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Exam 11: Statement of Cash Flows

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Question 71

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Nevada Boot Co.reported net income of $205,000 Beginning and ending Inventory balances were $40,000 and $45,000,respectively.Accounts Payable balances at the beginning and end of the year were $35,000 and $33,000,respectively.Assuming that all relevant information has been presented,Nevada Boot would report operating cash flows of:

A) $202,000.
B) $198,000.
C) $212,000.
D) $205,000.

E) B) and C)
F) All of the above

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Question 72

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The balance sheet of Storage Solutions reports total assets of $300,000 and $350,000 at the beginning and end of the year,respectively.The cash return on assets for the year is 10%.What is Storage Solutions' net cash flows from operating activities for the year?

A) $25,000.
B) $30,000.
C) $32,500.
D) $35,000.

E) None of the above
F) All of the above

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Question 73

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Which of the following is an example of a cash outflow from an investing activity?

Cash flows from investing activities do not include cash flows from:

Data Solutions reports sales of $100 million.Accounts receivable at the beginning and end of the year are $6 million and $9 million,respectively.What is the amount of cash received from customers?

Which of the following is NOT a correct practice when adjusting net income to net operating cash flows?

Transactions that don't increase or decrease cash,but that result in significant investing and financing activities,are reported either directly after the cash flow statement or in a separate note to the financial statements as noncash activities.

We report the purchase of stock in another corporation as a cash outflow from investing activities.

Distinguish between the indirect method and the direct method for reporting net cash flows from operating activities.Which method is more common in practice? Which method provides a more logical presentation of cash flows?

Bad Brad's BBQ had cash flows for the year as follows ($ in millions) : CASH RECEIVED FROM: $\begin{array} { l r } \text { Customers } & \$ 1,800 \\ \text { Interest on investments } & 200 \\ \text { Sale of land } & 100 \\ \text { Sale of common stock } & 600 \\ \text { Issuance of debt securities } & 2,000 \\\text { CASH PAID FOR: }\\\text { Interest on debt } & \$ 300 \\\text { Income tax } & 80 \\\text { Debt principal reduction } & 1,500 \\\text { Purchase of equipment } & 4,000 \\\text { Purchase of inventory } & 1,000 \\\text { Dividends on common stock } & 200 \\\text { Operating expenses } & 500\end{array}$ -Bad Brad's would report net cash inflows (outflows) from investing activities in the amount of:

In preparing a statement of cash flows under the indirect method,an increase in accounts payable would be reported as a(n) :

Which of the following items is reported in the statement of cash flows using the direct method?

A statement of cash flows provides a summary of cash inflows and cash outflows during the reporting period.

In the operating activities section of the statement of cash flows,we start with net income when using:

The sale of land is reported in the operating section of the statement of cash flows.

When preparing a statement of cash flows using the indirect method,a decrease in accounts payable is subtracted from net income.

The balance sheet of Sound Designs reports total assets of $750,000 and $800,000 at the beginning and end of the year,respectively.Sales revenues are $1.5 million ($1.2 million in the previous year) ,net income is $150,000,and net cash flows from operating activities are $175,000.What is Sound Designs' cash flow to sales?

Which of the following is added to net income as an adjustment under the indirect method of preparing the statement of cash flows?

The total of the cash flows from operating,investing,and financing activities equals the net increase or decrease in cash for the year.

We record dividends paid as a financing activity.