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Exam 23: Statement of Cash Flows

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Question 1

True/False

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Cash payments for operating expenses are computed by subtracting an increase in prepaid expenses and a decrease in accrued expenses payable from operating expenses.

A) True
B) False

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False

Question 2

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In a statement of cash flows, the cash flows from investing activities section should report

A) the issuance of common stock in exchange for a factory building.
B) stock dividends received.
C) a major repair to machinery charged to accumulated depreciation.
D) the assignment of accounts receivable.

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

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Question 3

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The following information was taken from the 2015 financial statements of Dunlop Corporation: $\begin{array}{lr}\text { Bonds payable, January 1, 2015 } & \$ 600,000 \\\text { Bonds payable, December 31,2015 } & 3,600,000\end{array}$ During 2015 $\bullet$ A $540,000 payment was made to retire bonds payable with a face amount of $600,000. $\bullet$ Bonds payable with a face amount of $240,000 were issued in exchange for equipment.In its statement of cash flows for the year ended December 31, 2015, what amount should Dunlop report as proceeds from issuance of bonds payable?

Nagel Co.'s prepaid insurance was $95,000 at December 31, 2015 and $45,000 at December 31, 2014. Insurance expense was $31,000 for 2015 and $27,000 for 2014. What amount of cash disbursements for insurance would be reported in Nagel's 2015 net cash provided by operating activities presented on a direct basis?

Income from an investment in common stock using the equity method is added to net income in computing net cash provided from operating activities.

An objective of the statement of cash flows is to

Minear Company reported net income of $450,000 for the year ended 12/31/15. Included in the computation of net income were: depreciation expense, $60,000; amortization of a patent, $32,000; income from an investment in common stock of Brett Inc., accounted for under the equity method, $48,000; and amortization of a bond discount, $12,000. Minear also paid an $80,000 dividend during the year. The net cash provided by operating activities would be reported at

Zook Incorporated, had net income for 2015 of $4,500,000. Additional information is as follows: $\begin{array}{lr}\text { Amortization of patents } & 45,000 \\\text { Depreciation on plant assets } & 1,650,000\\\text { Long-term debt: }\\\text { Bond premium amortization } & 65,000 \\\text { Interest paid } & 900,000\\\text { Provision for doubtful accounts: }\\\text { Current receivables } & 80,000 \\\text { Long-term nontrade receivables } & 30,000\end{array}$ What should be the net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2015, based solely on the above information?

Use the following information for questions 68 and 69. The balance in retained earnings at December 31, 2014 was $1,080,000 and at December 31, 2015 was $873,000. Net income for 2015 was $750,000. A stock dividend was declared and distributed which increased common stock $375,000 and paid-in capital $165,000. A cash dividend was declared and paid. -The amount of the cash dividend was

Use the following information for questions 115 and 116. Peavy Corp.'s transactions for the year ended December 31, 2015 included the following: $\bullet$ Acquired 50% of Gant Corp.'s common stock for $200,000 cash which was borrowed from a bank. $\bullet$ Issued 5,000 shares of its preferred stock for land having a fair value of $320,000. $\bullet$ Issued 500 of its 11% debenture bonds, due 2020, for $392,000 cash. $\bullet$ Purchased a patent for $220,000 cash. $\bullet$ Paid $120,000 toward a bank loan. $\bullet$ Sold available-for-sale securities for $796,000. $\bullet$ Had a net increase in returnable customer deposits (long-term) of $88,000. -Peavy's net cash provided by investing activities for 2015 was

Donnegan Company reported operating expenses of $325,000 for 2015. The following data were extracted from the company's financial records: $\begin{array}{lrr}&12 / 31 / 14&12 / 31 / 15\\\text { Prepaid Expenses } & \$ 60,000 & \$ 69,000 \\\text { Accrued Expenses } & 210,000 & 255,000\end{array}$ On a statement of cash flows for 2015, using the direct method, cash payments for operating expenses should be

The amount to be shown on the cash flow statement as net cash provided by financing activities would total what amount?

Which of the following is false concerning the statement of cash flows?

Under IFRS, noncash investing and financing activities are excluded from the statement of cash flows.

The primary purpose of the statement of cash flows is to provide information

Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015 Included in net income were depreciation expense of $8,400 and a gain on sale of equipment of $1,700. The equipment had an historical cost of $40,000 and accumulated depreciation of $24,000. Each of the following accounts increased during 2015: $\begin{array} { l l } \text { Patents } & \$ 5,500 \\\text { Prepaid rent } & \$ 6,800 \\\text { Available-for-sale securities } & \$ 1,000 \\\text { Bonds payable } & \$ 5,000\end{array}$ What is the amount of cash provided by or used by investing activities for Jarvis, Inc. for the year ended December 31, 2015?

Surf Company follows IFRS for its external financial reporting. The following amounts were available at December 31, 2013:Interest paid $22,000Dividends paid 16,000Taxes paid 37,000Under IFRS, what is the maximum amount that could be reported for cash used by operating activities for Surf Company for the year ended December 31, 2013?

Use the following information for questions 106 through 108. Jamison Corp.'s balance sheet accounts as of December 31, 2015 and 2014 and information relating to 2015 activities are presented below. Information relating to 2015 activities: $\bullet$ Net income for 2015 was $1,300,000. $\bullet$ Cash dividends of $400,000 were declared and paid in 2015. $\bullet$ Equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in 2015 for $360,000. $\bullet$ A long-term investment was sold in 2015 for $320,000. There were no other transactions affecting long-term investments in 2015. $\bullet$ 20,000 shares of common stock were issued in 2015 for $25 a share. $\bullet$ Short-term investments consist of treasury bills maturing on 6/30/16. -Net cash used in Jamison's 2015 investing activities was

What amount of cash was paid on accounts payable to suppliers during 2015?

The indirect method adjusts net income for items that affected reported net income but did not affect cash.