Indirect Cash flows from operations
A cash equivalent is:
a. An investment readily convertible to a known amount of cash and sufficiently close to maturity so its market value is unaffected by interest rate changes.
b. Close to its maturity date but its market value may still be affected by interest rate changes.
c. An account payable due within 5 months.
d. Is not considered highly liquid.
e. One example of a noncash investing and financing activity.
a. An investment readily convertible to a known amount of cash and sufficiently close to maturity so its market value is unaffected by interest rate changes.
Investing activities do not include the:
a. Purchase of plant assets.
b. Loaning of money in exchange for notes receivable.
c. Issuance of common stock.
d. Sale of plant assets.
e. Sale of investments.
c. Issuance of common stock.
Which of the following items is reported on the statement of cash flows under financing activities?
a. Purchase of equipment for cash.
b. Payment of a cash dividend.
c. Payment for merchandise.
d. Purchase of an investment.
e. Sale of merchandise.
b. Payment of a cash dividend.
The cash flow on total assets ratio:
a. Is the same as return on assets.
b. Is the same as profit margin.
c. Can help measure a company’s ability to meet its obligations, pay dividends, expand operations, and obtain financing.
d. Is highly affected by accounting principles of income recognition and measurement.
e. Equals average net assets divided by cash flows from operations.
c. Can help measure a company’s ability to meet its obligations, pay dividends, expand operations, and obtain financing.
The statement of cash flows reports:
a. Assets, liabilities, and equity.
b. Revenues, gains, expenses, and losses.
c. Cash receipts (inflows) and cash payments (outflows) for an accounting period.
d. Equity, net income, and dividends.
e. Changes in equity.
c. Cash receipts (inflows) and cash payments (outflows) for an accounting period.
Which one of the following is an example of cash flows from operating activities?
a. Proceeds from collecting the principal amounts of loans.
b. Receipts of cash from sales.
c. Repayment of principals on loans.
d. Proceeds from the issuance of bonds and notes payable.
e. Payments to acquire equity securities of other companies.
b. Receipts of cash from sales.
Which of the following is not a cash flow from investing activities?
a. Payments to purchase plant assets.
b. Payments to buy intangible assets.
c. Proceeds from collecting accounts receivable that arise from customer sales.
d. Payments to acquire investments.
e. Proceeds from the sale of equipment.
c. Proceeds from collecting accounts receivable that arise from customer sales.
If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):
a. Financing activity.
b. Investing activity.
c. Operating activity.
d. Noncash investing and financing activity.
e. This is not reported in the statement of cash flows.
c. Operating activity.
The cash flow on total assets ratio is calculated by:
a. Dividing average total assets by cash flow from financing activities.
b. Dividing total cash flows by average total assets.
c. Dividing average total assets by total cash flows.
d. Dividing cash flow from operations by average total assets.
e. Total cash flows divided by average total assets times 365.
d. Dividing cash flow from operations by average total assets.
The section in the statement of cash flows for reporting the receipt of cash from dividend revenue is:
a. Operating activities.
b. Financing activities.
c. Investing activities.
d. Schedule of noncash investing or financing activity.
e. This is not reported on the statement of cash flows.
a. Operating activities.
Alfredo Incorporated reports net income of $230,000 for the year ended December 31. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.
a. $376,450.
b. $351,450.
c. $356,450.
d. $319,950.
e. $263,750.
b. $351,450.
$230,000 + $87,700 + $35,500 + $15,750 − $12,500 − $5,000 = $351,450
In preparing a company's statement of cash flows for the year just ended, the following information is available: Loss on the sale of equipment $ 14,000 Purchase of equipment 225,000 Proceeds from the sale of equipment 106,000 Repayment of outstanding bonds 87,000 Purchase of treasury stock 25,000 Issuance of common stock 96,000 Purchase of land 115,000 Increase in accounts receivable during the year 33,000 Decrease in accounts payable during the year 75,000 Payment of cash dividends 35,000
Net cash flows from financing activities for the year were:
a. $147,000 of net cash used.
b. $26,000 of net cash used.
c. $347,000 of net cash used.
d. $51,000 of net cash used.
e. $340,000 of net cash used.
d. $51,000 of net cash used.
Repayment of outstanding bonds $ (87,000)
Purchase of treasury stock (25,000)
Issuance of common stock 96,000
Payment of cash dividends (35,000)
Total $ (51,000)
In preparing a company's statement of cash flows for the most recent year, the following information is available:
Loss on the sale of equipment $ 14,500 Purchase of equipment for cash 150,000 Proceeds from the sale of equipment 131,000 Repayment of outstanding bonds 89,500 Purchase of treasury stock 64,500 Issuance of common stock 98,500 Purchase of land for cash 120,000 Increase in accounts receivable during the year 45,500 Decrease in accounts payable during the year 77,500 Payment of cash dividends 37,500
Net cash flows from investing activities for the year were:
a. $262,000 of net cash used.
b. $124,500 of net cash used.
c. $139,000 of net cash used.
d. $139,000 of net cash provided.
e. $228,500 of net cash provided.
c. $139,000 of net cash used.
Purchase of equipment $ (150,000)
Purchase of land (120,000)
Proceeds from sale of equipment 131,000
Total $ (139,000)
A company had net cash flows from operations of $344,100, net income of $286,000 and average total assets of $1,850,000. The cash flow on total assets ratio equals:
a. 83.9%
b. 542.5%
c. 15.5%
d. 18.6%
e. 646.9%
d. 18.6%
Cash Flow on Total Assets Ratio = Cash Flows from Operations/Average Total Assets
Cash Flow on Total Assets Ratio = $344,100/$1,850,000 = 18.6%
Use the following information to calculate cash paid for income taxes:
Income tax expense $ 64,000
Income tax payable, January 1 15,400
Income tax payable, December 31 18,600
a. $30,000.
b. $79,400.
c. $82,600.
d. $60,800.
e. $64,000.
d. $60,800.
Increase in Income Taxes Payable = $18,600 − $15,400 = $3,200
Cash paid for Income Taxes = $64,000 − $3,200 = $60,800
Income Tax Expense $ 64,000
Income Tax Payable $ 3,200
Cash $ 60,800
Analysis reveals that a company had a net increase in cash of $20,000 for the current year. Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash provided by financing activities was $12,000. If the year-end cash balance is $24,000, the beginning cash balance was:
a. $4,000.
b. $16,000.
c. $44,000.
d. $40,000.
e. $39,000.
a. $4,000.
Cash = $24,000 ending balance − $20,000 increase in cash = $4,000 beginning balance
Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities of $38,500; net cash used in investing activities of $14,200 and net cash used in financing activities of $18,300. If the beginning cash balance is $7,100, what is the ending cash balance?
a. $78,100.
b. $63,900.
c. $41,500.
d. $6,000.
e. $13,100.
e. $13,100.
Provided by operating activities $ 38,500
Used in investing activities $ (14,200)
Used in financing activities $ (18,300)
Net increase in cash $ 6,000
Plus Beginning Cash $ 7,100
Ending Cash $ 13,100
Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities of $28,000; net cash used in investing activities of $10,000 and net cash used in financing activities of $12,000. If the beginning cash balance is $5,000, what is the ending cash balance?
a. $55,000.
b. $45,000.
c. $31,000.
d. $11,000.
e. $6,000.
d. $11,000.
Provided by operating activities $ 28,000
Used in investing activities $ (10,000)
Used in financing activities $ (12,000)
Net increase in cash $ 6,000
Plus Beginning Cash $ 5,000
Ending Cash $ 11,000
A company had net cash flows from operations of $122,000, cash flows from financing of $334,000, total cash flows of $506,000, and average total assets of $2,620,000. The cash flow on total assets ratio equals:
a. 4.7%.
b. 4.9%.
c. 19.3%.
d. 20.0%.
e. 24.1%.
a. 4.7%.
Cash Flow on Total Assets Ratio = Cash Flows from Operations/Average Total Assets
Cash Flow on Total Assets Ratio = $122,000/$2,620,000 = 4.7%
Use the following information to calculate cash paid for wages and salaries:
Salaries expense $ 185,000
Salaries payable, January 1 8,100
Salaries payable, December 31 14,000
a. $179,100.
b. $185,000.
c. $190,900.
d. $171,000.
e. $193,100.
a. $179,100.
Increase in Salaries Payable = $14,000 − $8,100 = $5,900
Cash paid for salaries = $185,000 − $5,900 = $179,100
Salaries Expense $ 185,000
Salaries Payable $ 5,900
Cash $ 179,100
Use the following information to calculate cash received from dividends:
Dividends revenue $ 32,800
Dividends receivable, January 1 3,200
Dividends receivable, December 31 4,600
a. $36,000.
b. $28,200.
c. $34,200.
d. $31,400.
e. $32,800.
d. $31,400.
Increase in Dividends Receivable = $4,600 − $3,200 = $1,400
Cash received from dividends = $32,800 − $1,400 = $31,400
Cash $ 31,400
Dividends Receivable $ 1,400
Dividends Revenue $ 32,800
A machine with a cost of $150,000 and accumulated depreciation of $95,000 is sold for $48,000 cash. The amount of the loss related to the sale of this machine should be reported in the operating section under the indirect method is:
a. $22,000.
b. $4,800.
c. $70,000.
d. $18,000.
e. $7,000.
e. $7,000.
Machine book value = $150,000 − $95,000 = $55,000
Proceeds from sale = $48,000
Loss on sale = $48,000 − $55,000 = $7,000
A company reported that its bonds with a par value of $50,000 and a carrying value of $63,000 are retired for $67,200 cash, resulting in a loss of $4,200. The amount to be reported under cash flows from financing activities is:
a. $(13,000).
b. $(63,000).
c. $13,000.
d. $(4,200).
e. $(67,200).
e. $(67,200).
A company had net cash flows from operations of $120,000, cash flows from financing of $330,000, total cash flows of $500,000, and average total assets of $2,500,000. The cash flow on total assets ratio equals:
a. 5.0%.
b. 4.8%.
c. 20.0%.
d. 20.8%.
e. 24.0%.
b. 4.8%.
Cash Flow on Total Assets Ratio = Cash Flows from Operations/Average Total Assets
Cash Flow on Total Assets Ratio = $120,000/$2,500,000 = 4.8%
A company's Inventory balance at the end of the year was $206,000 and $220,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $104,000 and $98,000 at the beginning of the year, and its cost of goods sold for the year was $740,000. The company's total amount of cash payments for merchandise during the year equals:
a. $748,000.
b. $760,000.
c. $720,000.
d. $740,000.
e. $732,000.
c. $720,000.
Decrease in merchandise = $220,000 − $206,000 = $14,000
Purchases = $740,000 − $14,000 = $726,000
Increase in Accounts Payable = $104,000 − $98,000 = $6,000
Cash paid for merchandise = $726,000 − $6,000 = $720,000