Cash Flow Statement

Question 1

Increase in Accounts Receivable: $2,000

Answer 1

Accounts receivable is subtracted when there is an increase as this increases net income but does not affect cash.

Question 2

A pr company that uses LIFO to account for inventory will have higher total cash flow than a nonprofitable company that uses FIFO during a period of rising prices. True /False Check this question Properly

Answer 2

False.Because of the impact of income taxes, a profitable company that accounts for inventory using LIFO will have higher total cash flow than a profitable company that uses FIFO. The company that uses LIFO will have higher cost of goods sold, resulting in lower net income and thus lower taxes.

Question 3

Cash salaries paid of $17000

Answer 3

CFO

Question 4

Increase in accounts payable $20

Answer 4

Increases in accounts payable and deferred taxes are sources of operating cash that are not included in net income and must be added

Question 5

Loss on sale of machinery: $500

Answer 5

The loss on the sale of machinery is not a cash outflow so it is also added back to calculate CFO.

Question 6

Interest Received From Short term Investments

Answer 6

CFO

Question 7

Equipment with a book value of $50,000 was sold for $100,000.

Answer 7

CFI Note that cash flow from operations must be adjusted downward for the amount of the gain on the sale of the equipment.( − $50,000)

Question 8

Cash paid for purchase of equipment

Answer 8

CFI

Question 9

Interest paid was $100,000.

Answer 9

Note that interest and income taxes paid are expenses shown on the income statement and will already be factored into net income.

Question 10

Retired long term debenture bonds with a face amount of $10 million by issuing 500,000 shares of common stock to the bondholders

Answer 10

Retiring bonds by issuing common stock to the bondholders is a non cash transaction and is disclosed separately in a note or supplementary schedule to the cash flow statement rather than a financing cash flow.

Question 11

Sold one share of stock for $15.

Answer 11

The sale of stock and the dividends paid are financing cash flows that are not included in net income, so they do not require adjustment when calculating CFO.

Question 12

A stock split would:

Answer 12

not be reported on the statement of cash flows because it is a non-cash event.

Question 13

§ Repayment of Bonds: $3,000

Answer 13

Repayment of Bonds is a financing activity and would not be included with operating activities. Accounts receivable is subtracted when there is an increase as this increases net income but does not affect cash.

Question 14

Decrease in deferred taxes: $10

Answer 14

− Deferred taxes $10

Question 15

An analyst contemplates using the indirect method to create the projected statement of cash flows. She decides to research the differences between the direct and indirect methods. Which of the following is least likely a component of the statement of cash flows under the direct method? 1) Net Income 2) PP&E 3) Payment of Dividends

Answer 15

A) Net income. B) Payment of dividends. C) Property, Plant, & Equipment. Property, Plant, & Equipment and payment of dividends are components of the statement of cash flows under both the direct and indirect methods. Net income is the first figure under the indirect method, but it is not a part of the statement of cash flows under the direct method. The correct response is net income.

Question 16

Cash Received from Issuance of Preferred Stock

Answer 16

CFF

Question 17

Cash paid for purchase of equipment

Answer 17

CFI

Question 18

Dividends paid on preferred stock 400,000

Answer 18

CFF

Question 19

Interest and Dividend Received :- IFRS

Answer 19

CFO or CFI

Question 20

Depreciation expense

Answer 20

CFO (to be added to NI)

Question 21

Net Sales An increase in accounts receivable 20 A decrease in accounts payable 40 An increase in inventory 30 Sale of common stock 100 Repayment of debt 10 Depreciation 2 Net Income 100 Interest expense on debt 5 Calculate CFF ?

Answer 21

Sale of common stock $100 Repayment of debt (10) Financing cash flows A $ 90

Question 22

Net income: $225

Answer 22

+Net Income $225

Question 23

Sale of common stock 100

Answer 23

CFF

Question 24

Juniper declared and paid a $100,000 cash dividend.

Answer 24

The only item involving cash flow from financing (CFF) was the payment of a cash dividend by Juniper.

Question 25

Exchange equipment with a book value of $1.7 million for equipment valued at $2.1 million .The exchange was an even trade

Answer 25

NCT

Question 26

Depreciation Expense: $1,000

Answer 26

To be added back to NI in Indirect method Depreciation is not a cash flow activity and is therefore always added back to net income to calculate CFO.

Question 27

Cash from sale of truck of $7000

Answer 27

CFI

Question 28

Gain from Sale of Equip.

Answer 28

Less:

Question 29

A parcel of land was purchased for $100,000 worth of Juniper common stock.

Answer 29

The purchase of land has no effect on cash, and itr is a NCT.

Question 30

ABC company paid Juniper preferred dividends of $40,000. What is the impact on Juniper's Cash Flow From Operations. ?

Answer 30

Preferred dividends received are cash flow from operations.

Question 31

When recognizing a gain on the sale of fixed assets

Answer 31

the amount is a deduction to operating cash flows. This is because the gain would be double counted in the investing section and in net income. Therefore, the gain must be removed from net income.

Question 32

Dividend Paid :- US GAAP

Answer 32

CFF

Question 33

Decrease in payables

Answer 33

CFO (to be Substraceted )

Question 34

Gain from cash sales of land 200,000

Answer 34

Substract from NI

Question 35

Decrease in inventory

Answer 35

To be added to NI

Question 36

Decrease in Accounts Payable: $1,500

Answer 36

Accounts payable is subtracted when there is an decrease as this decreases the cash by paying it to the suppliers.

Question 37

Decrease in accounts payable: $25

Answer 37

− A/P $25

Question 38

Increase in Income taxes payable: $500

Answer 38

Income taxes are added back when the income tax payable increases ( + Income taxes payable $500 )

Question 39

An increase in inventory 30

Answer 39

CFO (To be Subtracted)

Question 40

Other cash expenses including rent

Answer 40

CFO

Question 41

Sale of equipment $25

Answer 41

CFI

Question 42

Cash from Sale of Land

Answer 42

CFI

Question 43

Change in Retained Earnings +21

Answer 43

No Effect

Question 44

A decrease in accounts payable 40

Answer 44

CFO (To be Substracted)

Question 45

The actual coupon payment on a bond is reported on the statement of cash flow as:

Answer 45

The coupon payment is recorded on the statement of cash flows as an operating cash outflow because cash flow from operations includes a deduction for interest expense.

Question 46

Sale of equipment $25

Answer 46

Only the profit on sale of equipment, not the full proceeds from sale, is included in net income

Question 47

Depreciation Expense

Answer 47

Add:

Question 48

Loss on sale of equipment -8

Answer 48

plus loss on sale of equipment,

Question 49

Wages Paid

Answer 49

CFO

Question 50

Depreciation Expense: $1,000

Answer 50

Depreciation is not a cash flow activity and is therefore always added back to net income to calculate CFO.

Question 51

Cash paid to suppliers

Answer 51

CFO (– $40,000 COGS + $2,500 decrease in inventory – $1,000 decrease in payables)

Question 52

§ Decrease in Accounts Payable: $1,500

Answer 52

To be Substracted

Question 53

What is the impact on accounts receivable if sales exceed cash collections and what is the impact on accounts payable if cash paid to suppliers exceeds purchases?

Answer 53

If a firm sells more than it collects, accounts receivable will increase. If a firm pays suppliers more than it purchases, accounts payable will decrease.

Question 54

Financial information for Jefferson Corp. for the year ended December 31 , was as follows: 1)Sales :- $3,000,000 2)Purchases:- 1,800,000 3)Inventory at Beginning:-500,000 4)Inventory at Ending:-800,000 5)Accounts Receivable at Beginning:-300,000 6)Accounts Receivable at Ending:-200,000 7)Accounts Payable at Beginning:-100,000 8)Accounts Payable at Ending:-100,000 9)Other Operating Expenses Paid: -400,000 Based upon this data and using the direct method, what was Jefferson Corp.’s cash flow from operations (CFO) for the year ended December 31st?

Answer 54

A) $1,200,000. B) $900,000. C) $800,000.

Question 55

Juniper’s equipment with a book value of $55,000 was sold for $85,000 cash.

Answer 55

The sale of equipment affects cash flow from investing (CFI),

Question 56

Sale of held-to-maturity securities for cash.

Answer 56

CFI

Question 57

Cash from sale of land

Answer 57

CFI

Question 58

Tax expense

Answer 58

CFO(to be subtracted )

Question 59

Net income was $850,000.

Answer 59

Cash flow from operations is ($850,000 + $200,000 – ($100,000 − $50,000)) = $1,000,000.

Question 60

Interest received on short term investments

Answer 60

CFO

Question 61

What adjustment needs to be made for "Cash payment of dividends worth $30" in the CFO to be calculated with indirect method ?

Answer 61

No adjustment needs to be made for cash payment of dividends (CFF), because it is not included in net income.

Question 62

Issued 5000 shares of preferred stock for land with a fair value of 8.4 million

Answer 62

NCT

Question 63

Borrowed $5 million from a bank and used the proceeds to purchase equipment used in the manufacturing process

Answer 63

The cash borrowed for the equipment purchase is a financing inflow and cash cost of the equipment is reported as an investing cash flow in the cash flow statement . Had a bond been issued to the seller of the equipment it would be treated as a non cash transaction and reported only in the notes to the cash flow statement

Question 64

§ Loss on sale of machinery: $500

Answer 64

To be added to NI The loss on the sale of machinery is not a cash outflow so it is also added back to calculate CFO.

Question 65

Cash paid to supplier

Answer 65

CFO

Question 66

Decrease in Account payable

Answer 66

Subtracted

Question 67

Cash operating expenses

Answer 67

CFO (to be Substracted)

Question 68

Dividends paid

Answer 68

CFF

Question 69

Increase in Wage a payable

Answer 69

Added to NI

Question 70

Increase in deferred taxes $5

Answer 70

Increases in accounts payable and deferred taxes are sources of operating cash that are not included in net income and must be added

Question 71

Repayment of loan to the bank

Answer 71

CFF

Question 72

Depreciation 2

Answer 72

Added Back to NI in Indirect Method

Question 73

Acquired 40% of the common stock of an affiliate for $2.7 million cash which was borrowed from a bank

Answer 73

CFF Inflow and CFI Outflow

Question 74

Increase in accounts receivable: $55

Answer 74

− A/R $55

Question 75

Change in Accounts Payable +1

Answer 75

plus increase in accounts payable,

Question 76

Increase in Accounts Receivable

Answer 76

Less:

Question 77

Cash paid to suppliers for purchase of merchandise

Answer 77

CFO

Question 78

Wages Paid

Answer 78

CFO

Question 79

Dividends paid: $75

Answer 79

Dividends paid would be a financing activity and would not be included in the CFO.

Question 80

Proceeds from Sale of Treasury Stock

Answer 80

CFF

Question 81

Change in Inventory +5

Answer 81

Less increase in inventory,

Question 82

In using the indirect method, each item on the income statement is converted to its cash equivalent T/F

Answer 82

False .The direct method of cash flow calculation converts the income statement items to their cash equivalents, not the indirect method.

Question 83

Interest Paid :- US GAAP

Answer 83

CFO

Question 84

Cash From Customers

Answer 84

CFO

Question 85

Interest Paid :- IFRS

Answer 85

CFO or CFF

Question 86

What adjustment needs to be made for "Sale of preferred stock wort $25" in the CFO to be calculated with indirect method ?

Answer 86

No adjustment needs to be made for "Sale of Preferred Stock (CFF) ",it is not included in net income.

Question 87

When using the indirect method for computing cash flow from operating activities, a change in accounts payable will require which of the following?

Answer 87

decrease in accounts payable represents an outflow. Hence, a negative adjustment will be required. Conversely, an increase represents an inflow and a positive adjustment.

Question 88

Interest Paid :- US GAAP

Answer 88

CFO

Question 89

What adjustment needs to be made for "Purchase of land worth $15" in the CFO to be calculated with indirect method ?

Answer 89

No adjustment needs to be made for Purchase of land (CFI) because it is not included in net income.

Question 90

Purchase of new equipment: $65

Answer 90

The purchase of new equipment would be an investing activity and, therefore, would not be included in the CFO.

Question 91

Income taxes paid were $50,000.

Answer 91

Note that interest and income taxes paid are expenses shown on the income statement and will already be factored into net income.

Question 92

Increase in account receivable

Answer 92

To be subtracted to NI

Question 93

Depreciation on fixed assets $1,500,000

Answer 93

Add Back to NI

Question 94

Repayment of Loan to the bank

Answer 94

CFF

Question 95

Change in Accounts Receivable +4

Answer 95

less increase in accounts receivable

Question 96

Dividends Paid

Answer 96

CFF

Question 97

Net Income

Answer 97

Add:

Question 98

Decrease in Inventory

Answer 98

Add:

Question 99

§ Net Income: $12,000

Answer 99

CFO ( Strating Point of Indirect Method)

Question 100

Repayment of Bonds: $3,000

Answer 100

Repayment of Bonds is a financing activity and would not be included with operating activities

Question 101

Increase in Accounts Payable

Answer 101

Add:

Question 102

Dividends paid

Answer 102

CFF

Question 103

Increase in deferred taxes $5

Answer 103

CFO

Question 104

Depreciation Expense

Answer 104

NCT

Question 105

Decrease in inventory: $33

Answer 105

+ Inventory $33

Question 106

Preferred stock dividends of $10,000 were paid.

Answer 106

CFF

Question 107

Depreciation

Answer 107

Added to NI in Indirect Method

Question 108

Increase in inventory of $20.

Answer 108

and increase in inventory is a use of cash from operations

Question 109

Increase in accounts payable 300,000

Answer 109

Add Back to NI

Question 110

Cash received from customers

Answer 110

CFO

Question 111

Depreciation expense of $100.

Answer 111

Depreciation expense is a non-cash expense added back in computing cash from operations (+100),

Question 112

Increase in receivables

Answer 112

CFO ( to be Subtracted )

Question 113

Proceeds from Sale of Equipment

Answer 113

CFI

Question 114

Depreciation expense was $200,000.

Answer 114

Cash flow from operations (CFO) using the indirect method is computed by taking net income plus non-cash expenses (i.e. depreciation) less gains from the equipment sale.

Question 115

Cash payment of dividends $30

Answer 115

CFF

Question 116

How would a stock spilt be reported on the statement of cash flows ?

Answer 116

A stock split would not be reported on the statement of cash flows because it is a non cash event

Question 117

Depreciation: $65

Answer 117

+ Depreciation $65

Question 118

An analyst has gathered the following information about a company: Income Statement for the Year Sales $1,500 Expenses COGS $1,300 Depreciation 20 Goodwill 10 Int. Expenses 40 Total expenses 1,370 Income from cont. op. 130 Gain on sale 30 Income before tax 160 Income tax 64 Net Income $96 Additional Information: Dividends paid $30 Common stock sold 20 Equipment purchased 50 Bonds issued 80 Fixed asset sold for (original cost of $100 with accumulated depreciation of $70) 60 Accounts receivable decreased by 30 Inventory decreased by 20 Accounts payable increased by 20 Wages payable decreased by 10 What is the cash flow from financing?

Answer 118

A) $70. B) $110. C) $130. Dividends paid -$30 Sale of stock 20 Bonds issued 80 72 CFF $70 A

Question 119

The increase in short-term notes payable is a

Answer 119

Financing activity.

Question 120

Cash Received from Customers

Answer 120

CFO

Question 121

Sale of preferred stock $25

Answer 121

CFF

Question 122

Dividend Paid :- IFRS

Answer 122

CFO or CFF

Question 123

Purchase of Bonds

Answer 123

CFI

Question 124

Convereted Bonds Payable with a book value of $5million to 50000 shares of common stock with affair value of $6million

Answer 124

NCT

Question 125

Increase in accounts payable $20

Answer 125

CFO

Question 126

Taxes paid

Answer 126

CFO

Question 127

Interest expense on debt 5

Answer 127

CFO ( Substracted)

Question 128

Gain on sale of real estate +4

Answer 128

less gain on sale of real estate.

Question 129

Net income $25

Answer 129

CFO

Question 130

Amortization of Bond Discount

Answer 130

No Idea

Question 131

Purchase a patient fir $3.3 million cash

Answer 131

CFI

Question 132

Cash Collection

Answer 132

CFO (Revenue - Expenses)

Question 133

Increase in receivables

Answer 133

CFO (to be Substracted)

Question 134

Common stock was sold for $100,000.

Answer 134

CFF

Question 135

Net Income 27

Answer 135

Using the indirect method, cash flow from operations is net income

Question 136

Preferred stock (eight percent annual dividend) was sold at par value of $125,000.

Answer 136

CFF

Question 137

Paid dividends of $10 to shareholders.

Answer 137

The sale of stock and the dividends paid are financing cash flows that are not included in net income, so they do not require adjustment when calculating CFO.

Question 138

Cash Received from issuance of preferred stock

Answer 138

CFF

Question 139

§ Increase in Income taxes payable: $500

Answer 139

To be added back

Question 140

Cash flow from financing (CFF) is higher over the life of a bond if a firm issues the bond at a premium, compared to issuing the bond at par. True /False

Answer 140

True .When a company issues bonds at a premium, the proceeds raised at issuance (CFF inflow) are greater than the par value repaid at maturity (CFF outflow). For bonds issued at par, the CFF inflow at issuance is equal to the CFF outflow at maturity.

Question 141

Increase in accounts payable of $25.

Answer 141

Using the indirect method, the increase in accounts payable is a source of cash from operations (+25),

Question 142

§ Increase in Accounts Receivable: $2,000

Answer 142

To be substracted from NI

Question 143

Interest and Dividend Received :- US GAAP

Answer 143

CFO

Question 144

Common stock dividends of $25,000 were paid.

Answer 144

CFF

Question 145

Interest on Bank line of Credit

Answer 145

CFO

Question 146

Gain on Sale of Equipment

Answer 146

NCT

Question 147

Decrease in inventory

Answer 147

CFO ( To be added )

Question 148

Principal payments received from loans made to others.

Answer 148

CFI

Question 149

Increase in wages payable: $15

Answer 149

+ Wages Payable $15

Question 150

An increase in accounts receivable 20

Answer 150

CFO (To be Subtracted)

Question 151

Profit on sale of equipment $15

Answer 151

Profit on sale of equipment is a CFI item that must be removed from net income.

Question 152

Dividends declared and paid +4

Answer 152

CFF

Question 153

Repayment of debt 10

Answer 153

CFF

Question 154

Purchase of plant and equipment used in the manufacturing process with financing provided by the seller.

Answer 154

The purchase of plant and equipment with financing provided by the seller is a non-cash transaction. Non-cash transactions are disclosed separately in a note or supplementary schedule to the cash flow statement.

Question 155

Purchase of land $15

Answer 155

CFI

Question 156

A company that finances through common stock issues may have the same cash flow from financing (CFF) as a firm that issues debt. T/F

Answer 156

True. A company that issues common stock is not required to pay dividends (which would reduce cash flow from financing). Thus, it may have the same CFF as a firm that issues debt since interest paid on debt is a component of CFO

Question 157

A firm has net sales of $3,500, earnings after taxes (EAT) of $1,000, depreciation expense of $500, cost of goods sold (COGS) of $1,500, and cash taxes of $500. Also, inventory decreased by $100, and accounts receivable increased by $300. What is the firm's cash flow from operations

Answer 157

Indirect Method EAT +1,000 Depreciation +500 Change in Inv. + 100 a source Change in Accts. Rec. (300) a use CFO 1,300 Direct Method Net Sales +3,500 Change in Accts. Rec. (300) a use COGS (1,500) Cash Taxes (500) Change in Inv. +100 a source CFO 1,300

Question 158

Interest Paid :- IFRS

Answer 158

CFO or CFF