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Posted on Jun 19, 2024

sure in Financial Reporting - Quiz Time Remaining: 1. (TCO F) Which of the following would not be disclosed within a statement of cash flow?

sure in Financial Reporting - Quiz Time Remaining: 1. (TCO F) Which of the following would not be disclosed within a statement of cash flow? (Points : 5) Stock dividends declared Cash dividends paid Capital stock issued greater than par value Purchase and retirement of treasury stock on same day 2. (TCO F) Which of the following is not true? (Points : 5) The statement of cash flow provides information to help investors and creditors assess the cash and noncash investing and financing transactions during the period. A company can convert net income to net cash flow utilizing either the direct or indirect method. When prepaid expenses decrease during a period, expenses on the accrual basis are lower than on the cash basis. When the accounts receivable balance decreases, cash basis revenues are higher than accrual basis revenues. 3. (TCO F) Glitter Girl, Inc. recognized net income of $136,000 including $24,000 in depreciation expense. Additional changes from the balance sheet are as follows. Accounts Receivable $3,000 decrease Prepaid Expenses $14,500 decrease Inventory $9,000 increase Accrued Liabilities $10,000 decrease Accounts Payable $19,500 increase Compute the net cash from operating activities based on the above information. (Points : 5) $178,000 $164,500 $96,500 $94,500 4. (TCO F) Big Dog Builder's, Inc. shows the following as of December 31, 2012. Acquired 50% of Kitty Corp's common stock for $225,000 cash which was borrowed from Mouse's Bank. Sold available for sales securities for $852,000 Issued 1,000 of its 12% debenture bonds, due 2017, for $350,000 cash Paid $160,000 toward bank loan. Recognized $66,000 net increase in returnable long term customer deposits Issued 2,000 shares of its preferred stock for land having a fair value of $500,000 Purchased a patent for $140,000 cash Big Dog's net cash provided by investing activities for 2012 is (Points : 5) $487,000. $127,000. $627,000. $352,000. 5. (TCO F) Big Dog Builder's, Inc. shows the following as of December 31, 2012. Acquired 50% of Kitty Corp's common stock for $225,000 cash which was borrowed from Mouse's Bank. Sold available for sales securities for $852,000 Issued 1,000 of its 12% debenture bonds, due 2017, for $350,000 cash Paid $160,000 toward bank loan. Recognized $66,000 net increase in returnable long term customer deposits Issued 2,000 shares of its preferred stock for land having a fair value of $500,000 Purchased a patent for $140,000 cash Big Dog's net cash provided by financing activities for 2012 is (Points : 5) $481,000. $415,000. $641,000. $575,000. 6. (TCO F) Cash flows from operating activities (indirect and direct methods). Presented below is the income statement of Smiling Tiger, Inc. Sales Cost of goods sold Gross profit Operating expenses Income before income taxes Income taxes Net income $1,020,000 640,000 $380,000 230,000 150,000 60,000 $90,000 In addition, the following information related to net changes in working capital is presented. Cash Accounts receivable Inventories Salaries payable (operating expenses) Accounts payable Income taxes payable Depreciation expense for the year was $54,000 Deferred tax liability account increased $6,500 Required: Debit $50,000 34,500 60,000 12,000 Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows: (a) (b) (Points : 15) using the indirect method. using the direct method. 1. (TCO F) Which of the following would not be disclosed within a statement of cash flow? (Points : 5) Stock dividends declared Cash dividends paid Capital stock issued greater than par value Purchase and retirement of treasury stock on same day Solution: Stock Dividend Declared would not be disclosed within a statement of cash flow Cash dividends paid is financing activity Capital stock issued greater than par value is financing activity Purchase and retirement of treasury stock on same day is financing activity 2. (TCO F) Which of the following is not true? (Points : 5) The statement of cash flow provides information to help investors and creditors assess the cash and noncash investing and financing transactions during the period. A company can convert net income to net cash flow utilizing either the direct or indirect method. When prepaid expenses decrease during a period, expenses on the accrual basis are lower than on the cash basis. When the accounts receivable balance decreases, cash basis revenues are higher than accrual basis revenues. Solution: When prepaid expenses decrease during a period, expenses on the accrual basis are lower than on the cash basis is not true. The remaining three are true 3. (TCO F) Glitter Girl, Inc. recognized net income of $136,000 including $24,000 in depreciation expense. Additional changes from the balance sheet are as follows. Accounts Receivable $3,000 decrease Prepaid Expenses $14,500 decrease Inventory $9,000 increase Accrued Liabilities $10,000 decrease Accounts Payable $19,500 increase Compute the net cash from operating activities based on the above information. (Points : 5) Solution: Net Cash from operating activities Net Income Add: Depreciation Accounts Receivable Prepaid expenses Inventory Accrued Liabilities Accounts Payable Net Cash from operating activities 136,000 24,000 3,000 14,500 (9,000) (10,000) 19,500 178,000 Net Cash from operating activities is $178,000 4. (TCO F) Big Dog Builder's, Inc. shows the following as of December 31, 2012. - Acquired 50% of Kitty Corp's common stock for $225,000 cash which was borrowed from Mouse's Bank. - Sold available for sales securities for $852,000 - Issued 1,000 of its 12% debenture bonds, due 2017, for $350,000 cash - Paid $160,000 toward bank loan. - Recognized $66,000 net increase in returnable long term customer deposits - Issued 2,000 shares of its preferred stock for land having a fair value of $500,000 - Purchased a patent for $140,000 cash Big Dog's net cash provided by investing activities for 2012 is (Points : 5) Solution: Net Cash provided by investing activities Proceeds from sale of available for sale securities Patent purchase Acquisitions - 50% Kitty Corporation Net Cash provided by investing activities 852,000 (140,000) (225,000) 487,000 Net cash provided by investing activities for 2012 is $487,000 5. (TCO F) Big Dog Builder's, Inc. shows the following as of December 31, 2012. - Acquired 50% of Kitty Corp's common stock for $225,000 cash which was borrowed from Mouse's Bank. - Sold available for sales securities for $852,000 - Issued 1,000 of its 12% debenture bonds, due 2017, for $350,000 cash - Paid $160,000 toward bank loan. - Recognized $66,000 net increase in returnable long term customer deposits - Issued 2,000 shares of its preferred stock for land having a fair value of $500,000 - Purchased a patent for $140,000 cash Big Dog's net cash provided by financing activities for 2012 is (Points : 5) Solution: Net Cash provided by financing activities Borrowed from Mouse's Bank 225,000 Debenture bonds - proceeds 350,000 Payment towards bank loan (160,000) Net Increase in returnable long term customer deposits 66,000 Net Cash provided by financing activities 481,000 Net Cash provided by financing activities is $481,000 6. (TCO F) Cash flows from operating activities (indirect and direct methods). Presented below is the income statement of Smiling Tiger, Inc. Sales $1,020,000 Cost of goods sold 640,000 Gross profit $380,000 Operating expenses 230,000 Income before income taxes 150,000 Income taxes 60,000 Net income $90,000 In addition, the following information related to net changes in working capital is presented. Debit Credit Cash $50,000 Accounts receivable 34,500 Inventories $25,000 Salaries payable (operating expenses) 60,000 Accounts payable 450,000 Income taxes payable 12,000 Depreciation expense for the year was $54,000 Deferred tax liability account increased $6,500 Required: Prepare a schedule computing the net cash flow from operating activities that would be shown on a statement of cash flows: (a) using the indirect method. (b) using the direct method. Solution: Tiger Inc Statement of cash flow (Partial) (Indirect Method) Cash flow from operting activities Net Income Adjustments to reconcile net income to net cash provided by operating activities Increase in accounts receivable Decrease in inventories Decrease in salaries payable Increase in accounts payable Decrease in income taxes payable Depreciation expense Increase in deferred tax liability net cash provided by operating activities (34,500) 25,000 (60,000) 450,000 (12,000) 54,000 6,500 519,000 Tiger Inc Statement of cash flow (Partial) (Direct Method) Cash flow from operting activities Cash received from customers Cash paid to suppliers Operating expenses paid Taxes paid net cash provided by operating activities 985,500 (165,000) (236,000) (65,500) 519,000 90,000