Quizz du chapitre 5 PDF

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CHAPTER 5 - QUIZZ The "bottom line" in a statement of cash flows shows: The cash (including cash equivalents) on the balance sheet at the end of the period. All of the following are considered cash equivalents except: Marketable securities Which of the following would indicate a cash disbursement? An increase in prepaid expenses. Which of the following does not decrease the cash flow from operating activities? The purchase of operating equipment. When equipment is purchased entirely through a loan: Neither the loan nor the purchase of equipment is shown in the investing or the financing sections. Which method will yield the higher cash flows from financing activities? Both The SEC requires public companies to use the indirect method for the statement of cash flows. FALSE In the statement of cash flows, the purchase of supplies is classified as: Operating activities. Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities? Both methods involve adjusting entries to the company's books so that the accounting records reflect the figures shown in the statement of cash flows. When using the indirect method, depreciation expense: Increases net cash flow from operations. The indirect method of computing cash flows from operations begins with net income. TRUE From the viewpoint of stockholders or potential investors, which of the following cash flow measurements would be of least importance? The dollar amount of overall increase or decrease in cash for the current year. The statement of cash flows helps investors and creditors assess both the cash and noncash aspects of a company's investing and financing activities. True

. Under the indirect method, when machinery is sold at a gain, the gain is added in the operating section of the statement of cash flows and the cost is added in the investing section. FALSE When preparing a statement of cash flows, money held in cash equivalents is considered the same as cash. TRUE Deferring income taxes by using legal accounting methods is one strategy to permanently improve cash flow. true Which of the following would not be presented in the cash from operating activities section of the statement of cash flows when the indirect method is used? Both a gain on the sale of investments and depreciation expense would be shown. . The FASB permits a company to use the direct method or the indirect method for the statement of cash flows. TRUE Free cash flow is computed as net cash flow from operating activities plus cash used to acquire plant assets minus cash paid for dividends. False Free cash flow arises out of: Operating activities. A statement of cash flows is not intended to assist investors in evaluating: The profitability of business operations. Interest paid belongs in the operating section of the statement of cash flows. TRUE Which of the following is not classified among the financing activities in a statement of cash flows? Payment of interest to creditors Cash flows from operating activities include all of the following except: Payments of dividends The principal purpose of a statement of cash flows is to measure the profitability of a business that maintains its accounting records on the cash basis. FALSE An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is: Selling land in exchange for a note receivable. Which of the following is not classified among the investing activities in a statement of cash flows?

Investment of cash made in the business by the owners. When applying the direct method in a statement of cash flows, the amount of depreciation is added to net income. FALSE In a statement of cash flows, collections of accounts receivable are classified as: Operating activities

Which of the following is not classified among the operating activities in a statement of cash flows? Haven Corporation issued $700,000 of 10-year bonds payable at par in 2014. During 2018 Haven paid $50,000 interest and an additional $233,333 to retire one-third of the bonds at par. These activities would be reported in Haven's statement of cash flows for 2018 as: $233,333 net cash used in financing activities, and $50,000 cash disbursed for operating activities. Whether one uses the direct or the indirect method of presentation of the statement of cash flows, the totals from each of the three sections (activities) will be the same regardless of the method used.->True Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities? both methods involve adjusting entries to the company's books so that the accounting records reflect the figures shown in the statement of cash flows Which of the following does not create a difference between net income and the net cash flow from operations? Depreciation expense Rent expense in Marrin Company's 2018 income statement is $175,000. If Prepaid Rent was $44,000 at December 31, 2017, and is $98,000 at December 31, 2018, the cash paid for rent during 2018 is:?????

Free cash flow refers to the excess of cash inflows over cash outflows -> False If accounts receivable increased during the year, deducting the increase from net sales determines the amount of cash received -> True When a company uses peak pricing, it is charging the highest or "peak" prices the public will be willing to pay during periods of low demand. -> False

The accounting staff of Wyoming Outfitters, Inc., has assembled the following information for the current year ended December 31. Cash and cash equivalents, Jan. 1 Cash and cash equivalents, Dec. 31 Cash paid to acquire plant assets Proceeds from short-term borrowing Loans made to borrowers Collections on loans (excluding interest) Interest and dividends received Cash received from customers Proceeds from sales of plant assets Dividends paid Cash paid to suppliers and employees Interest paid Income taxes paid

$35,800 190,20 0 21,000 10,000 4,500 4,000 36,900 865,00 0 9,000 45,000 617,00 0 19,000 64,000

Using this information, prepare a statement of cash flows under direct method. (List any deduction in cash and cash outflows as negative amounts.)  https://learn.esc.edu/media/212064+Introductory+Accounting+2++Problem+Demo+Exercise+13-7/1_optd8tqi

Presley, Inc., had the following positive and negative cash flows during the current year. Positive cash flows: Received from customers

270,00 0 50,000 360,00 0

$

Interest and dividends Sale of plant assets Negative cash flows: Paid to suppliers and employees Purchase of investments Purchase of treasury stock

$

127,00 0 45,000 40,000

Determine the amount of cash provided by or used for operating activities by the direct method. Net cash = provided by Operating activities = $193,000

Explanation Cash flows from operating activities:

Cash received from customers

270,00 0 50,000 (127,00 ) 0 193,00 $ 0 $

Cash received for interest and dividends Cash paid to suppliers and employees Net cash provided by operating activities

The general ledger of AXM, Inc., provides the following information relating to purchases of merchandise. Inventory Accounts payable to merchandise suppliers

End of Beginning of Year Year $ 926,000 $ 780,000 417,000

500,000

The company's cost of goods sold during the year was $2,500,000. Compute the amount of cash payments made during the year to suppliers of merchandise. --------

The general ledger of AXM, Inc., provides the following information relating to purchases of merchandise.

Inventory Accounts payable to merchandise suppliers

End of Beginning of Year Year $ 806,000 $ 780,000 417,000

500,000

The company's cost of goods sold during the year was $2,420,000. Compute the amount of cash payments made during the year to suppliers of merchandise. Cash payments to suppliers of merchandise: 2,529,000 Explanation

Cash payments to suppliers of merchandise:

Cost of goods sold

$

2,420,00 0

Add: Increase in inventory ($806,000 − Decrease in accounts payable ($500,000 − $780,000) $417,000)

26,00 $ 0 83,00 0

Cash payments to suppliers of merchandise

109,000 $2,529,000

New Mexico, Inc., sold common stock for $560,000 and preferred stock for $56,000 during the current year. In addition, the company purchased treasury stock for $47,000 and paid dividends on common and preferred stock for $24,000. Determine the amount of cash provided by or used for financing activities during the year. --An analysis of the Marketable Securities control account of Fancher Products, Inc., shows the following entries during the year. Balance, Jan. 290,00 $ 1 0 280,00 Debit entries 0 (120,00 Credit entries ) 0 Balance, Dec. 450,00 $ 31 0

In addition, the company’s income statement includes a $35,000 loss on sales of marketable securities. None of the company’s marketable securities is considered a cash equivalent. Compute the amounts that should appear in the statement of cash flows as: Purchases of marketable securities = Proceeds from sales of marketable securities = Zephre Company reported net income for the year of $68,000. Depreciation expense for the year was $15,000. During the year, accounts receivable increased by $4,000, inventory decreased by $6,000, accounts payable increased by $3,000, and accrued expenses payable decreased by $2,000. Reconcile the amount of net income to the amount of cash provided by or used for operating activities.

Spinx, Inc., reported cost of goods sold of $100,800 during the current year. Following are the beginning and ending balances of merchandise inventory and accounts payable for the year. Merchandise inventory

Beginning Ending $ 35,00 $ 43,00

Accounts payable

0 23,00 0

0 32,00 0

Amount of cash payments for purchases: Cost of goods sold

100,80 0 8,000 (9,000) $99,800

$

Add: Increase in merchandise inventory ($43,000 − $35,000) Deduct: Increase in accounts payable ($32,000 − $23,000) Amount of cash payments for purchases

Early in 2018, Larsen Corporation purchased marketable securities at a cost of $93,000. In September, dividends of $6,900 were received; Larsen sold the securities in December at a gain of $5,900. How would these transactions be reported on Larsen's statement of cash flows for 2018?  $5,900 net cash provided by investing activities; $6,900 included in cash provided by operating activities.

Shepherd Industries had the following cash flows by major categories during the current year.

Cash provided by: Receipts from customers Sale of bonds Sale of treasury stock Interest and dividends received Sale of equipment (at a $56,000 loss) Cash used for: Payments to employees Payments to purchase inventory Dividends on common stock Purchase of treasury stock Interest expense

560,00 $ 0 420,00 0 52,000 56,000 236,00 0 145,00 $ 0 190,00 0 60,000 20,000 82,000

Calculate the net amount of cash provided by or used for financing activities for the year : Net cash provided by financing activities: Sale of bonds Sale of treasury stock Dividends on common stock Purchase of treasury stock Net cash provided by financing

420,00 $ 0 52,000 (60,00 ) 0 (20,00 ) 0 $392,00

activities

0

An analysis of the Marketable Securities control account of Fancher Products, Inc., shows the following entries during the year.

Balance, Jan. 270,00 $ 0 1 290,00 Debit entries 0 (110,00 Credit entries ) 0 Balance, Dec. 450,00 $ 31 0

In addition, the company’s income statement includes a $35,000 loss on sales of marketable securities. None of the company’s marketable securities is considered a cash equivalent. Compute the amounts that should appear in the statement of cash flows as:

a.Purchases of marketable securities: 290,000 b.Proceeds from sales of marketable securities: ($110,000 book value – $35,000 loss) = $75,000

During the current year, Maine Salvage Company took out new loans of $12 million. In addition, the company repaid $2.4 million of prior loans and paid $1.8 million of interest expense. Explain how these cash flows will appear in the company's statement of cash flows, indicating the classification and the dollar amount of each cash flow. (Enter your answers in millions rounded to 1 decimal place.)

Explanation The new loans made ($12 million) will appear among the financing activities of the company as a positive cash flow. The $2.4 million of loans paid off will be a negative cash flow in the financing activities section. The interest paid, $1.8 million, will appear as a negative cash flow from operating activities.

Depreciation is a non-cash expense -> True

Depreciation expense reduces net income but does not reduce the net cash flow from operating activities. -> True

Patterson Company reported net income for the current year of $722,000. During the year, the company’s accounts receivable increased by $50,000, inventory decreased by $23,000, accounts payable decreased by $55,000, and accrued expenses payable increased by $14,000. Determine the amount of cash provided by or used for operating activities by the indirect method. Net cash provided by operating activities: $654,000 Explanation

722,00 $ 0

Net income Adjustments to reconcile net income to net cash from operations: Increase in accounts receivable Decrease in inventory Decrease in accounts payable Increase in accrued expenses payable Net cash provided by operating activities

(50,00 ) 0 23,00 0 (55,00 ) 0 14,00 (68,00 ) 0 0 654,00 $ 0

$

Rent expense in Marrin Company's 2018 income statement is $220,000. If Prepaid Rent was $50,000 at December 31, 2017, and is $101,000 at December 31, 2018, the cash paid for rent during 2018 is: $271,000 Explanation $220,000 + ($101,000 − $50,000) = $271,000

Rent expense in Burr Company's income statement is $480,000. If Prepaid Rent was $120,000 on January 1 and is $95,000 on December 31, the cash paid for rent during the year is: Explanation $480,000 + ($95,000 – $120,000) = $455,000

Chapin Company reported net income of $410,000 for 2018. Balances of selected current asset and current liability accounts are as shown on the indicated dates: Jan.1, 2018 Accounts receivable Inventory

$ 60,000 $

Dec. 31, 2018 69,400

$ 130,00 $ 141,000

Accounts payable

0 $ 54,000 $

48,000

Depreciation expense for 2018 amounted to $65,000. Using only the above information, compute Chapin's net cash flow from operating activities (indirect method) for 2018. $410,000 + $65,000 – $9,400 – $11,000 – $6,000 = $448,600

Peak pricing charges: A higher price when demand is high and a lower price when demand is low.

The statement of cash flows helps investors and creditors assess both the cash and noncash aspects of a company's investing and financing activities. -> True

Wallace Company’s statement of cash flows for the current year is summarized as follows.

Cash provided by operating 275,00 $ activities 0 (140,00 Cash used in investing ) activities 0 Cash provided by financing 45,000 activities 180,00 Increase in cash during the $ year 0 Cash balance, beginning of the 75,000 year 255,00 Cash balance, end of the year $ 0

a. Identify the appropriate cash flow section with the given meaning. b. Based on the limited information presented above, did the company's cash position increase or decrease during the year?

Explanation

a. The operating activities section generally includes the cash provided by and used for those transactions that are normal, ongoing operations and that included in the determination of net income. The investing activities

section includes cash provided by and used for the purchase and disposal of assets that are not held for resale, primarily investments, and plant and intangible assets. Financing activities generally include cash provided by and used for debt and equity financing transactions.

b. Wallace Company's cash increased significantly during the year, going from $75,000 to $255,000. Operations were strong, providing $275,000 of positive cash flow. Based on the limited information provided, interpreting the use of $140,000 for investing activities is difficult, but one possible positive interpretation is that the company is preparing for the future by acquiring additional plant and other assets that will be required. The increase in cash of $45,000 from financing activities indicates that the company is expanding its financing in some ways, probably some combination of selling bonds or other debt securities and selling common, preferred, or treasury stock. While the limited information presented makes substantive interpretation of the overall cash picture highly speculative, it is clear that the company has a much larger cash balance at the end than at the beginning of the year and that the increase is tied directly to its success in generating cash from its ongoing, normal operations.

Interest paid belongs in the operating activities section of the statement of cash flows.-> True

Early in 2018, Larsen Corporation purchased marketable securities at a cost of $99,000. In September, dividends of $7,500 were received; Larsen sold the securities in December at a gain of $6,500. How would these transactions be reported on Larsen's statement of cash flows for 2018? $6,500 net cash provided by investing activities; $7,500 included in cash provided by operating activities.

When credit sales exceed collections of cash from accounts receivable, the increase in accounts receivable is added to net sales to determine the amount of cash collected from customers during the period.  False

An analysis of the Marketable Securities control account of Fancher Products, Inc., shows the following entries during the year. Balance, Jan. 270,00 $ 0 1 250,00 Debit entries 0 (130,00 ) Credit entries 0 Balance, Dec. 390,00 $ 31 0

In addition, the company’s income statement includes a $35,000 loss on sales of marketable securities. None of the company’s marketable securities is considered a cash equivalent. Compute the amounts that should appear in the statement of cash flows as: Purchase of marketable securities: 250 000 Proceeds from sales of marketable securities: ($130,000 book value – $35,000 loss) = $95,000

Cash flows from investing activities include all of the following except: cash proceeds from borrowing A cash dividend paid to shareholders is reported on the: Financing activities section of the statement of cash flows.

Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used? Dividends paid

During the current year, Tachnic, Inc., made cash sales of $289,000 and credit sales of $472,000. During the year, accounts receivable decreased by $32,000. a-1. Compute for the current year the amount of net sales reported as revenue in the income statement. a-2. Compute for the current year the amount of cash received from collecting accounts receivable. a-3. Compute for the current year the amount of cash received from customers. Assume that the credit sales amount has been collected during the current year. Explanation

a-1. Net sales:

289,00 $ 0 472,00 Credit sales 0 Net sales reported as revenue in the income 761,00 $ statement 0

Cash sales

a-2. Cash received from collecting accounts receivable:

Credi...