Accounting Chapter 12 Review

28 February 2023
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Payment of interest
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Which of the following is an operating activity?
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Significant financing and investing activities that do not affect cash are reported in either a separate schedule at the bottom of the statement of cash flows, or in a separate note or supplementary schedule to the financial statements.
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Which of the following statements is correct?
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Investing activity
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What type of activity is the purchase of equipment for cash?
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Payment of a cash dividend
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Which of the following is not an operating activity?
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The net change in plant assets during the year
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Which of the following will not be reported in the statement of cash flows?
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Investing, financing, and operating
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Which activities are reported on the statement of cash flows?
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Payment of cash to lenders for interest
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Which is an example of a cash flow from an operating activity?
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Receipt of cash from the sale of equipment
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Which is an example of a cash flow from an investing activity?
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Financing activities
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How are cash dividends paid to stockholders classified on the statement of cash flows?
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Issuance of debt for cash
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Which is an example of a cash flow from a financing activity?
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$2,000
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Taylor Enterprises sold a piece of equipment for $3,000. The original cost was $15,000 and the accumulated depreciation prior to the sale was $10,000. What amount, if any, would appear in the operating activities section of the statement of cash flows using the indirect method?
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Add to net income $7,000
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A company's prepaid expenses are $15,000 at the beginning of the year and $8,000 at the end of the year. What adjustment to net income should be made if the indirect method is used?
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$136,000; (The result is: $132,000 + $10,000 + $6,000 - $12,000 = $136,000.)
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Net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, how much is net cash provided by operations?
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$220,000; (The decrease in accounts receivable is added to net income and the decrease in accounts payable is subtracted from net income. Noncash amounts that are part of income must be removed from net income as well. Depreciation expense is added back and the gain on the sale of land is subtracted from net income($200,000 + $40,000 - $10,000 + $20,000 - $30,000 = $220,000).)
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The following data are available for Allen Clapp Corporation: Net income: $200,000 Depreciation expense: 40,000 Dividends paid: 60,000 Gain on sale of land: 10,000 Decrease in accounts receivable: 20,000 Decrease in accounts payable: 30,000 How much is cash provided by operating activities using the indirect method?
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$60,000; (Free cash flow is cash remaining from operations after adjustments for capital expenditures and dividends($100,000 - $30,000 - $10,000 = $60,000).)
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Simpson Inc. reported $100,000 provided by operating activities. The company invested $30,000 in production equipment and it paid $10,000 in dividends. How much is its free cash flow?
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0.67 times; (Current cash debt coverage ratio is calculated by dividing cash provided by operating activities by average current liabilities: $120,259/ [($189,000 + $172,000/2)] = 0.67 times.)
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Arlo Company has cash provided by operating activities of $120,259 for 2014 and its liabilities are as follows: 2014 2013 Current liabilities $189,000 $172,000 Total liabilities 242,000 227,000 How much is Arlo Company's current cash debt coverage for 2014?
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0.51 times; (Cash debt coverage is cash provided by operating activities divided by average total liabilities: $120,259/ [($242,000 + $227,000/2) = 0.51 times.)
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Arlo Company has cash provided by operating activities of $120,259 for 2014 and its liabilities are as follows: 2014 2013 Current liabilities $189,000 $172,000 Total liabilities 242,000 227,000 How much is Arlo Company's cash debt coverage for 2014?
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Issued bonds for $200,000 cash. - cash inflow from financing activity; Purchased equipment for $180,000 cash. - cash outflow from investing activity; Sold land costing $20,000 for $20,000 cash. - cash inflow from investing activity; Declared and paid a $50,000 cash dividend. - cash outflow from financing activity
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Each of these items must be considered in preparing a statement of cash flows for Irvin Co. for the year ended December 31, 2014. For each item, state how it should be shown in the statement of cash flows for 2014.
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investing activity
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Purchase of equipment
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investing activity
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Sale of building
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Financing activity
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Redemption of bonds
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Operating activity
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Depreciation
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Financing activity
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Payment of dividends
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Financing activity
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Issuance of capital stock