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Exam 11: Statement of Cash Flows

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Question 61

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Operating cash flows exclude:

A) Interest received.
B) Interest paid.
C) Dividends received.
D) Dividends paid.

E) A) and B)
F) All of the above

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Question 62

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Cash paid for financing activities would include cash paid for:

A) the stock of another company.
B) dividends to stockholders.
C) the purchase of treasury stock.
D) b and c.

E) All of the above
F) B) and C)

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Question 63

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Assume net income was $100,000, depreciation expense was $8,000, accounts receivable decreased by $7,500, and accounts payable decreased by $2,500. The amount of cash flows from operating activities is:

Wilson Electric reports income tax expense of $150,000. Income tax payable at the beginning and end of the year are $20,000 and $25,000, respectively. What is the cash paid for income taxes during the year?

The indirect and direct methods:

Which of the following is not true regarding cash flows?

If accounts receivable decreases, this indicates that revenues exceed cash receipts from customers. If accounts receivable increases, this indicates that revenues exceed cash receipts from customers.

All classifications on the Balance Sheet have a general relationship with sections identified on the Statement of Cash Flows. Indicate which relationships are correctly identified in the table below. $\begin{array}{|c|c|c|}\hline \# & \begin{array}{c}\text { Classification on the Balance } \\\text { Sheet }\end{array} & \begin{array}{c}\text { Section on Statement of Cash } \\\text { Flows }\end{array} \\\hline \text { I } & \text { Bonds Payable } & \text { Financing } \\\hline \text { II } & \text { Equipment } & \text { Operating } \\\hline \text { III } & \text { Common Stock } & \text { Financing } \\\hline \text { IV } & \text { Accounts Payable } & \text { Operating } \\\hline \text { V } & \text { Accounts Receivable } & \text { Operating } \\\hline\end{array}$

Explain the difference in the calculation of return on assets and cash return on assets. How can cash-based ratios supplement the analysis of ratios based on income statement and balance sheet information?

In 2012, Hope Company incurred sales on account of $100,000. The company also has the following information: $\begin{array} { | l | c | c | } \hline & \text { December 31, 2011 } & \text { December 31, 2012 } \\\hline \text { Accounts Receivable } & \$ 50,000 & \$ 20,000 \\\hline \text { Accounts Payable } & \$ 65,000 & \$ 40,000 \\\hline\end{array}$ What is the amount of cash received from customers for Hope Company in 2012?

Data Solutions reports income tax expense of $1,700,000. Income taxes payable at the beginning and end of the year are $250,000 and $370,000, respectively. What is the amount of cash paid for income taxes?

Which of the following is an example of a cash outflow from an investing activity?

A $10,000 investment on the books of the company is sold for $11,000. How does this transaction affect operating, investing, and financing activities under the indirect method?

We add a decrease in income tax payable to income tax expense to calculate cash paid for income taxes.

If there are no current assets or liabilities associated with operating expenses, the amounts we report for these expenses in the income statement must equal the amount of cash we paid for these items.

The balance sheet of Tech Track reports total assets of $400,000 and $500,000 at the beginning and end of the year, respectively. Sales revenues are $1.1 million ($0.8 million in the previous year) , net income is $40,000, and net cash flows from operating activities are $50,000. How does Tech Track's cash return on assets compare to the industry average of 10%?

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

Listed below are ten terms followed by a list of phrases that describe or characterize the terms. Match each phrase with the best term placing the number designating the term in the space provided.

Fidelity Systems reports net income of $80 million. Included in that number is depreciation expense of $8 million, and a gain on the sale of equipment of $1 million. Records reveal increases in Accounts Receivable, Inventory, and Accounts Payable of $4 million, $3 million, and $2 million, respectively. Calculate Fidelity's net cash flows from operating activities.

The following selected transactions occur during the first year of operations. Determine how each should be reported in the statement of cash flows. State whether it is a cash inflow or a cash outflow and whether it is an operating, investing, or financing activity. 1. Issued a million shares of common stock at $20 per share. 2. Purchased land and a building for $3 million. 3. Received $200,000 from a cash sale of merchandise to customers. 4. Paid a dividend of $1 per share to common stockholders. 5. Loaned $50,000 to an employee and accepted a note receivable.