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Exam 11: Statement of Cash Flows

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Question 21

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

A) Subtract depreciation expense.
B) Add losses on sales of assets.
C) Subtract increase in Accounts Receivable.

D) A) and B)
E) All of the above

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Question 22

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Which of the following would be classified as an investing cash flow?

A) Issue bonds.
B) Receive cash in advance from a customer.
C) Sell a piece of equipment below cost.

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

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Question 23

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

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?

Cash return on assets indicates the amount of operating cash flow generated for each dollar invested in assets.

At the beginning of the period,Accounts Receivable equals $1,700.At the end of the period,Accounts Receivable equals $2,200.If Service Revenue for the period equals $15,400,what was the cash received from customers for the period?

We can separate cash return on assets into:

Mary's Music Store reported net income of $135,000.Beginning balances in Accounts Receivable and Accounts Payable were $29,000 and $26,000,respectively.Ending balances in these accounts were $30,000 and $24,000,respectively.Assuming that all relevant information has been presented,Mary's net cash flows from operating activities would be:

Under the indirect method,an increase in accounts payable is added to net income to arrive at net cash flows from operating activities.

Assuming Net Income for the year is $115,000,what is the net operating cash flows given the following information: $\begin{array} { | l | r | } \hline \text { Increase in Salaries Payable } & \$ 16,000 \\\hline \text { Depreciation Expense } & \$ 6,000 \\\hline \text { Increase in Prepaid Rent } & \$ 24,000 \\\hline \text { Loss on sale of asset } & \$ 1,000 \\\hline \text { Increase in Accounts Payable } & \$ 25,000 \\\hline \text { Increase in Inventory } & \$ 50,000 \\\hline\end{array}$

Kela Corporation reports net income of $450,000 that includes depreciation expense of $70,000.Also,cash of $50,000 was borrowed on a 5-year note payable.Based on this data,total cash inflows from operating activities are:

If accounts receivable decreases,this indicates that revenues exceed cash receipts from customers.If accounts receivable increases,this indicates that revenues exceed cash receipts from customers.

The balance sheet of Tech Track reports total assets of $400,000 and $500,000 at the beginning and end of the year,respectively.Sales revenues are $1.1 million ($0.8 million in the previous year) ,net income is $40,000,and net cash flows from operating activities are $50,000.How does Tech Track's cash return on assets compare to the industry average of 10%?

In 2018,Hope Company incurred sales on account of $100,000.The company also has the following information: What is the amount of cash received from customers for Hope Company in 2018? $\begin{array} { | l | r | r | } \hline & \mathbf { December ~31, } & \mathbf { December ~31, } \\& \mathbf { 2 0 1 8 } & \mathbf { 2 0 1 7 } \\\hline \text { Accounts } & \$ 20,000 & \$ 50,000 \\\text { Receivable } & & \\\hline \text { Accounts } & \$ 40,000 & \$ 65,000 \\ \text { Payable } & & \\\hline\end{array}$

Data Solutions reports income tax expense of $1,700,000.Income taxes payable at the beginning and end of the year are $250,000 and $370,000,respectively.What is the amount of cash paid for income taxes?

Financing activities include cash receipts and cash payments for transactions relating to revenue and expense activities.Operating activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

Operating activities are both inflows and outflows of cash resulting from the external financing of a business.Financing activities are both inflows and outflows of cash resulting from the external financing of a business.

Wireless Technologies reports cost of goods sold of $40 million.Inventory at the beginning and end of the year are $4 million and $3 million,respectively.Accounts payable at the beginning and end of the year are $3 million and $6 million,respectively.What is the amount of cash paid to suppliers?

We can find most financing activities by examining changes in long-term liabilities and stockholders' equity accounts.

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?