.     Ameasurethatdescribesthecashremainingfromoperationsafteradjustmentforcapital expendituresand dividendsis

a.adjustedcashfromoperations. b.cashprovidedbyoperations.c.freecashflow.

d.netcashprovided byoperating activities.

 114.     Freecashflowequalscashprovidedby

a.operationslesscapitalexpenditures andcashdividends. b.operationslesscashdividends.

c.investingactivities lesscapitalexpendituresandcashdividends. d.operationslesscapitalexpenditures.

 115.     DV’sPestControlProductshasthefollowinginformationavailable:

 NetIncome

CashProvidedbyOperations CashSales

CapitalExpenditures DividendsPaid

 Whatis DV’sfreecashflow? a.$18,000

$15,000 21,000 65,000 11,000 3,000

 b.$10,000 c.$7,000 d.$1,000

17-18

 a116.Whenlistingaccountsinthestatementofcashflowsworksheet,theaccumulated depreciation accountisshown

a.withaccountsthathavecreditbalances. b.withaccountsthathavedebitbalances. c.as acreditunderthereconcilingitems. d.asadebit underthereconcilingitems.

 a117.Inthebottomportionof the statementof cashflowsworksheet, a.inflows ofcasharedebitsinthereconciling columns.

b.outflowsof casharedebitsinthereconcilingcolumns.

c.informationpertainingtoinvestingandfinancingactivitiesonly isentered. d.onlysignificantnoncashtransactionsareentered.

 a118.Onthe statementof cashflowsworksheet,

a.significant noncashinvestingand financingactivities arenotenteredinthereconciling columns.

b.adecreaseincashwillbeoffsetbyadebitinthereconcilingitemscolumnsatthe bottomoftheworksheet.

c.anincreaseincashwillbeoffsetbyadebitinthereconcilingitemscolumnatthe bottomoftheworksheet.

d.incomestatementaccountsarelistedafterbalancesheetaccountsinthetophalfof theworksheetundertheindirectmethod.

 a119.Eachof thefollowingwouldbereportedunderoperatingactivitiesexceptcashreceipts a.from sales of goods.

b.fromsalesofinvestments. c.of interestonloans.

d.of dividendsfrominvestments.

 a120.Whichofthefollowing statements concerningthestatementof cashflowsistrue?

a.Thestatementof cashflows isusuallymoreaccuratewhenusingtheindirect method. b.Ifthedirectmethodisused,asupplementaryschedulereconciling the netincometoa

netcashfrom operatingactivitiesmuststillbe provided.

c.Thestatementof cashflows reflectsbothearningspershareandcashper share.

d.Thestatementofcashflowsisanoptionalfinancialstatementforexternalreporting purposes.

 a121.CarterCompanyreportsthefollowing:

  Inventory AccountsPayable

End ofYear $25,000

30,000

Beginning of Year $40,000

10,000

 Ifcostofgoodssoldforthe yearis$170,000,theamountof cashpaidtosuppliersis a.$175,000.

b.$165,000. c.$135,000. d.$205,000.

TheStatementof Cash Flows       17-19

 a122.Duringtheyear,SalariesPayabledecreasedby$6,000.IfSalaryExpenseamountedto $190,000fortheyear,thecashpaidtoemployees(includingdeductionsfromgrosspay)is a.$196,000.

b.$190,000. c.$184,000. d.$202,000.

 a123.GaryCompanyreportsa$15,000 increaseininventoryanda$5,000increaseinaccounts payableduringtheyear.CostofGoodsSoldfortheyearwas$180,000.Thecash payments madeto supplierswere

a.$180,000. b.$190,000. c.$160,000. d.$175,000.

 a124.RaderCompanyhadcreditsalesof$600,000. Thebeginningaccountsreceivablebalance was$40,000andtheendingaccountsreceivablebalancewas$140,000.Whatwerethe cash collectionsfromcustomersduringtheperiod?

a.$700,000 b.$600,000 c.$500,000 d.$640,000

 a125.GorenInc.hadcashsalesof$300,000andcreditsalesof$1,150,000.Theaccounts receivablebalanceincreased$15,000duringtheyear.HowmuchcashdidGorenreceive fromits customers duringtheyear?

a.$1,435,000 b.$1,465,000 c.$1,135,000 d.$1,165,000

 a126.StineCompanyhadacostofpurchasesof$220,000.Thecomparativebalancesheet analysisrevealeda$10,000decreaseininventoryanda$20,000increaseinaccounts payable.WhatwereStine'scashpaymentsto suppliers?

a.$200,000 b.$190,000 c.$230,000 d.$250,000

 a127.WayneCompanyhadanincreaseininventoryof$40,000.Thecostofgoodssoldwas $80,000.Therewasa$5,000decreaseinaccountspayablefromthepriorperiod.What wereWayne'scashpaymentstosuppliers?

a.$125,000 b.$75,000c.$115,000 d.$85,000

 a128.Whichofthefollowingitemsdoesnotappearinthestatementofcashflowsunderthe direct method?

a.Cashpaymentstosuppliers

b.Cashcollectionsfromcustomers c.DepreciationExpense

d.Cashfromthesaleof equipment

17-20

 a129.NixonCompanyhasotheroperatingexpensesof$90,000.Therehasbeenadecreasein prepaidexpensesof$4,000duringtheyear,andaccruedliabilitiesare$6,000largerthan in thepriorperiod.WhatwereNixon'scashpaymentsfor operatingexpenses?

a.$92,000 b.$88,000 c.$80,000 d.$90,000

 a130.CarsenCorporationshowsincometaxexpenseof$90,000.Therehasbeena$5,000 decreaseinfederalincometaxespayableanda$7,000increaseinstateincometaxes payable duringtheyear.What wasCarsen'scashpaymentforincometaxes?

a.$90,000 b.$88,000 c.$85,000 d.$92,000

 a131.Whichofthefollowingwouldnotappearintheoperatingactivitiessectionofastatement ofcashflowspreparedunderthedirectmethod?

a.Cashreceiptsfromcustomers b.Cashpaidfor incometaxes

c.Gainonsaleof equipment d.Cashpaidto employees

 a132.Thecostofgoodssoldduringtheyearwas$165,000.Merchandiseinventorydecreased by$6,000duringtheyearandaccountspayabledecreasedby$3,000duringtheyear. Usingthedirectmethodofreportingcashflowsfromoperatingactivities,cashpayments formerchandisetotal

a.$168,000. b.$162,000. c.$156,000. d.$174,000.

 a133.BentCompanyreportsa$20,000increaseininventoryanda$5,000decreasein accountspayableduringtheyear.CostofGoodsSoldfortheyearwas$150,000.Using thedirectmethodofreportingcashflowsfromoperatingactivities,cashpaymentsmade tosupplierswere

a.$150,000. b.$165,000. c.$175,000. d.$135,000.

 a134.During2008,UnruhCompanyhad $160,000incashsalesand$1,400,000increditsales. Theaccounts receivable balances were$180,000 and$212,000atDecember31,2007 and2008,respectively.Usingthedirectmethodofreportingcash flowsfromoperating activities,whatwasthe totalcashcollectedfromallcustomersduring2008?

a.$1,368,000 b.$1,592,000 c.$1,560,000 d.$1,528,000

TheStatementof Cash Flows       17-21

 a135.LoganCompanyhasotheroperatingexpensesof$260,000.Therehasbeenanincrease inprepaidexpensesof$16,000duringtheyear,andaccruedliabilitiesare$24,000lower thaninthepriorperiod.Usingthedirectmethodofreportingcashflowsfromoperating activities,whatwereLogan'scashpaymentsforoperatingexpenses?

a.$248,000 b.$252,000 c.$220,000 d.$300,000

 Additional MultipleChoiceQuestions

 136.     Whichof thefollowing steps isnotrequired inpreparingthestatement of cashflows? a.Determinethechangeincash.

b.Determinethenetcashprovidedbyoperatingactivities. c.Determinecashfrominvestingandfinancingactivities. d.Determinethechangeincurrentassets.

 137.     Financingactivitiesinvolve

a.lendingmoneytootherentitiesandcollectingonthoseloans. b.cash receiptsfromsalesof goodsandservices.

c.acquiringanddisposingof productivelong-livedassets. d.long-termliabilityand owners'equityitems.

 138.     Theinformationtopreparethestatementofcashflowsusuallycomesfromeachofthe followingexcept

a.thecomparativebalancesheet. b.theretainedearningsstatement. c.additionalinformation.

d.thecurrentincomestatement.

 139.     Thestatementof cashflows ispreparedfromallofthefollowing except a.theadjustedtrialbalance.

b.comparativebalancesheets. c.selectedtransactiondata.

d.thecurrentincomestatement.

 140.     Theinformationinastatementofcashflowswillnothelpinvestorstoassesstheentity's abilityto

a.generatefuture cashflows.

b.obtainfavorableborrowingterms at abank. c.paydividends.

d.payits obligations whentheybecomedue.

 141.     Inconvertingnetincometonetcashprovidedbyoperatingactivities,undertheindirect method:

a.decreasesinaccountsreceivable and increasesinprepaidexpensesare added. b.decreasesininventoryandincreasesinaccruedliabilitiesareadded.

c.decreasesinaccountspayableanddecreasesin inventoryarededucted.

d.increasesinaccountsreceivable and increasesin accruedliabilitiesarededucted.

17-22

 142.     IntheFreyfogleCompany,landdecreased$60,000becauseofacashsalefor$60,000, theequipmentaccountincreased$20,000asaresultofacashpurchase,andBonds Payableincreased$70,000fromanissuanceforcashatfacevalue.Thenetcash provided by investingactivities is

a.$60,000.b.$110,000. c.$40,000. d.$50,000.

 a143.CribbetsCompanyusesthedirectmethodindeterminingnetcashprovidedbyoperating activities,Duringtheyear,operatingexpenseswere$260,000,prepaidexpenses increased$20,000,andaccruedexpensespayableincreased$30,000.Cashpayments for operatingexpenseswere

a.$210,000. b.$310,000. c.$270,000. d.$250,000.

 a144.BainbridgeCompanyusesthedirectmethodindeterminingnetcashprovidedby operatingactivities.Theincomestatementshowsincometaxexpense$60,000.Income taxespayablewere$25,000atthebeginningoftheyearand$18,000attheendofthe year.Cashpaymentsforincometaxesare

a.$53,000. b.$60,000. c.$67,000. d.$78,000.

 a145.Whena worksheetisused, all butoneof thefollowingstatementsiscorrect.The incorrect statementis

a.Reconcilingitemsontheworksheetarenotjournalizedor posted.

b.Thebottomportionof theworksheetshowsthestatementof cashflowseffects.

c.Thebalancesheetaccounts portion of the worksheetisdivided intotwo parts:assets, and liabilitiesandstockholders'equity.

d.Eachline pertainingtoabalancesheetaccountshouldfootacross.

      BRIEFEXERCISES

BE146

Selectedtransactionsfor the EldonCompanyarelistedbelow.

 1.Collectedaccountsreceivable.

2.Declaredandpaiddividends oncommonstock. 3.Soldlong-terminvestmentsforcash.

4.Issuedstockforequipment.

5.Repaidfiveyearnotepayable. 6.Paidemployeewages.

7.Convertedbonds payabletocommon stock. 8.Acquiredlong-term investmentwithcash.

9.Soldbuildingsand equipmentforcash. 10.Soldmerchandiseto customers.

 Instructions

 Classifyeachtransactionaseither(a)anoperatingactivity,(b)aninvestingactivity,(c)a financing activity,or(d) a noncashinvestingandfinancingactivity.

    BE147

 BertucciCompanyhadnetincomeof$204,000in2008.Depreciationexpensefortheyearis $45,000.Duringtheyear,AccountsReceivableincreased$9,000andPrepaidExpenses decreased$1,000.The companyalsosoldequipmentatalossof $2,000.

 Instructions

Calculatenet cashflowsfromoperatingactivitiesusingtheindirect method.

    BE148

 During2008,BaxterCompanysoldabuildingwithabookvalueof$145,000forproceedsof $132,000.Thecompanyalsosoldlong-terminvestmentsforproceedsof$45,000.Thecompany purchasedlandandanewbuildingfor$320,000bysigningalong-termnotepayable.Noother transactions impactedlong-term assetaccountsduring2008.

 Instructions

Computenet cashflowsfrom investingactivities.

    BE149

 MoverCompanyissuedcommonstockforproceedsof$14,000during2008.Thecompanypaid dividendsof$2,000.Thecompany alsoissued along-termnotepayable for$30,000inexchange forequipmentduringtheyear.Thecompanysoldtreasurystockthathadacostof$2,000for $4,000.

 Instructions

Computenet cashflowsfromfinancingactivities.

   BE150

 AtJanuary1,2008,BergmanEnterprisesreportedabalanceintheEquipmentaccountof $45,000.Duringtheyearthecompanypurchasedequipmentwithacostof$60,000andsold equipmentwithabookvalueof$30,000.Thecompany reportedalossonthesaleofequipment of$2,000. Assumethe indirectmethodisused.

 Instructions

 Determinewhatamountwillbereportedin(a)theoperatingactivitiessectionand(b)the investingactivitiessection withregardto thepurchaseandsaleof equipment.

      BE151

 Assumetheindirectmethodisusedtocomputecashflowsfromoperations.Foreachitemlisted below,indicatetheeffectonnetincomeinarrivingatcashflowsfromoperationsbychoosingone of thefollowingcodeletters.

CodeCashFlowsFromOperatingActivities

Addto NetIncome                                                     A DeductfromNetIncome                                             D

 1.     Increaseinaccountsreceivable 2.    Increaseininventory

3.     Decreaseinprepaidexpenses 4.        Decreaseinaccountspayable 5.        Increaseinaccruedliabilities

6.     Increaseinincometaxespayable 7.    Depreciationexpense

8.     Losson sale of investment

9.     Gainondisposalof equipment 10.    Amortizationexpense

   BE152

 DuttonCompanypreparedthetabulationbelowat December31,2008.

 NetIncome..............................................................................................................         $275,000

 Adjustmentstoreconcilenet incometonetcashprovidedbyoperatingactivities:

 Depreciationexpense,$25,000......................................................................

 Decreaseinaccountsreceivable,$55,000.....................................................

 Increase ininventory,$12,000.......................................................................

 Decreaseinaccountspayable,$6,600..........................................................

 Increase inincometaxespayable,$1,500.....................................................

 Loss onsaleofland,$5,000...........................................................................

 Netcashprovided(used)byoperatingactivities............................................

 Instructions

 Showhoweachitemshouldbereportedinthestatementofcashflows.Useparenthesesfor deductions.

  BE153

 Daimler Enterprisesreportedcash flowfromoperationsof$342,000. Thecompanymadecapital expendituresof $112,000andpaiddividends of $34,000.

 InstructionsComputefreecashflow.

 BE154

 SchickCompanyreportedcostofgoodssoldof$192,000onits2008incomestatement.The company’sbeginninginventorywas$35,000.Theendinginventorywasvaluedat$40,000.The AccountsPayablebalanceatJanuary1was$25,000.TheDecember31balanceinAccounts Payablewas $22,000.

 Instructions

Computecashpaymentstosuppliers.

   BE155

 HillerCompanyhadtotaloperatingexpensesof$135,000in2008,whichincludedDepreciation Expenseof$25,000.Alsoduring2008,prepaidexpensesdecreasedby$9,000andaccrued expenses increasedby$5,500.

 Instructions

 Calculatetheamountofcashpaymentsforoperatingexpensesin2008usingthedirectmethod.

   EXERCISES

Ex.156

Classifyeach ofthefollowing asa(n):

 A.OperatingActivity B.InvestingActivity C.FinancingActivity

 1Issuanceof bonds. 2.Saleofequipment.

3.Amortizationexpense.

 4.Purchaseof treasurystock.

 5.Receiptof dividendsoninvestment. 6.Purchaseof land.

   Ex.157

 SelectedtransactionsofEllerCompanyare listedbelow.

 1.Commonstockissoldforcashabove parvalue. 2.Bondspayableare issuedforcashatadiscount.

3.Interestreceivable onashort-termnotereceivableis collected. 4.Landis soldfor cashatbookvalue.

5.Accountspayable are paidincash.

6.Equipmentispurchasedbysigninga 3-year,10%notepayable. 7.Cashdividendsoncommonstockaredeclaredandpaid.

8.100sharesof XYZcommon stockarepurchasedforcash. 9.Merchandiseis soldtocustomersforcash.

10.Bondspayableareconvertedinto commonstock.

 Instructions

 Classifyeachtransactionaseither(a)anoperatingactivity,(b)aninvestingactivity,(c)a financing activity,or(d) anoncashinvestingandfinancingactivity.

   Ex.158

 (a)Identifyseveralalternativesforpresentingsignificantnoncashactivitiesinfinancial statements.

 (b)Givethreeexamplesof significantnoncashtransactions.

    Ex.159

 Thefollowinginformationis availableforSniderCompany:

 Receiptsfromcustomers Dividendsfrom stockinvestments Proceedsfrom saleofequipment Proceedsfrom issuanceofstock PaymentsforgoodsPaymentsforoperatingexpenses Interestpaid

Taxespaid Dividendspaid

$180,000 3,000 18,000 90,000 100,000 70,000 5,000 4,000 20,000

  Instructions

Basedonthe precedinginformation,computethenetcashprovided byoperating activities.

   Ex.160

 PierceCompanyreportednetincomeof$200,000forthecurrentyear.Depreciationrecordedon buildingsandequipmentamountedto$80,000fortheyear.Balancesofthecurrentassetand currentliability accountsat thebeginning andend of the year are asfollows:

  Cash Accountsreceivable Inventories

Prepaidexpenses Accountspayable Incometaxes payable

End ofYear $20,000

24,000 50,000 7,500 12,000 1,600

Beginning of Year $15,000

32,000 65,000 5,000 18,000 1,200

 Instructions

Preparethecashflowsfrom theoperatingactivitiessectionofthestatementof cashflowsusing theindirectmethod.

    Ex.161

 NealCompanyreportednetincomeof$120,000.For2008,depreciationwas$30,000,andthe companyreportedagainonsaleofinvestmentsof$10,000.Accountsreceivableincreased $25,000andaccountspayabledecreased$15,000.

 Instructions

 Computenet cashprovidedbyoperatingactivitiesusingtheindirectmethod.

    Ex.162

 Assumingastatementofcashflowsisprepared,indicatethereportingofthetransactionsand eventslistedbelow bymajorcategoriesonthestatement.Usethefollowingcodeletterstoindicate theappropriatecategoryunderwhichtheitemwould appearonthestatementof cashflows.

 CodeCashFlowsFromOperatingActivities

Addto NetIncome                                       A DeductfromNetIncome                              D CashFlowsFromInvestingActivities                IA

CashFlowsFromFinancingActivities                   FA

Category

 1.     Commonstockisissuedforcashat anamountaboveparvalue. 2.   Merchandiseinventoryincreasedduring theperiod.

3.     Depreciationexpenserecordedfortheperiod. 4.        Building waspurchasedforcash.

5.     Bondspayablewereacquiredandretiredattheircarryingvalue. 6.    Accountspayable decreasedduringtheperiod.

7.     Prepaidexpensesdecreasedduringtheperiod. 8.        Treasurystockwasacquiredfor cash.

9.     Landis soldfor cashatanamountequalto bookvalue. 10.    Patentamortizationexpense recordedfor aperiod.

  Ex.163

 AcomparativebalancesheetforLyonCompanyappearsbelow:

 LYONCOMPANY ComparativeBalanceSheet

  AssetsCash

Accountsreceivable Inventory

PrepaidexpensesLong-terminvestments Equipment

Accumulateddepreciation—equipment Totalassets

Dec.31, 2008

 $23,000 18,000 27,000 6,000

-0-60,000

(18,000) $116,000

Dec.31, 2007

 $10,000 14,000 18,000 9,000 18,000 32,000

(14,000) $87,000

  Liabilities and Stockholders'Equity

 Accountspayable Bondspayable Commonstock Retainedearnings

Totalliabilitiesandstockholders'equity

$17,000 37,000 40,000

   22,000$116,000

$7,000 47,000 23,000

10,000$87,000

  Additional information:

1.Netincomeforthe yearendingDecember31,2008was$24,000.2.Cashdividendsof $12,000weredeclaredandpaidduringthe year.

3.Long-terminvestmentsthathadacostof$18,000 weresoldfor$16,000. 4.Salesfor 2008were$120,000.

 Instructions

PrepareastatementofcashflowsfortheyearendedDecember31,2008,usingtheindirect method.

  Ex.164

 AcomparativebalancesheetforJenner Corporationis presentedbelow:

      CashAccountsreceivable (net) Prepaidinsurance

Land Equipment

Accumulateddepreciation TotalAssets

JENNER CORPORATION ComparativeBalanceSheet

  Assets

       2008                      2007    

 $36,000                 $31,000 80,000                  60,000 25,000                  17,000 18,000                 40,000 70,000                  60,000

(20,000)                 (13,000) $209,000 $195,000

  Liabilities and Stockholders'Equity Accountspayable        $11,000 Bondspayable                                                                                   27,000 Commonstock                                                                               140,000 Retainedearnings                                                                                                                   31,000

Totalliabilitiesandstockholders'equity                                     $209,000

 $6,000 19,000 115,000

   55,000$195,000

 Ex

164               (cont.) Additional information:

1.Netlossfor2008is$15,000.

 2.Cashdividendsof $9,000weredeclaredand paidin2008.

 3.Landwassoldforcashatalossof $7,000.Thiswasthe onlylandtransactionduringtheyear.

 4.Equipmentwithacostof$15,000andaccumulateddepreciationof$10,000wassoldfor $5,000cash.

 5.$12,000of bondswereretiredduringtheyearat carrying(book)value.

 6.Equipmentwasacquiredforcommonstock.Thefairmarketvalueofthestockatthetimeof theexchangewas$25,000.

 Instructions

 Prepareastatementofcashflowsfor the yearended2008,usingtheindirect method.

   Ex.165

 ThefollowinginformationisavailableforFryerCorporationfortheyearendedDecember31, 2008:

 Collectionof principalonlong-termloantoasupplier Acquisitionof equipmentforcash

Proceedsfrom thesale of long-terminvestmentatbookvalue Issuanceof commonstockfor cash

Depreciationexpense

Redemptionof bondspayable at carrying(book)value Paymentof cashdividends

Netincome

Purchaseof landbyissuing bondspayable

$15,000 10,000 27,000 20,000 35,000 24,000 14,000 30,000 40,000

  Inaddition, thefollowinginformationisavailablefromthecomparativebalancesheetforFryerat the endof 2007 and2008:

  CashAccountsreceivable (net) Prepaidinsurance

Totalcurrentassets

 Accountspayable SalariespayableTotalcurrentliabilities

   2008    

$87,000 20,000

   17,000$124,000

 $25,000

     4,000$29,000

   2007

$14,000 15,000

13,000$42,000

 $19,000

   7,000$26,000

 Instructions

PrepareFryer'sstatementofcashflowsfortheyearendedDecember31,2008usingtheindirect method.

17-36

  Ex.166

 TrentCompanypreparedthetabulationbelowat December31,2008.

 NetIncome..............................................................................................................         $300,000 Adjustmentstoreconcilenet incometonetcashprovidedbyoperatingactivities:

Depreciationexpense,$35,000...................................................................... Increaseinaccountsreceivable,$60,000...................................................... Decreaseininventory,$13,000...................................................................... Amortizationofpatent,$4,000........................................................................ Increaseinaccountspayable,$5,600............................................................ Decreaseininterestreceivable,$4,000......................................................... Increaseinprepaidexpenses,$6,000............................................................ Decreaseinincometaxespayable,$1,500.................................................... Gainonsaleofland,$5,000........................................................................... Netcashprovided (used)byoperatingactivities............................................

 Instructions

Showhoweachitemshouldbereportedinthestatementofcashflows.Useparenthesesfor deductions.

 Ex.167

 Thefollowinginformationis availableforVisserCorporation:

 Capitalexpenditures Cashdividends

Cashprovidedbyoperations Netincome

Sales

$115,000 65,000 200,000 130,000 500,000

 Instructions

ComputeVisser Corporation'sfreecashflow.

  Ex.168

 LeiterCompanyhasbegunaworksheetforpreparingastatementofcashflows.Thefollowing additionalinformation isprovided:

1.Cashdividendsof$15,000werepaidduringthe year.

2.Landwhichoriginallycost $60,000wassoldfor $55,000. 3.Commonstockwasissuedat par valuefor cash.

 Instructions

Completethe worksheetfor LeiterCompany.

 aEx.168       (cont.)

 LEITERCOMPANY Worksheet

StatementofCashFlows

FortheYearEndedDecember31,2008

  Balance SheetAccountsDebits

Cash Accountsreceivable Inventory

Land Equipment

Total

 Credits Accountspayable Bondspayable

Accumulateddepreciation— equipment

Commonstock Retainedearnings

Total

 Statement ofCashFlows Effects Operatingactivities

Netincome

Balance 12/31/07

 30,000 40,000 90,000 60,000 131,000351,000

  15,000 25,000

 81,000 170,000

60,000351,000

ReconcilingItems Debits    Credits

                   21,000

Balance 12/31/08

 55,000 58,000 110,000

-0-145,000368,000

  12,000 10,000

 95,000 180,000

71,000368,000

   Ex.169

 DolanCompany'sincomestatementshowedrevenuesof$250,000andoperatingexpensesof $160,000.Accountsreceivabledecreasedby$60,000andaccountspayableincreasedby $40,000duringtheyear.

 Instructions

Compute(a)cashreceiptsfromcustomersand(b)cashpayments foroperatingexpensesusing thedirect method.

  Ex.170

 Banner Company hadtotaloperatingexpenses of$140,000in2008,whichincludedDepreciation Expenseof$20,000.Also,during2008,prepaidexpensesincreasedby$5,000andaccrued expenses decreasedby$6,700.

 Instructions

Calculatetheamountofcashpaymentsforoperatingexpensesin2008usingthedirectmethod.

  Ex.171

 Thegeneralledgerof Lopez Companyprovidesthefollowinginformation:

  AccountsReceivable Inventory AccountsPayable

End ofYear $55,000

350,000 40,000

Beginning of Year $94,000

210,000 65,000

 Thecompany'snetsalesfortheyearwas$2,100,000andcostofgoodssoldamountedto $1,500,000.

 InstructionsComputethe following:

(a)     Cashreceiptsfromcustomers. (b)         Cashpaymentstosuppliers.

  Ex.172

 TheincomestatementofRedmanInc.fortheyearendedDecember31,2008,reportedthe following condensedinformation:

 Servicerevenue Operatingexpenses Incomefromoperations IncometaxexpenseNetincome

$600,000

360,000 240,000

   60,000$180,000

  Redman'sbalancesheetcontainedthefollowingcomparativedataat December31:

  Accountsreceivable Accountspayable Incometaxespayable

2008

$50,000 35,000 6,000

2007

$40,000 50,000 3,000

 Redmanhasnodepreciableassets.Accountspayable pertainstooperatingexpenses.

 Instructions

 Preparetheoperatingactivitiessectionof the statementof cashflowsusingthedirectmethod.

   Ex.173

 Theincomestatementof HaslettCompanyis shownbelow:

 HASLETT COMPANY IncomeStatement

FortheYearEndedDecember31,2008

 Sales

Costof goodssold Grossprofit Operatingexpenses

Sellingexpenses Administrativeexpense Depreciationexpense Amortizationexpense

Netincome

     $500,000 700,000 90,000

   30,000

$8,000,000

5,400,000 2,600,000

     1,320,000$1,280,000

 Ex.173         (cont.)

 Additionalinformation:

1.Accountsreceivable increased$500,000duringtheyear. 2.Inventoryincreased$250,000duringtheyear.

3.Prepaidexpensesincreased$200,000duringthe year.

4.Accountspayable tomerchandisesuppliers increased$150,000duringtheyear. 5.Accruedexpensespayableincreased$180,000duringthe year.

 Instructions

Preparetheoperatingactivitiessectionofthestatementofcashflowsfortheyearended December31, 2008,forHaslettCompany,usingthedirectmethod.

  Ex.174

 ThefinancialstatementsofLarkinCompanyappear below:

       Cash Accountsreceivable Merchandiseinventory

Property,plant,andequipment Accumulateddepreciation

Total

LARKINCOMPANY ComparativeBalanceSheet December31

 Assets

        2008                   2007    

 $43,000              $23,000 26,000               34,000 25,000               15,000 50,000               78,000

(20,000)              (24,000) $124,000    $126,000

   Accountspayable Incometaxespayable Bondspayable Commonstock Retainedearnings

Total

Liabilities and Stockholders'Equity

 $17,000 13,000 7,000 41,000

   46,000$124,000

  $23,000 8,000 33,000 24,000

   38,000$126,000

  LARKINCOMPANY Income Statement

FortheYearEndedDecember31,2008

 Sales

Costofgoodssold GrossprofitSellingexpenses

Administrativeexpenses Incomefromoperations Interestexpense Incomebeforeincometaxes Incometaxexpense

Netincome

    $20,000

16,000

$360,000

280,000 80,000

     36,000 44,000

   4,000 40,000

   12,000$28,000

 Thefollowingadditionaldatawereprovided:

1.Dividendsdeclaredandpaidwere$20,000.

2.Duringtheyear,equipmentwassoldfor$12,000cash.Thisequipmentcost$28,000 originallyand hadabook valueof $12,000at thetime of sale.

3.Alldepreciationexpenseis inthesellingexpensecategory. 4.Allsalesandpurchasesareonaccount.

5.Accountspayable pertaintomerchandisesuppliers.

6.Alloperatingexpensesexceptfordepreciationwerepaidincash.

 Instructions

Prepareastatementofcashflowsfor LarkinCompanyusingthedirectmethod.

  Ex.175

 CondensedfinancialdataofStiner Companyappear below:

       Cash Accountsreceivable Inventories

Prepaidexpenses Investments

Plantassets Accumulateddepreciation

Total

STINER COMPANY ComparativeBalanceSheet December31

 Assets

    2008                      2007

 $71,000           $35,000 85,000               53,000 120,000             132,000 19,000               25,000 90,000               75,000 315,000             250,000

(65,000)              (60,000) $635,000$510,000

    Accountspayable Accruedexpensespayable Bondspayable Commonstock Retainedearnings

Total

Liabilities and Stockholders'Equity

 $93,000 29,000 130,000 245,000

138,000$635,000

  $75,000 24,000 160,000 170,000

   81,000$510,000

  STINERCOMPANY Income Statement

FortheYearEndedDecember31,2008

 Sales Less:

Costofgoodssold

Operatingexpenses(excludingdepreciation) Depreciationexpense

Incometaxes Interestexpense

Lossonsaleof plantassets Netincome

   $280,000 60,000 17,000 15,000 18,000

     3,000

$470,000

       393,000$77,000

  Additionalinformation:

1.Newplantassetscosting$90,000werepurchasedfor cashin2008.

2.Oldplantassetscosting$25,000weresoldfor$10,000cashwhenbookvaluewas$13,000. 3.Bondswithafacevalueof $30,000wereconvertedinto$30,000of commonstock.

4.Acashdividendof $20,000wasdeclaredandpaidduringtheyear. 5.Accountspayable pertaintomerchandisepurchases.

 Instructions

 Prepareastatementofcashflowsfor the yearusingthedirectmethod.

  Ex.176

 TheincomestatementforJavierCompanyshowedcostofgoodssoldof$95,000andoperating expensesof$50,000.Thecomparativebalancesheetsfortheyearshowthatinventory decreased$3,000,prepaidexpensesincreased$7,000,accountspayableincreased$4,000,and accrued expensespayable decreased$5,000.

 Instructions

 Compute(a)cashpayments tosuppliersand(b)cashpaymentsforoperatingexpensesusingthe direct method.

  COMPLETIONSTATEMENTS

  177.Astatementofcashflowssummarizestheoperating,                                      ,and activitiesof anentity.

 178.Thecasheffectsofsellinggoodsandservicesappearsinthe                                                 activities section of astatementofcashflows.

 179.Theoperatingactivities sectionofthestatement ofcash flowsmaybepreparedusingthe

                               methodorthe                                 method.

 180.Netincomefromoperationsisgenerallynotthesameascashprovidedfromoperations becauserevenuesandexpensesarerecognizedintheincomestatementonthe

                             basis.

 181.Usingtheindirectapproach,noncashchargesintheincomestatementare

                                                             tonetincomeandnoncashcreditsare                                           tocompute cash providedbyoperations.

 182.Ifaccountsreceivableincreaseduringaperiod,revenuesonanaccrualbasisare

                               thanrevenuesonacashbasis.

 183.Thesaleofequipmentatlessthanitsbookvalueisa(n)                                                 ofcashthatis reported inthe                                                       activitiessection.

 184.Free                                    equalscashprovidedbyoperationslesscapitalexpendituresand cash dividends.

 a185.Underthedirectmethod,noncashcharges,suchasdepreciation,are                                                  

 inthestatementof cashflows.

 a186.Underthedirectmethod,thetwo largestclassesof itemsintheoperating activitiessection foramerchandisingcompanyarecash                                                                         andcash

                                                  .

 a187.Costofgoodssoldfortheyearamountedto$150,000,andduringtheyear,accounts payable                                           by$8,000andinventory                                   by$7,000resulting in cashpaidtosuppliersof$135,000.

 a188.Incomputingcashpaymentsforoperatingexpenses,adecreaseinprepaidexpensesis

                                                           andanincreaseinaccruedexpensespayableis                                              to (from)operatingexpenses,exclusiveof depreciation.

 a189.Incomputingcashpaymentsforincometaxes,adecreaseinincometaxespayableis

                               to(from)incometaxexpense.

   MATCHING

 Set1—IndirectMethod

 190.Foreachofthefollowingitems,indicatebyusingtheappropriate codeletter,howtheitem should be reported inthestatementof cashflows,usingtheindirect method.

 A.    Addedtonetincome

B.    Deductedfromnetincome

C.     Cashoutflow—investingactivity D.        Cashinflow—investingactivity E.    Cash outflow—financingactivity F.    Cash inflow—financingactivity

G.    Significantnoncashinvestingandfinancing activity

  1.Decreaseinaccountspayable duringaperiod

 2.Declarationandpaymentofacashdividend.

 3.Lossonsaleof land.

 4.Decreaseinaccountsreceivable duringaperiod.

 5.Redemptionof bondsforcash.

 6.Proceedsfrom saleofequipmentatbookvalue.

 7.Issuanceof commonstockfor cash.

 8.Purchaseofa buildingfor cash.

 9.Acquisitionof landinexchangeforcommonstock.

 10.Increaseinmerchandiseinventoryduringa period.

    Set2—DirectMethod

  a191.For eachof thefollowingitems, indicatebyusingthe appropriatecode letter, howtheitem should be reported inthestatementof cashflows,usingthedirectmethod.

 A.    Addedindeterminingcashreceiptsfromcustomers

B.    Deductedindeterminingcashreceiptsfromcustomers C.        Addedindeterminingcashpaymentstosuppliers

D.    Deductedindeterminingcashpaymentstosuppliers E.        Cashoutflow—investingactivity

F.     Cashinflow—investingactivityG.    Cash outflow—financingactivity H.    Cash inflow—financingactivity

I.    Significantnoncashinvestingandfinancing activity J.       Isnotshown

  1.Decreaseinaccountspayable duringaperiod.

 2.Declarationandpaymentofa cashdividend.

 3.Decreaseinaccountsreceivable duringaperiod.

 4.Depreciationexpense.

 5.Conversionof bondspayable intocommonstock.

 6.Decreaseinmerchandiseinventoryduringa period.

 7.Saleofequipmentforcashat bookvalue.

 8.Issuanceofpreferredstockfor cash.

 9.Purchaseof landfor cash.

         10.Lossonsale of aplant asset.

     SHORT-ANSWERESSAYQUESTIONS

S-AE192

Thestatementofcashflowsistheonlyrequiredfinancialstatementthatisnotpreparedfroman adjustedtrialbalance.Whatarethesourcesofinformationforpreparingastatementofcash flows? Explainhowtheaccrualbasis of accounting affectsthestatementof cashflows.

    S-AE193

 Cashflowsfromoperatingactivitiescanbecalculatedusingtheindirectordirectmethod.Briefly describehowthetwomethodsdifferyetarriveatthesameinformationaboutthenetcashflows fromoperatingactivities.

    S-AE194

 Howisitpossibleforacompanytosufferanetlossforagivenyear,yetproduceapositivenet cashflowfrom operatingactivities?

  S-AE195(Ethics)

 FlintHillsCompany'smostrecentfinancialstatementsshoweddismalperformance.Therewasa netlossof$10,000andthestatementofcashflowsshowedanetcashdecreaseinall categories.Thecompanypresidentcalledallthemanagerstogetherandaskedthemtodoall theycouldtomakesurethenextquarter'sperformance wasbetter.

 MelLaw,managerofthemanufacturingdivision,soldoffoldmanufacturingequipment.Healso reclassifiedseveralworkerstoparttime(30hoursperweek)andhiredadditionaltemporary workerstotakeuptheslack.Thissavedthecompanymoney,sincepart-timeworkersdonot havethe same insuranceandotherbenefitsasfull-timeworkers.

 JohnReed,financialmanager,immediatelysuspendedpaymentsonallaccountsexceptthose on which interest wouldaccrue.Healsoinstitutedaggressivecollectionprocedures.

 Required:

1.Were MelLaw'sactionsethical?Explain.

2.WereJohnReed'sactionsethical?Explain.

3.Werethecompanypresident's actionsethical?Explain.

    S-AE196(Communication)

 Youaretheaccountant forasmallmanufacturingfirm.Yourcompany isprivatelyheld,sothereis nocurrentrequirementtoissuefinancialstatementsusingGAAP.Youwerehiredfouryearsago, andatthattimeyouinstitutedacashbudgetingsystem.Presently,youpresentascheduleof predictedcashsourcesand cashneedsattheendof eachweekforthefollowingweek.

TheStatementof Cash Flows       17-53

 S-AE196(cont.)

 KenHarmon, thecompany'spresident,hasaskedwhetherastatementofcashflowswouldalso be useful.

 Required:

Preparea shortmemorandumtothepresident indicatingwhether youbelieve suchanadditionto thefinancialstatementstobeuseful.Includeinyourmemothebenefitsthatmightbeexpected fromastatementofcashflowsandwhetherthosearedifferentfromthebenefitsofacash sourcesandcashneedslisting.

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Habits, routines, delegations, outsourcing, operations, cycles and even shortcuts can all fit under the category of automations. Maybe calling it something else makes them less sexy, but they are still super-useful. carpetbagenterprises.com/newsletter . . . [Image Description: Yellow background with a faded grid on top of it. On top of that is a large white square. On top is text that reads "An automation by any other name is...still really useful!"]

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If you think about it, automation is actually a pretty vague and malleable concept. carpetbagenterprises.com/newsletter . . . [Image Description: Background of single yellow and single pink vertical stripe with a faded grid pattern on it. Text reads "Automation is just a buzzword..."]

[carpetbagenterprises]

I recommend that you generate and review your "The Big 3" report at least every month. Not sure what those are? Learn all about them by reading my last 4 newsletters - carpetbagenterprises.com/newsletter . . . [Image Description: Watercolor-ish background of pink and green flower shapes. Text on top reads "Best practice Review "The Big 3" monthly"]

[carpetbagenterprises]

If you've got no time for swimming through numbers, then go the Statement of Cash Flows. This report gives you the a super-high level view of your business finances and answers the question "Where did the money actually go?" carpetbagenterprises.com/newsletter . . . [Image Description: Watercolor-ish background of green flower shape. Text on top reads "The Statement of Cash flows is for when you're impatient..."]

[carpetbagenterprises]

The Balance Sheet shows you a snapshot of the balances of your bank, liability & equity accounts on a specific day. carpetbagenterprises.com/newsletter . . . [Image Description: Watercolor-ish background of a pink flower. Text on top reads "Your Balance sheet is like a photo." ]

[carpetbagenterprises]

Think of your Profit & Loss statement as a movie that tells you the story of how much you earned and how much you spent within a given period. carpetbagenterprises.com/newsletter . . . [Image Description: Watercolor-ish background of pink and green flower shapes. Text on top reads "Your P&L is like a movie..."]