64. Free cash flow is cash from operations, less cash for :
65. Upon review of Bert’s statement of cash flows, the following was noted:
Cash flows from operating activities
$ 60,000
Cash flows from investing activities
(125,000)
Cash flows from financing activities
115,000
From this information, the most likely explanation is that Bert is:
66. Upon review of Roepers’s statement of cash flows, the following was noted:
Cash flows from operating activities
$ 50,000
Cash flows from investing activities
80,000
Cash flows from financing activities
(130,000)
From this information, the most likely explanation is that Roeper is:
67. Press Inc. reported the following information in its annual report for 2012.
Cash flows from operating activities
$295,000
Capital expenditures
110,000
Proceeds from disposals of property, plant and equipment
57,000
Total payments expected to retire long-term debt over the next 5 years
200,000
What is the cash flow adequacy ratio for 2012 for Press?
68. Power Chair Company reported the following information in its annual report for 2012.
Cash flows from operating activities
$525,000
Capital Expenditures
300,000
Total payments expected to retire long-term debt over the next 3 years
150,000
What is the cash flow adequacy ratio for 2012 for Power Chair Company?
69. Which of the following measures can be used to evaluate a company’s ability to meet future debt obligations
after paying operating expenses, dividends and making capital expenditures?
70. Free cash flow is:
71. Cash flows from acquiring and disposing of long-term assets are classified as:
72. Which of the following is not an investing activity?
73. Cash flows from borrowing and paying off a 180-day bank loan are classified as:
74. Which of the following activities is most likely to have a cash flow effect?
75. Cash flows from issuing and repurchasing stock or issuing and repaying debt are classified as:
76. Which of the following is not a financing activity?
77. The statement of cash flows:
78. Which balance sheet accounts are most affected by operating activities?
79. Which of the following statements is false regarding how the cash flow effects of the changes in the
equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect
method is used to prepare the operating activities section?
80. The Responsible Company completed the following transactions involving investments during 2012.
Purchased 20-year treasury bonds for
$80,000
Sold available-for-sale securities (cost $80,000) for
$100,000
Purchased trading securities for
$55,000
Responsible uses the indirect method to prepare the operating activities section of the statement of cash flows. The following statements describe
how Responsible reported the cash flow effects of the transactions above on its 2012 statement of cash flows. Which of the following has been
reported incorrectly by Responsible?
81. Cabo Corporation
Selected data from the financial statements of Cabo Corporation for the years ended December 31, 2011 and
2012, are presented below.
(In thousands)
2012
2011
Cash and cash equivalents
$ ?
$ 4,500
Total current assets (Except cash)
180,000
150,000
Income taxes paid
5,000
2,000
Interest paid
5,100
7,200
Net cash provided by operating activities
9,500
6,400
Net cash used by investing activities
5,100
6,300
Net cash provided by financing activities
1,500
7,400
Depreciation and amortization
7,000
5,000
Total stockholders’ equity
115,000
105,000
Net income
4,000
2,000
82. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation, how would the transaction to retire bonds by issuing common stock be reported on the
statement of cash flows for 2012 for King Corporation?
Net cash provided by operating activities
$ 9,500
Net cash used by investing activities
(5,100)
Net cash provided by financing activities
1,500
Net increase in cash
$ 5,900
Cash & cash equivalents—beginning of the year
4,500
Cash & cash equivalents—end of the year
$ 10,400
83. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation, what amount of cash was received from customers during 2012?
84. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation, what is the amount paid to suppliers for purchases of inventory during 2012?
85. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to information provided for King Corporation, what is the amount paid for operating expenses during 2012?
86. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation. Prepare the operating activities section of the statement of cash flows for King Corporation
for 2012 if the direct method is used to determine net cash flow from operating activities.
Operating activities:
Collections from customers
$ 1,033,000
Payments for inventory
(741,800)
Payments for operating expenses
(179,500)
Net cash provided by operating activities
$ 111,700
87. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation. Prepare the operating activities section of a statement of cash flows for King Corporation
for 2012 if the indirect method is used.
Operating activities:
Net income
$ 102,400
Add:
Depreciation
18,600
Decrease in accounts receivable
33,000
Increase in salaries payable
5,500
Less:
Gain on sale equipment
(6,000)
Increase in inventories
(6,600)
Decrease in accounts payable
(35,200)
Net cash provided by operating activities
$ 111,700
Calculations:
($77,000 – 41,800)
88. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation. Prepare the investing activities section of a statement of cash flows for 2012 for King
Corporation.
Investing activities:
Proceeds from selling equipment
$ 28,000
Purchase of equipment
(89,000)
Net cash used by investing activities
$(61,000)
89. King Corporation
Selected data and additional information from the records of King Corporation are presented below.
Balance Sheet Data
2012
2011
Accounts receivable
$132,000
$165,000
Inventories
61,600
55,000
Accounts payable
41,800
77,000
Salaries payable
11,000
5,500
Equipment
121,000
77,000
Accumulated depreciation
30,800
35,200
Bonds payable
110,000
220,000
Common stock
330,000
220,000
Retained earnings
83,600
44,000
Income Statement Data
2012
Net sales
$1,000,000
Cost of goods sold
700,000
Operating expenses (Excluding depreciation expense)
185,000
Net income (Includes depreciation expense and gain)
102,400
Gain on sale of equipment
6,000
Additional information:
Equipment with a cost of $45,000 and a book value of $22,000 was sold for $28,000 during 2012.
Common stock was issued to retire bonds payable during 2012.
The only items affecting retained earnings in 2012 were net income and dividends declared and paid.
Refer to the information provided for King Corporation. Prepare the financing activities section of a statement of cash flows for 2012 for King
Corporation.
90. During 2012, Delivery Systems Incorporated net cash provided by operating activities of $1,200,000, capital
expenditures of $540,000, dividends of $260,000, and average maturities of long-term debt over the next five
years of $650,000.
A)
Compute Delivery Systems Incorporated free cash flow for 2012.
B)
Compute Delivery Systems Incorporated cash flow adequacy ratio for 2012.
Financing activities:
Paid dividends
$(62,800)
Net cash used by financing activities
$(62,800)
91. Eagle Corporation’s current income statement and the last two years of balance sheet are listed below for the
year ending December 31, 2011. Prepare the full statement of cash flows using the direct method. Then show
the operating activities using the indirect method.
Income
Stateme
nt
2011
Balance
Sheets
2011
2010
Sales
$345
Cash
$ 82
$ 40
Expense
s:
Accounts
receivable
180
150
Cost of goods sold
$120
Inventory
170
200
Operating expenses
58
Equipment
200
140
Depreciation expense
20
Accum. depreciation
(72)
(60)
Interest expense
2
200
Total assets
$560
$470
Operatin
g income
145
Gain on
sale—
equip.
5
Accounts
payable
$100
$ 80
Income
before
taxes
150
L/T notes
payable
100
50
Tax
expense
30
Common
stock
250
250
Net
income
$120
Retained
earnings
110
90
Total
liabilities &
stockhol
der equity
$560
$470
Free cash
=
Net cash flow from
–
Capital
–
Cash
$400,000
=
$1,200,000
–
540,000
–
260,000
92. The financial statement that summarizes the operating, investing, and financing activities of a business over
a period of time is the ____________________.
93. Cash flows from operating activities correspond to the cash effects of items that determine the
____________________.
94. The purchase of inventory is an important ____________________ activity for a retailer.
95. ____________________ activities involve long-term liabilities and stockholders’ equity.
96. When a company sells its own common stock, it is a(n) ____________________ activity on the statement
of cash flows.
97. The collection of accounts receivable results in a cash ____________________ reported in the operating
activities section of the statement of cash flows using the direct method.
98. Under the ____________________ method of preparing a statement of cash flows, the net cash flow from
operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating
cash receipts and payments, and all accruals of future operating cash receipts or payments.
99. The indirect method of preparing a statement of cash flows begins with net income and then adjusts it for
noncash items to produce net cash flow from ____________________.
100. Under the indirect method, a gain from the sale of land is ____________________ net income in the
operating activities section of the statement of cash flows.
101. ____________________ represents the cash flow that a company is able to generate after considering the
maintenance or expansion of its assets (capital expenditures) and payment of dividends.
102. If this year’s balance sheet shows a decrease in taxes payable over last year’s balance sheet, the decrease
would be ____________________ income tax expense under the direct method.