Financial Accounting Ch13 Cash Flows – Flashcards

Which of the following statements accurately describes the statement of cash flows? A) It shows the relative proportion of debt and assets. B) It shows the link between accrual based income and the cash reported on the balance sheet. C) It indicates when long-term debt will mature. D) It shows the link between book income and earnings per share.

Which of the following describes the operating activities section of the statement of cash flows? A) It includes cash transactions that essentially increase or decrease the long-term assets of a business. B) It includes cash transactions affecting the capitalization of the business. C) It includes cash transactions that primarily affect current assets and current liabilities. D) It shows the beginning and ending balances of cash.

Which of the following describes the financing activities section of the statement of cash flows? A) It includes increases and decreases in long-term assets. B) It includes cash transactions affecting the long-term liabilities and equity of the business. C) It includes transactions that primarily affect current assets and current liabilities. D) It shows the beginning and ending balances of cash.

The purchase of equipment financed by a long-term notes payable is an example of ________. A) investing activity B) financing activity C) operating activity D) non-cash investing and financing activity

Allen Moving Pictures Company uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet:Comparative Balance Sheet 2015 2014 Increase/decrease Common Stock $28,000 $5,000 $23,000 Retained Earnings 108,000 82,000 26,000 Treasury Stock (9,000) (6,000) (3,000) Total equity 127,000 81,000 46,000 If the net income for the year was $58,000, the company must have declared $32,000 as dividends during the year. True or False

Walker Inc. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Comparative Balance Sheet 2014 2013 Increase/decrease Cash $42,000 $25,000 $17,000 Accounts Receivable 32,000 55,000 (23,000) Inventory 180,000 123,000 57,000 Total assets $254,000 $203,000 $51,000 The change in Accounts Receivable will be shown as a negative cash flow in the adjustments to Net Income. TRUE 0r FALSE

Which of the following is a cash outflow for a financing activity on the statement of cash flows? A) purchase of long-term investments, such as the stock of another company B) loans made to another party C) purchase of treasury stock D) purchase of land

Walker Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Walker Corp. Comparative Balance Sheet 2014 2013 Increase/decrease Cash $45,000 $27,000 $18,000 Accounts Receivable 48,000 45,000 3,000 Inventory 180,000 132,000 48,000 Total assets $273,000 $204,000 $69,000 How will the change in Accounts Receivable be shown on the statement of cash flows? A) positive cash flow under the operating activities section B) negative cash flow under the operating activities section C) positive cash flow under the financing activities section D) negative cash flow under the investing activities section

Avatar Auto Parts Company uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Avatar Company Comparative Balance Sheet 2014 2013 Increase/decrease Accounts Payable $4,000 $6,000 $(2,000) Accrued Liabilities 2,000 1,000 1,000 Long-Term Notes Payable 84,000 90,000 (6,000) Total liabilities $90,000 $97,000 $(7,000) How will the change in Accrued Liabilities be shown on the statement of cash flows? A) as an addition to Net Income B) as a deduction from Net Income C) as a deduction from operating cash flows D) as an addition to operating cash flows

Felix Skateboards Company uses the indirect method to prepare the statement of cash flows. Refer to the following income statement: Felix Company Income Statement Year Ended December 31, 2015 Sales Revenue $245,000 Interest Revenue 2,000 Gain on Sale of Plant Assets 5,000 Total revenues and gains $252,000 Cost of Goods Sold 118,000 Salary Expense 43,000 Depreciation Expense 13,000 Other Operating Expenses 25,000 Interest Expense 1,500 Income Tax Expense 5,500 Total Expenses 206,000 Net Income (loss) $46,000 Additional information provided by the company includes the following: 1) Current assets, other than cash, increased by $24,000 2) Current liabilities decreased by $1,000 How much is the net cash provided by operating activities? A) $21,000 B) $34,000 C) $29,000 D) $39,000

Rodriguez Tint Inc. uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet:Rodriguez Inc. Comparative Balance Sheet 2012 2013 Increase/decrease Cash $21,000 $18,000 $3,000 Accounts Receivable 31,000 35,000 (4,000) Inventory 53,000 25,000 28,000 Plant and Equipment 123,000 90,000 33,000 Accumulated Depreciation-Plant and Equipment (43,000) (40,000) (3,000) Total assets $228,000 $168,000 $60,000 Additional information provided by the company includes the following: 1) Equipment costing $65,000 was purchased for cash. 2) Equipment with a cost of $32,000 and accumulated depreciation of $7,000 was sold for $45,000. What was the amount of net cash provided by (used for) investing activities? A) $120,000 B) $20,000 C) $(120,000) D) $(20,000)

Sonesta Farm equipment Company sold equipment for cash. The income statement shows a loss on sale of $7,000. The net book value of the asset prior to the sale was $26,900. Which of the following statements describes the cash effect of the transaction? A) positive cash flow of $33,900 from financing activities B) negative cash flow of $19,900 for operating activities C) negative cash flow of $19,900 for financing activities D) positive cash flow of $19,900 from investing activities

Martin Ceramics Company is preparing its statement of cash flows using the indirect method. During the year, they sold equipment for $5,990 cash. The net book value of the asset prior to sale was $5,550. Which of the following statements is true? A) The gain on sale of $440 would be added back to net income in the operating activities section. B) The book value of the assets sold would be shown as a negative cash flow in the investing activities section. C) The cash receipt of $5,990 would be shown as a positive cash flow in the investing activities section. D) The gain on sale of $440 would be shown as a positive cash flow in the financing activities section.

Avatar Auto Parts Company is preparing its statement of cash flows using the indirect method. Refer to the following portion of the comparative balance sheet: Avatar Company Comparative Balance Sheet December 31, 2014 and 2013 2014 2013 Increase/decrease Accounts Payable $4,000 $ 6,000 $(2,000) Accrued Liabilities 2,000 1,000 1,000 Long-Term Notes Payable 56,000 64,000 (8,000) Total liabilities $62,000 $71,000 $(9,000) Additional information provided by the company includes the following: 1) During 2014, the company repaid $35,000 of Long-Term Notes Payable. 2) During 2014, the company borrowed $27,000 on a new Note Payable. Based on the above information only, what amount of net cash flow would be shown in the financing section of the statement of cash flows? A) $(8,000) B) $8,000 C) $62,000 D) $(62,000)

Perez Biofuels Company is preparing its statement of cash flows using the indirect method. Refer to the following information. 1) Repayments on Long-Term Notes Payable $58,000 2) New borrowing on Long-Term Notes Payable $19,000 Which of the following statements is accurate regarding the statement of cash flows? A) Net cash used for financing activities will amount to $(39,000). B) Net cash used for investing activities will amount to $58,000. C) Net cash provided by financing activities will amount to $39,000. D) Net cash provided by investing activities will amount to $39,000.

Lopez Corp. uses the indirect method to prepare its statement of cash flows. Refer to the following information for the year 2014: 1) Long-Term Notes Payable, beginning balance, $80,000 2) Long-Term Notes Payable, ending balance, $76,000 3) Common Stock, beginning balance, $3,000 4) Common Stock, ending balance, $26,000 5) Retained Earnings, beginning balance, $75,000 6) Retained Earnings, ending balance, $115,000 7) Treasury Stock, beginning balance, $6,000 8) Treasury Stock, ending balance, $10,000 9) No stock was retired. 10) No treasury stock was sold. 11) During 2014, the company repaid $36,000 of Long-Term Notes Payable. 12) During 2014, the company borrowed $32,000 on a new Note Payable. 13) Net income for the year was $49,000. 14) Assume all dividends declared during the year were paid. How much was the net cash flow from financing activities? A) $2,000 B) $10,000 C) $(6,000) D) $6,000

2014 2013 Increase/decrease Accounts Payable $6,000 $9,000 $(3,000) Accrued Liabilities 3,000 1,500 1,500 Long-Term Notes Payable 126,000 135,000 (9,000) Total liabilities $135,000 $145,500 $(10,500) Additional information provided by the company includes the following: During 2014, the company repaid $60,000 of Long-Term Notes Payable. During 2014, the company borrowed $51,000 on a new Long-Term Note Payable. With the help of T-account format, analyze the transactions affecting the Long-Term Notes Payable account.

What is the equation to calculate Free Cash Flow

Refer to the following information of Harris Inc. and calculate the free cash flow of Harris Inc. Net Cash from operating activities, $25,000 Net Cash from financing activities, $35,000 Net Cash used in investing activities, apart from investment in Long-Term Assets, $12,000. Net Cash used in investing activities, ($20,000) Investment in Long-Term Assets, $12,000 Cash dividend paid $10,000.