Chapter 15 Quiz

Question 1

When preparing a statement of cash flows (indirect method), a decrease in ending accounts payable versus beginning accounts payable will result in an adjustment to reported net income because:

A) Payment of accounts payable is a financing activity.
B) Cash payments for expenses recorded last year have not reduced this year’s net income.
C) Cash received from sales is greater than revenues recorded.
D) Payables relate to expenses not yet paid so the entire ending accounts payable balance must be added.

Answer 1

Cash payments for expenses recorded last year have not reduced this year’s net income.

Question 2

Beacham Corporation’s net cash provided by operating activities was $115; its net income was $95; its capital expenditures were $65; and its cash dividends were $17. The company’s free cash flow was:

A) $292
B) $13
C) $33
D) $128

Answer 2

$33

Question 3

Which of the following would be considered a cash inflow in the financing activities section of the statement of cash flows?

A) Receiving cash from customers.
B) Collection of a loan made to another company.
C) Sale of equipment.
D) Issuing bonds payable.

Answer 3

Issuing bonds payable.

Question 4

The following events occurred last year at Dorder Corporation:

Purchase of plant and equipment for $45,000
Sale of long-term investment for $24,000
Dividends received on long-term investments for $9,000
Paid off bonds payable for $12,000
Depreciation expense for $32,000

Based on the above information, the net cash provided by (used in) investing activities for the year on the statement of cash flows would be:

A) $(69,000)
B) $(32,000)
C) $(21,000)
D) $(12,000)

Answer 4

$(21,000)

Question 5

Birchett Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet
(Ending Balance; Beginning Balance)
Assets:
Current assets:
Cash & cash Equiv.: ($27; $26)
Accounts Receivable: (65; 59)
Inventory: (49; 55)
Total Current Assets: (141; 140)
PPE: (533; 490)
Less Accum Dep: (234; 231)
Net PPE: (299; 259)
Total Assets: ($440; $399)

Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts Payable: ($28; $26)
Total Current Liabilities: (28; 26)
Bonds Payable: (169; 200)
Total Liabilities: (197; 226)

Stockholders’ Equity:
Common Stock: (71; 70)
Retained Earnings: (172; 103)
Total SE: (243; 173)
Total Liabilities & SE: ($440; $399)

The company’s net income for the year was $91 and it did not sell or retire any property, plant, and equipment during the year. Cash dividends declared and paid were $22. The net cash provided by (used in) operating activities for the year was:

A) $96
B) $86
C) $5
D) $130

Answer 5

$96

Question 6

Kuma, Inc. had cost of goods sold of $106,000 for the just completed year. Shown below are the beginning and ending balances of various Kuma accounts:

(Ending, Beginning)
Cash & Cash Equiv: ($59,000; $45,000)
Accounts Receivable: ($75,000; $81,000)
Inventory: ($36,000; $42,000)
Accounts Payable: ($18,000; $14,000)
Retained Earnings: ($79,000; $64,000)

Kuma prepares its statement of cash flows using the direct method. On its statement of cash flows, what amount should Kuma show for its cost of goods sold adjusted to a cash basis (i.e., cash paid to suppliers)?

A) $102,000
B) $116,000
C) $96,000
D) $100,000

Answer 6

$96,000

Question 7

Wister Corporation had sales of $462,000 for the just completed year. Shown below are the beginning and ending balances of various Wister accounts:

(Ending; Beginning)
Cash & Cash Equiv: ($105,000; $132,000)
Accounts Receivable: ($168,000; $142,000)
Inventory: ($472,000; $536,000)
Accounts Payable: ($74,000; $91,000)
Retained Earnings: ($364,000; $292,000)

Wister prepares its statement of cash flows using the direct method. On its statement of cash flows, what amount should Wister show for its sales adjusted to a cash basis (i.e., cash received from sales)?

A) $462,000
B) $488,000
C) $436,000
D) $445,000

Answer 7

$436,000