124.
The statement of cash flows of Bosley Corporation shows the amount of cash received
from customers as $720,000. If net sales in Bosley Corporation’s income statement are
reported at $670,000 then:
125.
Hamilton Company reported an increase of $370,000 in its accounts receivable during the
year 2015. The company’s statement of cash flows for 2015 reported $1 million of cash
received from customers. What amount of net sales must Hamilton have recorded in 2015?
126.
Rent expense in Marrin Company’s 2015 income statement is $420,000. If Prepaid Rent
was $70,000 at December 31, 2014, and is $95,000 at December 31, 2015, the cash paid for
rent during 2015 is:
127.
Bert’s Bungy Jumping, Inc. paid $650,000 cash for casualty insurance during the year 2015.
If the income statement for the year reports insurance expense of $620,000 then:
128.
The comparative balance sheets of Friends, Inc. show a net increase in accounts receivable
of $650 and a net decrease in inventory of $500. To determine net cash flow from operating
activities under the indirect method, net income should be:
129.
The comparative balance sheets of Greenvale Games, Inc. show a net decrease in
unexpired insurance of $400 and a net decrease in interest payable of $250. In order to
reconcile net income with net cash flow from operating activities, net income should be:
130.
The comparative balance sheets of Apollo Rocket, Inc. show a net increase in inventory of
$79,000 and a net decrease in accounts payable of $42,000 during 2015. In computing net
cash flow from operating activities under the indirect method, net income for 2015 should
be:
131.
During the current year, Atkins, Inc. sold a parcel of land for $840,000 cash. The land had
been purchased by Atkins several years ago for $410,000. Atkins, Inc. uses the indirect
method to prepare its statement of cash flows. In order to reconcile net income to net cash
flow from operating activities, net income must be:
132.
At the end of the first year of operations, the balance sheet of Midwood Medical Supply
showed the following account balances: Accounts Receivable, $5,000; Accounts Payable,
$6,000; Inventory, $3,000; and Unexpired Insurance, $2,000. The corporation reported net
income of $79,000 for the year, including depreciation expense of $5,000, and uses the
indirect method of computing net cash flow from operating activities. Solely on the basis of
this information, net cash flow from operating activities is:
133.
At the end of the first year of operations, Meacham’s balance sheet showed the following
account balances: Accounts Receivable, $13,400; Inventory, $9,400; and Accounts Payable,
$14,650. The company’s income statement reports net income of $37,400, including
depreciation expense of $10,400. Using only the given information, compute Meacham’s
net cash flow from operating activities using the indirect method.
134.
Chapin Company reported net income of $410,000 for 2015. Balances of selected current
asset and current liability accounts are as shown on the indicated dates:
Depreciation expense for 2015 amounted to $65,000. Using only the above information,
compute Chapin’s net cash flow from operating activities (indirect method) for 2015:
135.
Monarch Company uses the indirect method to prepare its statement of cash flows. The
following information has been gathered for the current period:
On the basis of the above information only, Monarch Company’s statement of cash flows
shows net cash flow from operating activities to be:
136.
Empire Company uses the indirect method to prepare its statement of cash flows. The
following information has been gathered for the current period:
Solely on the basis of the above information, Empire’s net cash flow from operating
activities is:
137.
Royal Corporation uses the indirect method of computing net cash flow from operating
activities and reported the following for 2015: accounts receivable decreased by $10,300,
merchandise inventory increased by $15,300, accounts payable decreased by $4,000, and
income taxes payable increased by $18,800. If Royal Corporation reported net income for
2015 of $157,800 (including $34,800 of depreciation expense), net cash flow from operating
activities for 2015 is:
138.
At the end of 2015, Schenck Corporation sold its only piece of equipment for $9,000 cash, a
price which resulted in a loss of $3,000. During 2015, depreciation expense recognized by
Schenck was $1,000. Schenck uses the indirect method to compute net cash flow from
operating activities. In reconciling net income to net cash flow from operating activities
under the indirect method, the required adjustments based upon the given data:
139.
Alexander Company reported an increase of $185,000 in its accounts receivable during the
year. The company’s statement of cash flows reported $500,000 of cash received from
customers. What amount of net sales must Alexander have recorded?
140.
Rent expense in Burr Company’s income statement is $480,000. If Prepaid Rent was
$120,000 on January 1 and is $95,000 on December 31, the cash paid for rent during the
year is:
141.
Free cash flow arises out of:
13–73
142.
Peak pricing charges:
143.
From the viewpoint of stockholders or potential investors, which of the following cash flow
measurements would be of least importance?
Essay Questions
144.
Accounting terminology
Listed below are eight technical accounting terms introduced in this chapter:
Each of the following statements may (or may not) describe one of these technical terms.
In the space provided beside each statement, indicate the accounting term described, or
answer “None” if the statement does not correctly describe any of the terms.
____ (a) Cash sales and collections of accounts receivable.
____ (b) The classification of cash flows which includes issuing capital stock and paying
dividends.
____ (c) The financial statement which best describes the profitability of a business.
____ (d) The section of a statement of cash flows summarizing the cash effects of most
transactions entering into the determination of net income.
____ (e) An expense that reduces net cash flow but does not reduce net income.
____ (f) The classification of cash flows that includes purchases and sales of plant assets.
____ (g) Transactions shown in a supplementary schedule accompanying a statement of
cash flows.
145.
Cash flows and accounting records
In a business with an accrual-based accounting system, is a statement of cash flows based
upon account balances shown in the adjusted trial balance? Explain.
146.
Classification of cash flows
Indicate how each of the following events should be classified in a statement of cash flows
for the current calendar year. Use the following code: O = operating activities, I = investing
activities, and F = financing activities
Assume use of the direct method. If the event does not involve a cash flow that should be
included in the statement of cash flows, use an X.
____ (a) Paid an account payable for inventory purchased in a prior accounting period.
____ (b) On December 28, made a large credit sale; terms, 2/10, n/30.
____ (c) Received a dividend from an investment in IBM common stock.
____ (d) Paid a dividend to stockholders.
____ (e) Paid the interest on a note payable to First Bank.
____ (f) Paid the principal amount due on the note payable to First Bank.
____ (g) Transferred cash from a checking account into a money market fund.
____ (h) Made an adjusting entry to record accrued wages payable at the end of the period.
____ (i) Recorded depreciation expense for the current year.
____ (j) Purchased plant assets for cash.
147.
Format of a cash flow statement-direct method
Arrange the following information to complete the statement of cash flows for Olympia, Inc.
Place parentheses around those dollar amounts representing cash outlays.
148.
Format of a cash flows statement-direct method
Arrange the following information to complete the statement of cash flows for Jericho
Corporation. Place parentheses around those dollar amounts representing cash outlays.
