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Exam 13: Statement of Cash Flows

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Question 61

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A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted) .How should this be reported on the statement of cash flows?

A) Report $12,000 as inflow and outflow of cash.
B) Report $12,000 as an inflow of cash.
C) Should not be reported on the statement of cash flows.
D) Report in the schedule of significant noncash transactions.

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

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Question 62

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Which of the following statements about the capital acquisitions ratio is incorrect?

A) The ratio is computed by dividing cash flow from operations by cash paid for property, plant and equipment.
B) Because the need for investment in property, plant and equipment differs dramatically across industries, a firm's ratio should only be compared with its prior years' ratio or with firms in the same industry.
C) A high ratio indicates more need for outside financing of current and future purchases of property, plant and equipment.
D) It increases when an account receivable is collected.

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

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Question 63

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Which of the following transactions would not be reported within the investing section of the cash flow statement?

Which of the following transactions would not create a cash flow?

Which of the following is not reported as a cash flow from investing activities?

A company reported an increase in prepaid rent and an increase in accrued liabilities during 2010.Which of the following statements is correct?

DJ Company,a manufacturer,has provided the following information pertaining to its recent year of operation: Cash flow from operating activities,$272,000; Accounts payable decreased $21,000; Prepaid assets increased $15,000; Depreciation expense was $27,000; Accounts receivable decreased $21,000; Loss on sale of a depreciable asset was $16,000; Wages payable increased $10,000; Unearned revenue decreased $16,000; Patent amortization expense was $10,000. How much was DJ's net income?

Madison Company had sales of $154,000.Additional information from the balance sheet is below: $\begin{array}{lrr}&\text { Beginning Balance } & \text { Ending Balance } \\\text { Accounts Receivable } & \$ 22,000 & \$ 28,000 \\\text { Accounts Payable } & 21,000 & 25,000\end{array}$ How much cash was collected from customers?

Which of the following would not be a cash flow from financing activities?

Which of the following transactions would be reported within the investing section of the cash flow statement?

Brooks Company reported net income of $40,000 which included depreciation expense and depletion expense of $21,000 and $18,000,respectively.The following changes also occurred during 2009: $\begin{array} { l r l } \text { Inventory } & \$ 10,000 & \text { decrease } \\\text { Accounts payable } & 5,000 & \text { increase } \\\text { Notes payable (long-term) } & 15,000 & \text { decrease } \\\text { Income tax payable } & 7,000 & \text { increase } \\\text { Accounts receivable } & 10,000 & \text { increase }\end{array}$ Calculate cash flows from operating activities.

Lab Industries,Inc.,issued $50,000 of bonds,paid cash dividends of $8,000,sold long-term investments for $12,000,received $5,000 of dividend revenue,purchased treasury stock for $15,000,and purchased new equipment for $19,000.What is the net cash flow from financing activities?

KAJ Incorporated purchased a machine costing $100,000 by paying $20,000 and signing an $80,000 note payable.How would this transaction be reported within the cash flow from investing activities section of the cash flow statement?

Under the indirect method,depreciation expense is added to net income,because it decreases net income but doesn't consume a cash flow.

Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities when using the indirect method?

Burich Co.reported short-term borrowings of $2.5 million,long-term borrowings of $6.8 million,repayments of long-term borrowings of $3.5 million,interest payments of $780,000,repurchase of treasury shares of $.5 million and cash dividends declared of $1.1 million.What is the cash flow from financing activities?

GJ Company,a manufacturer,has provided the following information pertaining to its recent year of operation: Net income,$500,000; Accounts payable decreased $42,000; Prepaid assets increased $31,000; Depreciation expense was $53,000; Accounts receivable decreased $41,000; Loss on sale of a depreciable asset was $31,000; Wages payable increased $19,000; Unearned revenue decreased $31,000; Patent amortization expense was $5,000. How much was GJ's net cash inflow from operating activities?

Atkins Corporation has provided the following information for the year ended December 31,2010: The equipment account balance increased $200,000. The equipment accumulated depreciation account increased $35,000. Equipment costing $50,000 was sold during the year resulting in a $10,000 gain. Depreciation expense on the equipment recorded during the year was $65,000. Which of the following statements is correct with respect to cash flow from operating activities determination?

KAJ Incorporated purchased a machine costing $100,000 by paying $20,000 cash and signing an $80,000 note payable.How would this transaction be reported within the cash flow from financing activities section of the cash flow statement?

For each of the following items,indicate whether it would appear in the operating,investing,or financing activities section of the statement of cash flows or is not reported in one of these three categories.Assume the indirect method is used for reporting.