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Flashcards in SCF Deck (59):
1

The following items relate to the preparation of statement of cash flows:

                               year 2        year I                            year 2

Cash                        $150,000  $100,000  Net sales     $3,200,000

Dividends payable      35,000    0              CGS            (2,500,000)

Common stock         600,000    450,000  Expenses     (500,000)

Retained earnings    280,000     165,000  Net income   $200,000 

Capital stock was sold to provide additional working capital. Under financing activities, cash dividend payments during year 2 amounted to 

$ 50,000

2

The following items relate to the preparation of statement of cash flows:

                               year 2        year I                         year 2

Cash                        $150,000  $100,000  

Inventory                    330,000   210,000  Net sales $3,200,000

Prepaid Expenses        50,000    25,000   CGS         (2,500,000)

Non current assets     565,000  300,000  Expenses    (500,000)

Accumulated Dep       (55,000)  (25,000)  Net income$200,000

Accrued Exp.                70,000    65,000 

The direct approach is used for operating activities.  Under operating activities, cash paid for operating expenses for year 2 amounted to 

$490,000

3

New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. New England's cash balance was $27,000 on January I. During the year, there was a sale of land that resulted in a gain of $25,000 and proceeds of $40,000 were received from the sale. What was New England's cash balance at the end of the year?

$208,000 

4

In its cash flow statement for the current year, Ness Co. reported cash paid for interest of $70,000. Ness did not capitalize any interest during the current year. Changes occurred in several balance sheet accounts as follows:

Accrued interest payable    17,000 decrease

Prepaid interest                   23,000 decrease

In its income statement for the current year, what amount should Ness report as interest expense? 

$ 76,000

5

Stevie Company owns shares of stock in Rod Inc.  Stevie received $5,000 cash dividend. If Stevie reports under IFRS, the dividend received can be classified as 

 Either an operating activity or investing activity.

6

Reed Co.'s year 2 statement of cash flows reported cash provided from operating activities of $400,000. For year 2, depreciation of equipment was $190,000, amortization of patent was $5,000, and dividends paid on common stock were $100,000. In Reed's year 2 statement of cash flows, what amount was reported as net income? 

$205,000

7

In a statement of cash flows in which the operating activities section is prepared under the indirect method, a gain on the sale of an investment in available-for-sale securities should be presented as a

Deduction from net income

8

In statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

Operating activities. 

9

Bay Manufacturing Co. purchased 3-month US Treasury bill. In preparing Bay's statement of cash flows, this purchase would

Have no effect.

10

Able Company reports its income from investments under the equity method and recognized income of $15,000 from its investment in Tech Company during the current year even though no dividends were declared or paid by Tech Company during the year. On Able Company's statement of cash flows in which the operating activities section is prepared under the indirect method, the $15,000 must

Be shown as a deduction from net income under operating activities.

11

Darinda Corporation has a cash advance from the bank for an overdraft of $5,000 on its checking account. Darinda prepares its financial statements in accordance with IFRS. The cash advances from the bank due to the overdraft should be reported on the statement of cash flows as

Operating activities. 

12

In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method? (Ignore income tax considerations.)

a. Gain on sale of equipment.

b. Change from straight-line to accelerated depreciation.

c. Gain on early retirement of bonds.

d. Dividends received from investments.

Dividends received from investments.

13

The purchase for cash of treasury stock should be presented in statement of cash flows as a(n) 

a. Neither

b. Financing activity

c. Investing activity

d. Investing activity and Financian activity

Financing activity

14

A company's accounts receivable decreased from the beginning to the end of the year. In the company's statement of cash flows (operating activities shown using direct approach), the cash collected from customers would be 

Sales revenues plus the decrease in accounts receivable from the beginning to the end of the year. 

15

The following items relate to the preparation of statement of cash flows:

                              year 2       year I 

Cash                      $150,000  $100,000  Net sales      $3,200,000

MES*

(Available for sale)  40,000       0             CGS              (2,500,000)

AR net                    420,000   290,000   Expenses      (500,000)

Inventory                330,000   210,000    Net income   $200,000

Noncurrent assets  565,000   300,000

Accum. Deprec.       (5,000)     (25,000)

*Cost and market value          

All accounts receivable relate to trade merchandise. Cash discounts are not allowed to customers but a service charge is added to an account for late payment. The allowance for doubtful accounts at the end of year 2 was the same as the end of year I; no receivables were charged against the allowance during year 2. Under investing activities, cash outflows during year 2 totaled 

$305,000

16

The following information is available from Sand Corp.'s accounting records for the year ended December 31, year 2: 

Cash received from customers               $870,000 

Rent received                                             10,000  

Cash paid to suppliers and employees     510,000

Taxes paid                                                110,000

Cash dividends paid                                  30,000

The Net cash flow provided by operations for year 2 was 

$260,000 

17

Deferred income tax expense resulting from temporary differences related to depreciation of plant assets should be presented in statement of cash flows (using indirect approach for operating activities) as an 

Addition to net income.

18

Paper Co. had net income of $70,000 during the year. Dividend payment was $10,000. The following information is available:   

Mortgage repayment            $20,000 

Available-for-sale securities

purchased                             10,000 increase

Bonds payable—issued         50,000 increase

Inventory                              40,000 increase

Accounts payable                 30,000 decrease 

What amount should Paper report as net cash provided by operating activities in its statement of cash flows for the year? 

$0

19

Which of the following items is included in the financing activities section of the statement of cash flows?

a. Cash effects of transactions obtaining resources from owners and providing them with return on their investment. 

b. Cash effects of transactions that enter into the determination of net income.

c. Cash effects of acquiring and disposing of investments and property, plant, and equipment.

d. Cash effects of transactions involving making and collecting loans. 

Cash effects of transactions obtaining resources from owners and providing them with return on their investment. 

20

Kresley Co. has provided the following year 2 current account balances for the preparation of the annual statement of cash flows:

                                                           January I   December 31

Accounts receivable                           $11,500     $14,500    

Allowance for uncollectible accounts       400           500  

Prepaid rent expense                            6,200        4,100

Accounts payable                                  9,700       11,200

Kresley's year 2 net income is $75,000. Net cash provided by operating activities in the statement of cash flows should be 

$75,700

21

Tam Co. reported the following items in its year-end financial statements:

Capital expenditures      $1,000,000

Capital lease payments       125,000

Income taxes paid              325,000

Dividends paid                   200,000

Net interest payments        220,000 

What amount should Tam report as supplemental disclosures in its statement of cash flows prepared using the indirect method?

$545,000

22

Baker Co. began its operations during the current year. The following is Baker's balance sheet at December 31: .

                                       Baker Co

                                 BALANCE SHEET

Assets                            

Cash                              $192,000

 Accounts receivable         82,000

 Total assets                   $274 000

 Liabilities and stockholders ' equity

Accounts payable           $24,000

Common stock               200,000     

Retained earnings             50,000

Total liabilities and

stockholders' equity      $274 000

Baker's net income for the current year was $78,000 and dividends of $28,000 were declared and paid. Common stock was issued for $200,000. What amount should Baker report as cash provided by operating activities in its statement of cash flows for the current year? 

$ 20,000 

23

KoIlar s transactions for the year ended December 31, year 2, Included the following:

Purchased real estate for $550,000 cash which was borrowed from bank.

Sold investment securities for $500,000.

Paid dividends of $600,000. I

ssued 500 shares of common stock for $250,000.

Purchased machinery and equipment for $125,000 cash.

Paid $450,000 toward bank loan.

Reduced accounts receivable by $100,000.

Increased accounts payable by $200,000.

Kollar's net cash from financing activities for year 2 was 

 $250,000

24

A loss on the sale of machinery in the ordinary course of business should be presented in statement of cash flows (using indirect approach for operating activities) 
as an 

Addition to net income. 

25

Abbey Corporation prepares its financial statements in accordance with IFRS. Abbey acquired equipment by signing $100,000 note payable with the seller of the equipment. How should this transaction be reported on the statement of cash flows? 

In the notes to the financial statements as a significant noncash transaction. 

26

KoIlar s transactions for the year ended December 31, year 2, Included the following:

Purchased real estate for $550,000 cash which was borrowed from bank.

Sold investment securities for $500,000.

Paid dividends of $600,000. I

ssued 500 shares of common stock for $250,000.

Purchased machinery and equipment for $125,000 cash.

Paid $450,000 toward bank loan.

Reduced accounts receivable by $100,000.

Increased accounts payable by $200,000.

Kollar's net cash used in investing activities for year 2 was

$175,000

27

Green Co. had the following equity transactions at December 31 : Cash proceeds from sale of                        $75,000

investment in Blue Co. (carrying value -

$60,000)                                                      10,500 

Dividends received on Grey Co. stock

Common stock purchased from Brown Co.   38,000 

What amount should Green recognize as net cash from investing activities in its statement of cash flows at December 31? 

$37,000 

28

Jackson Company classifies trading securities as an operating activity based on their nature and purpose. In a statement of cash flows in which the operating activities section is prepared under the indirect method, the realized gain on an investment in securities held for trading should be presented as an

Addition to net income in the amount of the securities' fair value at the beginning of the period. 

29

If company issues both balance sheet and an income statement with comparative figures from last year, statement of cash flows

Should be issued for each period for which an income statement is presented. 

30

Rory Co.'s prepaid insurance was $50,000 at December 31 year 2, and $25,000 at December 31 year Insurance expense was $20,000 for year 2 and $15,000 for year 1. What amount of cash disbursements for insurance would be repofled in Rory's year 2 net cash flows from operating activities presented on a direct basis? 

$45,000 

31

A company's wages payable increased from the beginning to the end of the year. In the company's statement of cash flows in which the operating activities section is prepared under the direct method, the cash paid for wages would be 

Salary expense less the increase in wages payable from the beginning to the end of the year.

32

In statement of cash flows (using indirect approach for operating activities) an increase in inventories should be presented as an

Deduction from net income. 

33

Roe Company is preparing a statement of cash flows for the year ended December 31, year 2 It has the following account balances

 

    12/31/Y1        12/31/Y2

Machinery                                               $250,000   $320,000

Accumulated depreciation—machinery   102,000       120,000 

Loss on sale of machinery                                              4,000

 

During year 2  Roe sold for $26,000 a machine that cost $40,000, and purchased several items of machinery. Depreciation on machinery for year 2 was 

$28,000

34

Which of the following transactions should be classified as investing activities on an entity's statement of cash flows?

a. Payment of cash dividend to the shareholders.

b. Issuance of common stock to the shareholders. 

c. Sale of property, plant, and equipment.

d. Increase in accounts receivable. 

Sale of property, plant, and equipment. 

35

For the year ended December 31, Ion Corp. had cash inflows of $25,000 from the purchases, sales, and maturities of held-to maturity securities and $40,000 from the purchases, sales and maturities of available-for-sale securities. What amount of net cash from investing activities should Ion report in its cash flow statement? 

$65,000

36

In statement of cash flows, proceeds from issuing equity instruments should be classified as cash inflows from

Financing activities. 

37

The retirement of long-term debt by the issuance of common stock should be presented in statement of cash flows as

a. Financing activities

b. Investment activities

c. Neither

d. Financing activities and Investment activities

Neither

38

In a statement of cash flows, payments to acquire debt instruments of other entities (other than cash equivalents) which will be held until maturity should be classified as cash outflows for 

Investing activities. 

39

In statement of cash flows, receipts from sales of paperty, plant, and equipment and other productive assets should generally be classified as cash inflows from 

Investing activities. 

40

 In statement of cash flows, if used equipment is sold at loss, the amount shown as cash inflow from investing activities equals the carrying amount of the equipment 

Less the loss. 

41

Which of the following should be presented with the statement of cash flows in separate schedule?

a. Purchase of treasury stock.

b. Conversion of bonds to common stock.

c. Sale of common stock.

d. Declaration of cash dividend.

Conversion of bonds to common stock. 

42

The following items relate to the preparation of statement of cash flows:

                               year 2        year I                            year 2

AP                       $265,000 $220,000 Net sales     $3,200,000

Dividends payable      35,000    0              CGS        (2,500,000)

Notes payable           250,000   0

Common stock         600,000    450,000  Expenses     (500,000)

Retained earnings    280,000     165,000  Net income   $200,000 

All accounts payable relate to trade merchandise. Accounts payable are recorded net and always are paid to take all of the discount allowed. The proceeds from the note payable were used to finance a new store building. Capital stock was sold to provide additional working capital. Under financing activities, cash inflows during year 2 totaled

 $400,000 

43

Sterling Corporation prepares its financial statements in accordance with IFRS. Sterling paid $10,000 of interest during the year. Sterling must report these finance costs on the statement of cash flows:

Either in operating activities or financing activities.

44

 The primary purpose of statement of cash flows is to provide relevant information about 

The cash receipts and cash disbursements of an enterprise during period.

45

Wick Co. purchased a three-month US Treasury bill. Wick's policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Wick's statement of cash flows? 

Not reported 

46

Which of the following would be reported as an investing activity in company's statement of cash flows?

a. Collection of an overdue account receivable from customer. 

b. Collection of a tax refund from the government.

c. Collection of proceeds from a note payable.

d. Collection of a note receivable from a related party. 

Collection of a note receivable from a related party.

47

Duke Co reported cost of goods sold of $270,000 for year 2 Additional information is as follows

                               December 31 year2 January 1 year 2

Inventory                60,000                     $45,000

Accounts payable   26,000                       39,000

If Duke uses the direct method, what amount should Duke report as cash paid to suppliers in its year 2 statement of cash flows? 

$298,000

48

In statement of cash flows, which of the following items is reported as cash outflow from financing activities?

I. Payments to retire mortgage notes.

Il. Interest payments on mortgage notes.

Ill. Dividend payments. 

I and III

49

In year 2, a tornado completely destroyed a building belonging to Holland Corp. The building cost $100,000 and had accumulated depreciation of $48,000 at the time of the loss. Holland received a cash settlement from the insurance company and reported an extraordinary loss of $21,000. In Holland's year 2 cash flow statement, the net change reported in the cash flows from investing activities section should be a 

$31,000 increase.

50

On the statement of cash flows in which the operating activities section is prepared under the indirect method, depreciation is treated as an adjustment to reported net earnings because depreciation 

Reduces reported net earnings but does not involve an outflow of cash. 

51

In statement of cash flows (operating activities shown using indirect approach), decrease in prepaid expenses should be 

 Added to net income. 

52

How should the amortization of bond discount on long-term debt be reported in statement of cash flows prepared using the indirect method?

In operating activities as an addition to income. 

53

The amortization of bond premium on long-term debt should be presented in statement of cash flows (using indirect approach for operating activities) as a 

 Deduction from net income. 

54

Lance Corp.'s statement of cash flows for the year ended September 30, year I, was prepared using the indirect method and included the following:

Net income                                                    60,000

Noncash adjustments:                              

Depreciation expense                                      9,000

Increase in accounts receivable                      (5,000)

Decrease in inventory                                    40,000

Decrease in accounts payable                       (12,000) 

Net cash flows from operating activities        $92,000

Lance reported revenues from customers of $75 in its year I income statement. What amount of cash did Lance receive from its customers during the year ended September 30, year 1?  

$70,000

55

Would the following be added back to net income when reporting operating activities' cash flows by the indirect method?

a. Excess of treasury stock acquisition cost over seles proceeds (cost method ) and Bond discount amortization 

b. Neither

c. Bond discount amortization 

d.  Excess of treasury stock acquisition cost over seles proceeds (cost method ) 

 Neither

56

Roe Company is preparing a statement of cash flows for the year ended December 31, year 2 It has the following account balances

 

    12/31/Y1        12/31/Y2

Machinery                                               $250,000   $320,000

Accumulated depreciation—machinery   102,000       120,000 

Loss on sale of machinery                                              4,000

 

During year 2 Roe sold for 26,000 a machine that cost $40,000, and purchased several items of machinery.  Machinery purchases for year 2 amounted to

$110,000

57

During year 2, Teb, Inc. had the following activities related to its financial operations:

Payment for the early retirement of long-term

bonds payable (carrying value $740,000)                $750,000

Distribution in year 2 of cash dividend declared

in year I to preferred shareholders                               62,000

Carrying value of convertible preferred stock in

Teb, converted into common shares                          120,000

Proceeds from sale of treasury stock (carrying

value at cost, $86,000)                                                95,000

In Teb's year 2 statement of cash flows, net cash used in financing activities should be

$717,000

58

During the current year, Ace Co. amortized a bond discount. Ace prepares its statement of cash flows using the indirect method.  In which section of the statement should Ace report the amortization of the bond discount? 

Operating activities. 

59

 of the following cash flows per share should be reported in statement of cash flows?

a. Diluted cash flows per share only.

b. Both basic and diluted cash flows per share.

c. Cash flows per share should not be reported.

d. Basic cash flows per share only. 

Cash flows per share should not be reported.