MT 2

Question 1

What are the three types of activities on the cash flow statement/ statement of cash flows?

Answer 1

Operating
Investing
Financing

Question 2

What are the first three lines of a statement of cash flows?

Answer 2

Company name
Statement of Cash flows
For the period ended XXX

Question 3

Layout of cash flow statement? (not the last three lines)

Answer 3

Operating activates
Cash provided by (used in) operating activates
Investing activates
Cash provided by (used in) investing activates
financing activates
Cash provided by (used in) financing activates

Question 4

Last three lines of statement of cash flows

Answer 4

Net change in cash
Cash balance, beginning
Cash balance, end

Question 5

Difference between direct method and indirect method

Answer 5

Direct follows income statement order of items
Indirect starts with net income and back out all non-cash amounts and accruals

Question 6

Calculating cash from customers

Answer 6

=net sales+ A/R beg - A/R end - unearned rev beg + unearned rev end

Question 7

Calculating cash from suppliers

Answer 7

= - COGS + beg inv - end inv - A/P beg + A/p end

Question 8

Calculating cash paid to employees

Answer 8

= - salaries expense - salaries payable beg + salaries payable end

Question 9

Calculating cash paid in operating expenses

Answer 9

= - operating expenses (not depreciation) +
prepaid expenses beg – prepaid expenses
end

Question 10

Calculating cash paid for interest

Answer 10

= -interest expense - interest payable beg + interest payable end

Question 11

Calculating cash paid for income tax

Answer 11

= -income tax expense - income tax payable beg + income tax payable end

Question 12

Indirect cash flow methodology

Answer 12

Net income
+/- Income statement adjustments
Add back losses and expenses
Deduct gains
+/- Working capital adjustments
Add back decreases in assets
Deduct increases in assets
Add back increases in Liabilities
Deduct decreases in Liabilities

Question 13

How to calculate A/R

Answer 13

A/R gross
Less: Allowance for doubtful accounts

=A/R Net

Question 14

What is the rational/ how does AFDA work?

Answer 14

calculate ending balance, then prepare journal entry to make Allowance equal to our calculated balance

Question 15

A/R Turnover formula

Answer 15

AR Turnover = Sales / (AR LT + AR TY)/2

Question 16

Days in A/R Formula

Answer 16

Days in A/R = 356/AR turnover

Question 17

How to calculate COGS in periodic inventory systems

Answer 17

Beginning inventory
Plus: Purchases
Cost of Goods Available for Sale
Less: Ending inventory
Cost of Goods Sold

Question 18

Inventory turnover ration

Answer 18

=COGS / (𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 + 𝑝𝑟𝑖𝑜𝑟 𝑝𝑒𝑟𝑖𝑜𝑑 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦)⁄2

Question 19

Average days in inventory equation

Answer 19

𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑑𝑎𝑦𝑠 𝑖𝑛 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 = 365 𝑑𝑎𝑦𝑠/
𝐼𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦 𝑡𝑢𝑟𝑛𝑜𝑣𝑒r

Question 20

In a period of rising costs what method will have higher COGS and which account will have higher inventory

Answer 20

in a period of rising costs average weighted will result in higher costs of goods sold while FIFO will result in higher inventory value

Question 21

Who pays for shipping in FOB Shipping Point?

Answer 21

Receiver is responsible for the shipped item as soon as it leaves suppliers hands

Question 22

Who pays for shipping in FOB destination?

Answer 22

Supplier is responsible for goods transit until it gets to the receiver