ACCT 201 Final – Ch 12 – Flashcards

B. Investing activity Investing activities deal with the cash acquisition and sale of long-term assets.

B. Payment of interest

B. Payment of a cash dividend Payment of a cash dividend is a financing activity, not an operating activity.

C. Investing, financing, and operating Operating, investing, and financing are the three classifications of cash payments and cash receipts used in the statement of cash flows.

C. Payment of cash to lenders for interest Payment of cash to lenders for interest and receipt of interest are both operating activities.

C. Significant noncash investing and financing activity that merits disclosure Cash is not involved in this transaction; therefore, it is not reported as an operating, an investing, or a financing activity. It is a noncash transaction.

D. It is deducted from net income. An increase in accounts receivable represents sales revenue recognized for which no cash has been collected. It is subtracted from net income in determining operating cash flows.

D. $2,000 Since the book value was $5,000 ($15,000 - $10,000) and the sale price was $3,000, a loss of $2,000 would appear on the income statement. The loss is added to net income in the operating activities section.

C. Add to net income $7,000 Since prepaid expenses decreased by $7,000, net income must be increased by the $7,000 that represents an expense that did not involve the outflow of cash.

A. A decrease of $6,000 A decrease of $6,000 in accounts payable during the period means that the company paid more for goods during the period than it actually expensed. Net income must be decreased by $6,000 to arrive at cash flow from operations.

C. $136,000 Net cash provided by operating activities is computed by adjusting net income for the changes in the three current asset/current liability accounts listed. An increase in accounts payable and a decrease in inventory are added to net income and an increase in accounts receivable is subtracted from net income. The result is: $132,000 + $10,000 + $6,000 - $12,000 = $136,000.

D. $220,000 Net cash provided by operating activities is computed by adjusting net income for the changes in the two current asset/current liability accounts listed. The decrease in accounts receivable is added to net income and the decrease in accounts payable is subtracted from net income. Noncash amounts that are part of income must be removed from net income as well. Depreciation expense is added back and the gain on the sale of land is subtracted from net income $200,000 + $40,000 - $10,000 + $20,000 - $30,000 = $220,000

B. $120,000 Investing activities include acquiring and disposing of investment and property, plant, and equipment, and lending money and collecting loans. The net cash provided by investing activities is $100,000 + $50,000 - $30,000 = $120,000. Issuance of common stock and the payment of dividends are financing activities.

B. $130,000 Correct! Financing activities deal with obtaining cash from issuing debt and repaying the amounts borrowed, and obtaining cash from stockholders, repurchasing shares, and paying dividends: $100,000 + $60,000 - $30,000 = $130,000.

B. $131,000 The decrease in accounts receivable means that revenues are less than cash receipts from customers. The change in accounts receivable should be added to sales revenue since it represents cash collected that is not included in sales. Cash collections = $129,000 + ($44,000 - $42,000) = $131,000.

A. $127,000 The increase in accounts receivable means that revenues are greater than cash receipts from customers. The change in accounts receivable should be subtracted from sales revenue since it represents cash that is included in sales but not collected. Cash collections = $130,000 - ($15,000 - $12,000) = $127,000.