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Marion Manufacturing had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows.  Cash receipts from issuance of stock 60,000 Bonds payable issued at face value 250,000 Cash dividends received from long-term investments 4,500 Cash paid for wages 20,000 Cash paid for dividends 5,000 Cash received from customers 42,500 Cash paid for other operating expenses 19,500 Cash paid to purchase equipment 100,000\begin{array}{lr}\text { Cash receipts from issuance of stock } & 60,000 \\\text { Bonds payable issued at face value } & 250,000 \\\text { Cash dividends received from long-term investments } & 4,500 \\\text { Cash paid for wages } & 20,000 \\\text { Cash paid for dividends } & 5,000 \\\text { Cash received from customers } & 42,500 \\\text { Cash paid for other operating expenses } & 19,500\\\text { Cash paid to purchase equipment }&100,000\end{array} What is the net cash flows provided by (used in) financing activities?


A) $310,000
B) $205,000
C) $305,000
D) $245,000

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Which of the following statements about the calculation of cash flows from operating activities under the direct method is correct?


A) When the direct method is used,each revenue and expense account on the income statement is individually examined to calculate the cash flows from operating activities.
B) Noncash revenues and expenses must be included in cash flows from operating activities when preparing a statement of cash flows using the direct method.
C) Depreciation is reported as a cash inflow in the cash flows from operating activities when the direct method is used.
D) A loss on the sale of a long-term asset is subtracted in the cash flows from operating activities when the direct method is used.

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During the current year,Woodson paid $9,000 which it owed from its prior year income tax liability and $60,000 for its current year tax liability.The company still owes $12,000 at the end of the current year.How much should the company report as cash paid for income taxes on its statement of cash flows for the current year?


A) $69,000
B) $81,000
C) $60,000
D) $7,000

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Which of the following items is considered to be a cash equivalent?


A) An investment in a U.S.bond due in two years.
B) A one-year certificate of deposit due in six months.
C) A one-month Treasury bill due in two weeks.
D) A promissory note due from a customer in 7 months.

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Suppose a company generally records revenues and expenses before receiving or making cash payments.Which of the following statements is not correct?


A) If revenues are falling,a net loss could result even though the company reports a net cash inflow from operating activities.
B) If revenues are rising,net income could result even though the company reports a net cash outflow from operating activities.
C) Net income and net cash flows provided by operating activities will always agree.
D) The income statement doesn't explain changes in cash because it focuses on just the operating results of the business.

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The Extra Surplus Company's Balance Sheet for December 31,2017 and the Income Statement for 2018 are shown below. The Extra Surplus Company's Balance Sheet for December 31,2017 and the Income Statement for 2018 are shown below. Additional data: • Sales were $13,000;$8,000 in cash was received from customers. • Bought new land for cash,$10,000. • Sold other land for its book value of $5,000. • Paid $1,000 principal on the long-term note payable and $1,000 in interest. • Issued new shares of stock for $10,000 cash. • Cash dividends of $1,000 were declared and paid to stockholders. • Paid $5,500 on accounts payable. • No inventory purchases were made;other expenses were incurred on account. • All wages were paid in cash. • Other expenses were on account. Required: Part a.Prepare a balance sheet at December 31,2018. Part b.Prepare the statement of cash flows using the direct method. Additional data: • Sales were $13,000;$8,000 in cash was received from customers. • Bought new land for cash,$10,000. • Sold other land for its book value of $5,000. • Paid $1,000 principal on the long-term note payable and $1,000 in interest. • Issued new shares of stock for $10,000 cash. • Cash dividends of $1,000 were declared and paid to stockholders. • Paid $5,500 on accounts payable. • No inventory purchases were made;other expenses were incurred on account. • All wages were paid in cash. • Other expenses were on account. Required: Part a.Prepare a balance sheet at December 31,2018. Part b.Prepare the statement of cash flows using the direct method.

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Part a
Extra Surplus...

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Which of the statements below is correct when comparing the direct and indirect methods of reporting operating cash flows?


A) The direct method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
B) The indirect method starts with cash collected from customers and details cash inflows and outflows from operations.
C) The indirect method starts with net income and makes adjustments to arrive at the net cash provided by or used in operations.
D) The net cash provided by or used in operations will be different depending on whether the direct or indirect method is used.

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Match each term with the appropriate definition.Not all definitions will be used. -Noncash Investing and Financing Activities


A) Results from activities such as purchases of goods and assets,payment of debt,payment of cash dividends,and payment of taxes.
B) The starting point for calculating operating cash flows with the direct method.
C) The percent of a company's net cash flow that comes from investing and financing activities.
D) A balance sheet that shows the starting and ending balance of the different accounts;it is used to calculate the net cash flow provided by operating activities.
E) Purchases and sales of this are classified as operating activities.
F) Reported as supplement disclosures or in the notes section to the financial statements rather than within the body of the statement of cash flows.
G) Cash flows from operations in excess of amount paid to replace property,plant and equipment and to pay cash dividends to stockholders.
H) Cash flows in excess of net income.
I) Purchases and sales of this are classified as investing activities.
J) Results from activities such as sales of goods and assets,receipt of cash dividends,and receipts of interest.
K) A financial statement that tracks the flow of cash into and out of a company according to the three types of activities that generate the flows.
L) An adjustment made when using the indirect method of calculating cash flows from operating activities.
M) Cash a company receives that is not subject to income tax.
N) The starting point for calculating operating cash flows with the indirect method.

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During the current year,Kelso Construction had $976,000 in cash sales and $3,552,000 in credit sales.The Accounts Receivable balance was $848,000 at the beginning of the year and $680,000 at the end of the year.What was the total cash collected from customers during the year?


A) $4,696,000
B) $4,528,000
C) $4,360,000
D) $3,720,000

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In arriving at cash from operating activities,adding a decrease in Supplies to net income eliminates the effect of recording expenses that:


A) increased net income,but has not been paid in cash this period.
B) decreased net income,but has not been paid in cash this period.
C) decreased net income and decreased cash.
D) flow this period increased net income and increased cash flow this period.

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The cash flow statement should be evaluated by examining the cash flow pattern suggested by the:


A) subtotals of each of the three main sections.
B) operating activities section since this section details the day to day operations of the business.
C) change in cash regardless of which section had the biggest impact on the change.
D) financing section since this section details how much debt the company has incurred.

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The net cash flow provided by operating activities is an inflow of $37,042,the net cash flow used in investing activities is $16,831,and the net cash flow used in financing activities is $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?


A) $5,097
B) ($6,186)
C) $38,759
D) $27,476

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Material noncash investing and financing transactions are:


A) reported within the body of the statement of cash flows.
B) reported in a supplementary schedule to the statement of cash flows.
C) not reported in any part of the financial statement because cash flow is not affected.
D) reported in the body of the income statement.

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Bardell,Inc.prepared its statement of cash flows for the year.The following information is taken from that statement: Bardell,Inc.prepared its statement of cash flows for the year.The following information is taken from that statement: What is the amount of net cash provided by (used in) financing activities? A) $30,800 B) ($6,600) C) ($30,800) D) $6,600 What is the amount of net cash provided by (used in) financing activities?


A) $30,800
B) ($6,600)
C) ($30,800)
D) $6,600

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Which of the following would not be included in the cash and cash equivalents amount reported on the balance sheet?


A) Money market funds
B) Checking accounts
C) Treasury bills
D) Notes receivable due in 90 days

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When the indirect method is used,if accounts payable increases during the accounting period,the change in accounts payable is:


A) added to the change in the cash account.
B) added to net income.
C) subtracted from net income.
D) subtracted from the change in the cash account.

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Which of the following represents a cash inflow from financing activities?


A) Issuing stock in exchange for another company's stock.
B) Paying a bond's face value at maturity.
C) Issuing long-term bonds at a discount.
D) Receiving interest on promissory notes.

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Which of the following statements best describes the reason Depreciation Expense is added to net income when preparing the statement of cash flows?


A) Depreciation expense originally reduced net income,but it actually represents a cash inflow for the company.
B) Depreciation expense originally reduced net income,but the expense does not involve paying cash.
C) Depreciation expense originally reduced net income,but it actually represents a cash outflow for the company.
D) Depreciation expense is not included in net income and,so,its cash effect must be accounted for separately.

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Cash flows from financing activities include all of the following except:


A) payment of long-term debt.
B) payment of interest.
C) proceeds from stock issuance.
D) cash dividends paid.

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Cash flows from operating activities include:


A) changes in accounts receivable.
B) paying principal to lenders.
C) purchases of equipment.
D) proceeds from stock issuance.

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