TestBank financial accounting 2n spiceland ch11

Under the indirect method, an increase in accounts payable is added to net income to arrive at net cash flows from operating activities... We calculate cash return on assets as the chang

True False

11 The purchase of long-term assets by issuing debt is recorded as both an investing activity and a financing activity

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

34 We calculate cash return on assets as the change in cash divided by average total assets

46 The Statement of Cash Flows:

51 The statement of cash flows reports cash flows from the activities of:

A Operating, purchasing, and investing

B Borrowing, paying, and investing

C Operating, investing, and financing

D Using, investing, and financing

52 Which one of the following is correct about the statement of cash flows?

54 All classifications on the Balance Sheet have a general relationship with sections identified on the

Statement of Cash Flows Indicate which relationships are correctly identified in the table below

56 Under what section of the Statement of Cash Flows would you classify the purchase of equipment by issuing a long-term note payable?

58 Which of the following is an example of a noncash activity?

A Sale of land for less than its cost

B Purchase of land by issuing debt

C Sale of land for more than its cost

D Purchase of land using cash proceeds from issuance of common stock

59 Which of the following is not true regarding cash flows?

60 Dividends received from an investment is classified as a(an) cash flow, and paying dividends

on stock issued is classified as a(an) cash flow on the Statement of Cash Flows

61 The collection of cash from customers would be classified as which type of cash flow on the Statement of Cash Flows?

62 The indirect and direct methods:

A are used by companies about equally in actual practice

B affect the presentations of operating, investing, and financing activities

C arrive at different amounts for net cash flows from operating activities

D are two allowable methods to present operating activities in the statement of cash flows

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

A the direct method

B the indirect method

C both the direct and the indirect method

D neither the direct nor the indirect method

64 Arrow Printers paid $2,000 interest on short-term notes payable, $10,000 interest on long-term bonds, and

$6,000 in dividends on its common stock Arrow would report cash outflows from activities, as follows:

65 Bad Brad's would report net cash inflows (outflows) from operating activities in the amount of:

68 We can identify operating activities from income statement information and changes in

A Long-term asset accounts

B Long-term liability accounts

C Current asset and current liability accounts

D Stockholders' equity accounts

69 In preparing a statement of cash flows under the indirect method, a decrease in accounts receivable would

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

A Salaries payable increase

B Gain on the sale of land

C Inventory increase

D Accounts receivable increase

73 Which of the following is deducted from net income as an adjustment under the indirect method of

preparing the statement of cash flows?

A Salaries payable decrease

B Inventory decrease

C Depreciation expense

D Accounts receivable decrease

74 Given the items below, which of the following is a subtraction from net income to arrive at Operating Cash Flows using the indirect method?

76 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 cash flows from operating activities would be:

A $132,000

B $134,000

C $136,000

D $138,000

77 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

78 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 cash flows from operating activities is:

A $202,000

B $198,000

C $212,000

D $205,000

80 Lense Laboratories' net income was $250,000 Given the account information below, what is the net operating cash flows for Lense Laboratories?

81 Allen Company's income statement reported total revenues, $850,000 and total expenses (including

$40,000 depreciation) of $720,000 The balance sheet reported the following: Accounts Receivable—beginning balance, $50,000 and ending balance, $60,000; Accounts Payable—beginning balance, $22,000 and ending balance, $28,000 Therefore, based only on this information, the net cash inflows from

operating activities were:

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

A Payment of cash for treasury stock

B Payment of cash for the purchase of land

C Payment of cash for inventory

D Payment on a long-term note payable

85 Which of the following is an example of a cash inflow from a financing activity?

A Issuance of bonds

B Sale of an intangible asset

C Receipt of cash dividends

D The purchase of land and buildings

88 Cash flows from financing activities include:

A Interest received

B Interest paid

C Dividends received

D Dividends paid

89 Cash flows from investing activities do not include:

A Proceeds from the sale of land

B Proceeds from the issuance of common stock

C Proceeds from the sale of marketable securities

D Cash outflows from acquiring land

90 Shively Mfg Co sold land costing $10,000 for $12,000 Shively would report:

A Operating cash inflows of $12,000

B Investing cash inflows of $12,000

C Financing cash inflows of $12,000

D Financing cash inflows of $2,000

91 During 2012, Smithson Corp had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000 What amount would be reported for

investing cash flows on the Statement of Cash Flows?

financing cash flows on the Statement of Cash Flows?

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

96 During 2012, Victoria Group: (1) received cash of $5,000 billed to a customer in 2011; (2) earned $20,000

of net income; (3) paid interest of $6,000 on a corporate bond issued; (4) paid dividends of $8,000 to its stockholders; (5) borrowed $40,000 from a local bank; and (6) purchased its own shares of common stock

for $10,000 What is Victoria Group's cash flow from financing activities in 2012?

A Option a

B Option b

C Option c

D Option d

97 The following information pertains to Alpha Computing at the end of 2012:

Alpha Computing's Retained Earnings account had a zero balance at the beginning of 2012

What amount of dividends did the company pay in 2012?

A Option a

B Option b

C Option c

D Option d

98 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 return on assets?

99 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?

100.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' asset turnover?

101.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

A Option a

B Option b

C Option c

D Option d

102.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 flow to sales ratio compare to the industry average of 5%?

103.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 asset turnover compare to the industry average of 2.4 times?

104.We can separate cash return on assets into:

A Cash flow to sales and return on assets

B Cash flow to sales and asset turnover

C Cash flow to sales and profit margin

D Profit margin and asset turnover

105.We calculate cash return on assets as

A The change in cash divided by average total assets

B Net cash flows from operating activities divided by average total assets

C The change in cash divided by ending total assets

D Met cash flows from operating activities divided by ending total assets

106.Which of the following statements is not true relating to cash flow analysis?

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

107.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 $2,000,000

B $2,070,000

C $1,950,000

D $2,050,000

112.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?

A $780,000

B $800,000

C $820,000

D $870,000

113.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?

A $5,000,000

B $5,040,000

C $4,960,000

D $5,080,000

116.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?

A $453 million

B $447 million

C $433 million

D $427 million

118.A company's Income Tax Payable account decreased from $14 million to $12 million during the year If its income tax expense was $80 million, what would be shown as cash paid for income taxes under the direct method?

A A cash outflow of $12 million

B A cash outflow of $78 million

C A cash outflow of $80 million

D A cash outflow of $82 million

119.Which of the following items is not reported in the operating section of the statement of cash flows using the direct method?

A Depreciation expense

B Cash paid to suppliers

C Cash received from customers

D Cash paid for income taxes

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

A Depreciation expense

B Gain on sale of an asset

C Cash received from customers

D Loss on sale of an asset

121.Classify each of the following items as an operating, investing, or financing activity

1 Dividends paid

2 Sale of goods or services for cash

3 Sale of equipment

4 Purchase of inventory

5 Repayment of notes payable

122.Classify each of the following items as an operating, investing, or financing activity

1 Payment of income taxes

2 Sale of investments

3 Receipt of interest

4 Issuance of common stock

5 Purchase of intangibles

123.The following selected transactions occur during the first year of operations Determine how each should

be reported in the statement of cash flows State whether it is a cash inflow or a cash outflow and whether it

is an operating, investing, or financing activity

1 Issued a million shares of common stock at $20 per share

2 Purchased land and a building for $3 million

3 Received $200,000 from a cash sale of merchandise to customers

4 Paid a dividend of $1 per share to common stockholders

5 Loaned $50,000 to an employee and accepted a note receivable

124.Analysis of an income statement, balance sheets, and additional information from the accounting records of Gaming Strategies reveal the following items:

1 Collection of notes receivable

2 Purchase of equipment

3 Exchange of long-term assets

4 Decrease in accounts payable

5 Payment of dividends

6 Purchase of a patent

7 Depreciation expense

8 Decrease in accounts receivable

9 Issuance of note payable

10 Increase in inventory

Indicate in which section of the statement of cash flows each of these items would be reported: operating activities (indirect method), investing activities, financing activities, or noncash activities

125.Place the following items in the correct order as they would appear in the statement of cash flows:

1 Beginning cash balance

2 Ending cash balance

3 Investing activities

4 Financing activities

5 Net increase (decrease) in cash

6 Operating activities

126.Electronic Wonders reports net income of $95,000 The accounting records reveal Depreciation Expense

of $50,000 as well as increases in Prepaid Rent, Accounts Payable, and Income Tax Payable of $40,000,

$23,000, and $20,000, respectively Prepare the operating activities section of Electronic Wonders' statement of cash flows using the indirect method

127.Micro Manufacturing reports net income of $850,000 Depreciation Expense is $60,000, Accounts Receivable increases $30,000 and Accounts Payable decreases $10,000 Calculate net cash flows from operating activities using the indirect method

128.Fidelity Systems reports net income of $80 million Included in that number is depreciation expense

of $8 million, and a gain on the sale of equipment of $1 million Records reveal increases in Accounts Receivable, Inventory, and Accounts Payable of $4 million, $3 million, and $2 million, respectively Calculate Fidelity's net cash flows from operating activities

129.Alpha Computers reports net income of $44 million Included in that number are depreciation expense of

$7 million and a loss on the sale of land of $2 million Records reveal decreases in Accounts Receivable, Inventory, and Accounts Payable of $4 million, $3 million, and $2 million, respectively Calculate Alpha Computers' net cash flows from operating activities