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Exam 11: Statement of Cash Flows

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Question 51

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Wireless Technologies reports cost of goods sold of $40 million.Inventory at the beginning and end of the year are $4 million and $3 million,respectively.Accounts payable at the beginning and end of the year are $3 million and $6 million,respectively.What is the amount of cash paid to suppliers?

A) $40 million.
B) $36 million.
C) $44 million.
D) $42 million.

E) A) and B)
F) A) and C)

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Question 52

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We can find most financing activities by examining changes in long-term liabilities and stockholders' equity accounts.

A) True
B) False

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Question 53

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When accounts payable decrease,cash paid to suppliers must have been more than purchases.

We calculate cash return on assets as the change in cash divided by average total assets.

Which of the following statements is not true relating to cash flow analysis?

During the year,Victory Solutions: (1) received cash of $5,000 billed to a customer in 2014; (2) earned $20,000 of net income; (3) paid interest of $6,000 on a corporate bond issued; (4) paid dividends of $8,000 to its stockholders; (5) borrowed $40,000 from a local bank;and (6) purchased its own shares of common stock for $10,000.What is Victoria Solution's cash flow from financing activities?

Income statement items that have no cash effect are still reported under the direct method.

Transactions that don't increase or decrease cash,but that result in significant investing and financing activities,are reported either directly after the cash flow statement or in a separate note to the financial statements as noncash activities.

Alpha Computers reports net income of $44 million.Included in that number are depreciation expense of $7 million and a loss on the sale of land of $2 million.Records reveal decreases in Accounts Receivable,Inventory,and Accounts Payable of $4 million,$3 million,and $2 million,respectively.Calculate Alpha Computers' net cash flows from operating activities using the indirect method.

We can separate cash return on assets into:

Financing activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

For each of the following five transactions,indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating (O),investing (I),financing (F),or noncash (NC)activity.

In 2015,Hope Company incurred sales on account of $100,000.The company also has the following information: What is the amount of cash received from customers for Hope Company in 2015? What is the amount of cash received from customers for Hope Company in 2015?

The balance sheet of The Computer Doctor reports total assets of $160,000 and $220,000 at the beginning and end of the year,respectively.The cash return on assets for the year is 10%.Calculate The Computer Doctor's net cash flows from operating activities for the year.

If no cash was exchanged in the purchase of equipment financed entirely with a note payable,we represent this as both an investing activity and a financing activity in the statement of cash flows.

The balance in Retained Earnings is increased by net income and is decreased by dividends.

Under the indirect method,a decrease in accounts receivable is added to net income to arrive at net cash flows from operating activities.

Under the indirect method,an increase in inventory is added to net income and a decrease in inventory is subtracted from net income to arrive at net cash flows from operating activities.

The total net cash flows from operating activities differ between the direct and indirect methods.

The sale of land is reported in the operating section of the statement of cash flows.