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Exam 16: The Statement of Cash Flows

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Question 1

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Ocean Auto Parts Company uses the direct method to prepare its statement of cash flows. Refer to the following information reported for 2017: 1. Sales Revenue, $516,000 2) Accounts Receivable, beginning balance, $97,000 3) Accounts Receivable, ending balance, $63,000 Compute the collections from customers.

A) $550,000
B) $453,000
C) $160,000
D) $356,000

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

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A

Question 2

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The operating and financing activities of the statement of cash flows are presented differently between the indirect and direct methods.

A) True
B) False

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Question 3

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Which of the following describes the financing activities section of the statement of cash flows?

Kevin Woodworking Company is preparing its statement of cash flows using the indirect method. During the year, Kevin sold equipment for $7,490 cash. The net book value of the asset was $4,670. Which of the following statements is true?

Pastel Paints Company uses the direct method for preparing its statement of cash flow. Pastel reports the following information regarding 2017: From the income statement: Sales Revenues, $265,000 Cost of Goods Sold, $213,000 Operating Expenses, $32,000 From the balance sheet: What amount will be shown for collections from customers?

Merchandise Inventory increased $28,300 and Accounts Payable decreased $19,600 during the year. Accounts Payable relates only to the acquisition of merchandise inventory. Sales were $795,900 and Cost of Goods Sold was $549,700. Compute the payment made to the suppliers.

The payment of interest on a loan is considered a ________ on a statement of cash flows prepared using the direct method.

Gladiator, Inc. uses the direct method to prepare its statement of cash flows. Use the following information reported for 2016 to compute the amount of cash paid for merchandise inventory. Cost of Goods Sold, $135,000 Merchandise Inventory, beginning balance, $26,000 Merchandise Inventory, ending balance, $66,000 Accounts Payable, beginning balance, $7,900 Accounts Payable, ending balance, $5,100

Caleb Auto Parts Company uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet: Additional information provided by the company includes the following: Equipment costing $104,000 was purchased for cash. Equipment with a net book value of $20,000 was sold for $28,000. Depreciation expense of $24,000 was recorded during the year. Prepare the investing activities section of the statement of cash flows.

Accountants can prepare the statement of cash flows directly from the lower part of the spreadsheet.

Martinez Installations Company uses the direct method to prepare its statement of cash flows. Martinez has reported sales revenues of $200,000 on its income statement for 2017. If the balance in Accounts Receivable has increased by $10,000 during the year, then $10,000 needs to be added to $200,000 to calculate collections from customers.

Regarding the use of a spreadsheet for the preparation of the statement of cash flows, which of the following statements is incorrect?

Rodriguez Tint, Inc. uses the indirect method to prepare the statement of cash flows. Refer to the following income statement: Additional information provided by the company includes the following: Current assets, other than cash, decreased by $5,200. Current liabilities increased by $2,400. Compute the net cash provided by (used for) operating activities.

The direct method restates the income statements in terms of cash.

While preparing a statement of cash flows using the indirect method, an increase in current assets is added to net income to arrive at net cash flow from operating activities.

Which of the following transactions would be shown in the non-cash investing and financing activities section of the statement of cash flows?

Martin Ceramics Company sold equipment for cash. The income statement shows a gain on the sale of $920. The net book value of the asset was $3,610. Which of the following statements describes the cash effect of the transaction?

Which of the following sections of the statement of cash flows includes activities that affect current assets and current liabilities on the balance sheet? (Assume the indirect method is used.)

Crossword, Inc. uses the direct method to prepare its statement of cash flows. Refer to the following financial statement information for the year ended December 31, 2017: Use the direct method to compute the payments to suppliers for Merchandise Inventory and other operating expenses. (Accrued Liabilities relate to other operating expense.)

Neutral Paints Company uses the direct method for preparing its statement of cash flow. Neutral reports the following information regarding 2017: From the income statement: Sales Revenues, $268,000 Cost of Goods Sold, $213,000 Operating Expenses, $34,000 From the balance sheet: What amount will be shown for payments to suppliers for operating expenses? (Accounts Payable are for purchases of merchandise inventory only, and Accrued Liabilities relate to operating expenses.)