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Exam 14: Statement of Cash Flows

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Question 71

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Cash flows from investing activities are related to the acquisition and disposition of assets, other than inventory and supplies.

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Question 72

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Under the indirect method, the increase or decrease in long term assets is handled in the investing section of a cash flow statement.

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Question 73

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Under the direct method, depreciation expense is added back to net income when computing net cash flow from operating activities.

When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment of depreciation expense?

Pingry Company's Accounts Receivable balance increased by $14,000 during the year. The company's income statement reports sales revenue of $437,500, all on account. How much cash was collected from customers during the year?

Under the indirect method, losses would be added to net income when determining the net cash flow from operating activities.

Under the indirect method, the net cash flow from financing activities would be the same as if the direct method had been used.

Joyce Company began the year with a $21,000 balance in its Accounts Receivable account. During the accounting period Joyce earned revenue on account amounting to $35,000. At the end of the accounting period, the Accounts Receivable account had a balance of $8,500. Using the above information, determine the amount of cash collected from Accounts Receivable during the current accounting period.

What are the two methods used to prepare the statement of cash flows?

Use the reconciliation approach to determine cash paid for inventory for the Ji Company. Assume all inventory is bought on account and the Accounts Payable account is used only for inventory. Beginning and ending balances of merchandise inventory were $12,400 and $18,800 respectively. Beginning and ending balances of Accounts Payable were $4,000 and $2,800 respectively. Sales revenue amounted to $137,024 and cost of goods sold equaled $83,808.

Leo Company reported sales of $200,000 during Year 2. Leo's balance sheets for Year 2 and Year 1 showed the following: Based on this information, how much cash did Leo collect from sales during Year 2? $\begin{array}{|l|ll|ll|}&&2014&2013\\\hline \text {Accounts receivable }&\$ & 90,000 & \$ & 80,000 \\\hline \text {Accounts payable }& 64,000 & & 60,000 \\\hline\end{array}$

All of the following are deducted from net income when preparing the statement of cash flows under the indirect method except:

Bertram, Inc. had a beginning Accounts Payable balances of $400 and $450, respectively. Inventory had beginning and ending balances of $450 and $425, respectively. All inventory purchases are made on account. If cost of goods sold equaled $350, how much cash was spent to purchase inventory?

The cash proceeds from the sale of a building will be the book value plus any loss or minus any gain.

What is the major advantage of using the direct method of preparing the statement of cash flows?

On January 1, the balance of Fink Corporation's Accounts Receivable was $10,000. Sales on account amounted to $80,000 during the year. The ending balance of Accounts Receivable was $16,000. What is the amount of cash collected from customers?

Noncash investing and financing activities are not reported on the statement of cash flows.

In preparing the statement of cash flows by the indirect method, a decrease in a long-term investment account would be added to net income.

The income statement for Year 2 of Winter Co. reported wages expense of $160,000. At December 31, Year 1, the balance sheet showed a balance in Wages Payable of $16,000. At December 31, Year 2, the balance sheet showed a balance in Wages Payable of $22,000. What amount of cash was paid for wages during the year?

What can cause cash flow from operating activities to be greater than net income from operating activities?