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Exam 11: Statement of Cash Flows

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Question 1

True/False

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To maximize cash flow from operations,a company strives to increase both cash flows per dollar of sales and sales per dollar of assets invested.

A) True
B) False

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True

Question 2

Multiple Choice

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

A) ($80) .
B) $120.
C) $200.

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

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Question 3

Multiple Choice

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Consider the following items: How many of these items would be subtracted from net income when using the indirect method to prepare the operating activities section of the statement of cash flows? $\begin{array} { | l | l | } \hline \text { (a) Decrease in accounts receivable } & \text { (f) Gain on the sale of equipment } \\\hline \text { (b) Issuance of common stock } & \text { (g) Depreciation expense } \\\hline \text { (c) Increase in interest recewable } & \text { (h) Payment of dividends } \\\hline \text { (d) Purchase of land } & \text { (i) Decrease in utilities payable } \\\hline \text { (e) Decrease in accounts payable } & \text { (j) Increase in inventory } \\\hline\end{array}$

Assume net income was $100,000,depreciation expense was $8,000,accounts receivable decreased by $7,500,and accounts payable decreased by $2,500.The amount of net cash flows from operating activities is:

Wireless Technologies reports income tax expense of $800,000.Income tax payable at the beginning and end of the year are $50,000 and $70,000,respectively.What is the amount of cash paid for income taxes?

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

The total net cash flows from operating activities differ between the direct and indirect methods.The total net cash flows from operating activities are identical under both the direct and indirect methods.

Data Solutions reports cost of goods sold of $75 million.Inventory at the beginning and end of the year are $8 million and $9 million,respectively.Accounts payable at the beginning and end of the year are $5 million and $3 million,respectively.What is the amount of cash paid to suppliers?

Cash flows from financing activities include:

Servo Industries' net income was $300,000.Given the account information below,what is the net operating cash flows for Servo Industries? $\begin{array} { | l | r | } \hline \text { Decrease in Acc ounts Receivable } & \$ 50,000 \\\hline \text { Decrease in Salaries Payable } & \$ 75,000 \\\hline \text { Decrease in Inventory } & \$ 20,000 \\\hline \text { Depreciation Expense } & \$ 35,000 \\\hline \text { Increase in Interest Payable } & \$ 7,000 \\\hline\end{array}$

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 subtracted from net income as an adjustment under the indirect method of preparing the statement of cash flows?

Cash flows from investing activities do not include:

Innovative Products 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,the company would report net operating cash flows of:

Which of the following is not true regarding cash flows?

We report interest paid on bonds or notes payable with operating activities rather than financing activities.

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

Cash received from issuing common stock would be classified in which section of the Statement of Cash Flows?

Using the indirect method,we begin with net income and then list adjustments to net income in order to arrive at operating cash flows.

Which of the following statements is true?