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Cash flows to sales is a measure of free cash flow.

A) True
B) False

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Using the indirect method,calculate the amount of net cash flows from operating activities from the following data.Show your work.  Net Income $63,000 Beginning Accounts Payable $3,000 Beginning Accounts  Ending Accounts Payable 2,800 Receivable 5,000 Depreciation Expense 10,200 Ending Accounts Receivable 4,400 Amortization of Intangible  Beginning Prepaid Expenses 1,000 Assets  Ending Prepaid Expenses 1,400 Dividends Declared and Paid 2,200\begin{array}{lrlr}\text { Net Income } & \$ 63,000 & \text { Beginning Accounts Payable } & \$ 3,000 \\\text { Beginning Accounts } & & \text { Ending Accounts Payable } & 2,800 \\\text { Receivable } & 5,000 & \text { Depreciation Expense } & 10,200 \\\text { Ending Accounts Receivable } & 4,400 & \text { Amortization of Intangible } & \\\text { Beginning Prepaid Expenses } & 1,000 & \text { Assets } \\\text { Ending Prepaid Expenses } & 1,400 & \text { Dividends Declared and Paid } & 2,200\end{array}

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Match each definition with the correct term below. -Indirect method


A) The method of preparing the operating section of the statement of cash flows that adjusts each item on the income statement from the accrual basis to the cash basis.
B) The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level.
C) Activities of a business that involve obtaining resources from stockholders and creditors,providing stockholders with a return on their investments,and repaying the amounts borrowed from creditors.
D) Investments that can be quickly converted into cash.
E) Activities of a business that involve the purchase and sale of property,plant,and equipment and other long-term assets.
F) The ratio of net cash flow from operating activities to average total assets.
G) Activities of a business that involve the cash inflows and outflows that enter into the determination of net income.
H) The ratio of net cash flow from operating activities to net income.
I) The method of preparing the operating section of the statement of cash flows that does not require the adjustment of each item on the income statement.
J) The ratio of net cash flow from operating activities to net sales.

K) A) and F)
L) D) and G)

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Dillon Corporation purchased investments for $240,000 cash.The journal entry to record the outflow of cash is:


A) Investments 240,000
Cash 240,000
B) Cash 240,000
Investments 240,000
C) Investments 240,000
Purchases 240,000
D) Purchases 240,000
Investments 240,000

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

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Bamberg Corporation purchased land and building with a mortgage.Indicate which section,if any,this transaction would appear in,or relate to,on a statement of cash flows.


A) Financing activities section
B) Operating activities section
C) Investing activities section
D) Schedule of noncash investing and financing transactions

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

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Royer Corporation engaged in this transaction: Abandoned fully depreciated equipment. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.


A) Investing activities section
B) Operating activities section
C) Does not represent a cash flow
D) Financing activities section

E) B) and C)
F) None of the above

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The statement of cash flows explains the difference between net income as shown on the income statement and the net cash flows generated from operations.

A) True
B) False

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Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Rent Income (assume that cash received is equal to amount reported) -indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:


A) Add to net income to arrive at net cash flows from operating activities
B) Subtract from net income to arrive at net cash flows from operating activities
C) Not used to adjust net income to calculate net cash flows from operating activities

D) None of the above
E) All of the above

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Union Corporation issued 40,000 shares of $10 par value common stock for $600,000,purchased 10,000 shares of treasury stock with a par value of $20 for $150,000,and paid $20,000 in cash dividends.Net cash flows from financing activities totaled


A) $0.
B) $430,000.
C) $280,000.
D) ($470,000) .

E) A) and C)
F) A) and B)

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York Company's cash balance at December 31,2012,was $338,000.Calculate the company's cash balance at December 31,2013,given the following information for the year ended December 31,2013.Show your work. York Company's cash balance at December 31,2012,was $338,000.Calculate the company's cash balance at December 31,2013,given the following information for the year ended December 31,2013.Show your work.

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The activity from the Long-Term Investments account for Rice Corporation appears below.In addition,the income statement shows a loss on the sale of investments of $16,000. The activity from the Long-Term Investments account for Rice Corporation appears below.In addition,the income statement shows a loss on the sale of investments of $16,000. Based on the information given,compute the amounts to be shown and indicate how they would appear on the statement of cash flows.Assume that the indirect method is being used and that the investments were purchased for cash. Based on the information given,compute the amounts to be shown and indicate how they would appear on the statement of cash flows.Assume that the indirect method is being used and that the investments were purchased for cash.

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blured image *$101,000 cost - $16,000 loss...

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Which of the following items would not be included in a statement of cash flows prepared using the indirect method?


A) Net income
B) Depreciation expense
C) Sale of a plant asset
D) Cash paid for wages

E) A) and B)
F) None of the above

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Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Interest Income (assume that cash received is equal to amount reported) -indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:


A) Add to net income to arrive at net cash flows from operating activities
B) Subtract from net income to arrive at net cash flows from operating activities
C) Not used to adjust net income to calculate net cash flows from operating activities

D) A) and B)
E) B) and C)

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Match each definition with the correct term below. -Investing activities


A) The method of preparing the operating section of the statement of cash flows that adjusts each item on the income statement from the accrual basis to the cash basis.
B) The amount of cash that remains after deducting the funds a company must commit to continue operating at its planned level.
C) Activities of a business that involve obtaining resources from stockholders and creditors,providing stockholders with a return on their investments,and repaying the amounts borrowed from creditors.
D) Investments that can be quickly converted into cash.
E) Activities of a business that involve the purchase and sale of property,plant,and equipment and other long-term assets.
F) The ratio of net cash flow from operating activities to average total assets.
G) Activities of a business that involve the cash inflows and outflows that enter into the determination of net income.
H) The ratio of net cash flow from operating activities to net income.
I) The method of preparing the operating section of the statement of cash flows that does not require the adjustment of each item on the income statement.
J) The ratio of net cash flow from operating activities to net sales.

K) D) and E)
L) A) and F)

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Interest paid would be included in the investing activities category on the statement of cash flows.

A) True
B) False

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Northbrook Corporation issued $60,000 bonds payable to acquire Machinery.The journal entry to record the transaction is:


A) Machinery 60,000
Cash 60,000
B) Machinery 60,000
Bonds Payable 60,000
C) Bonds Payable 60,000
Machinery 60,000
D) Cash 60,000
Bonds Payable 60,000

E) C) and D)
F) A) and D)

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Noncash investing and financing transactions


A) appear as a separate schedule on the statement of cash flows.
B) appear in either the investing or financing activities section,but not both.
C) are excluded from the statement of cash flows.
D) appear in both the investing and financing activities sections.

E) A) and B)
F) A) and C)

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The statement of cash flows shows the effects on cash of a company's operating,investing,and financing activities for an accounting period.

A) True
B) False

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Use this information to answer the following question. Oconee Corporation is preparing a statement of cash flows. The following transactions occurred during the year: 1. Sold machinery for $18,000 cash. 2. Purchased a building for $160,000 cash. 3. Issued $140,000 worth of stock to acquire an airplane. 4. Converted long-term bonds by issuing $200,000 worth of stock. 5. Declared and paid a $20,000 cash dividend. Transaction 5 would be found on the statement of cash flows in the


A) noncash investing and financing transactions section.
B) cash flows from financing activities section.
C) cash flows from operating activities section.
D) cash flows from investing activities section.

E) None of the above
F) A) and C)

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In preparing a statement of cash flows using the indirect method,a decrease in an unearned revenue account should


A) be shown as a financing activity.
B) be shown as a deduction from net income in computing net cash flows from operating activities.
C) not be shown on the statement of cash flows.
D) be shown as an addition to net income in computing net cash flows from operating activities.

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

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