TRUE or FALSE? (13 items at 0.30 points each = 3.90 possible points)

1.__T__ A company reports cash equivalents as an asset. The term "cash equivalents" has the same meaning as "cash."

2.____ If the cash flows from operating activities begins with "cash collected from customers," the indirect method is being applied.

3.____ When the direct method of reporting cash flows from operating activities is applied, depreciation expense is added to net income.

4.____ When the indirect method of reporting cash flows from operating activities is applied, a loss on the sale of equipment is added to net income.

5.____ The Walsingham Corporation reported rent expense of $75,000 this year. At the same time, prepaid rent increased by $9,000. The company paid $84,000 in rent this period.

6.____ The Trigger Company reported rent expense of $43,000 this year. At the same time, rent payable increases by $9,000. The company paid $52,000 in rent this period.

7.____ A company reports net income for the current year of $200,000. During that year, depreciation expense of $30,000 was reported as well as an $8,000 gain on the cash sale of a building. In addition, accounts receivable increased by $9,000. The net cash flows from operating activities for the period was $213,000.

8.____ A company reports cost of goods sold of $500,000. During that period, inventory fell by $34,000 while accounts payable rose by $9,000. The company paid $475,000 in cash this period for the purchase of merchandise.

9.____ Purchasing treasury stock is an example of a financing activity.

10.____ Significant investing and financing activities not involving cash still need to be disclosed.

11.____ During the current year, the Baxter Corporation paid $100,000 on a long-term note payable and $13,000 in related interest expense. According to U.S. GAAP, these two payments must be shown in separate sections of a statement of cash flows.

12.____ During the current year, the Frances Corporation paid $200,000 on a long-term note payable and $22,000 in related interest expense. According to IFRS, these two payments must be shown in separate sections of a statement of cash flows.

13.____ Equipment costing $320,000 but with accumulated depreciation of $240,000 was sold at a loss of $22,000. The company reports a cash inflow of $58,000 as a financing activity.

MULTIPLE CHOICE (12 questions at 0.50 points each = 6.00 possible points)

1.___A__ Where does cash that is collected from customers appear on a statement of cash flows?

a.Operating activities section

1. Investing activities section
2. Financing activities section
3. Capital activities section

2._____Fritz Corporation began the year with $900,000 in accounts receivable. During the year, sales revenue totaled $7,000,000. Fritz ended the year with $750,000 in accounts receivable. How much cash did Fritz collect from its customers during the year?

1. $6,850,000
2. $7,150,000
3. $7,750,000
4. $7,900,000

3._____The Willson Company pays off one of its bonds before it came due because interest rates have fallen rather significantly. Where does the cash paid to redeem a bond payable appear on a company's statement of cash flows?

1. Operating activities section
2. Investing activities section
3. Financing activities section
4. Capital activities section

4._____Which of the following is true about the reporting of cash flows from operating activities?

1. Most companies use the indirect method although FASB prefers the direct method.
2. Most companies use the indirect method because it is preferred by FASB.
3. Most companies use the direct method because it is preferred by FASB.
4. Most companies use the direct method, although FASB prefers the indirect method.

5._____During the current year, Rafael Corporation distributed dividends of $23,000, received cash by signing a note payable of $105,000, purchased a piece of equipment for $29,000 in cash, and received dividend income of $12,000. What is reported as Rafael's net cash inflow from financing activities for the year?

1. $53,000
2. $65,000
3. $82,000
4. $94,000

6._____Happy Toy Company began Year Nine with $1,000 in inventory and $4,500 in accounts payable. During the year, Happy Toy incurred cost of goods sold of $25,000. Happy Toy ended Year Nine with $2,700 in inventory and $3,800 in accounts payable. How much cash did Happy Toy pay for its merchandise purchases during Year Nine?

1. $22,600
2. $24,000
3. $26,000
4. $27,400

7._____Crystal Bell Company generated $48,900 in net income during the year. Included in this number are depreciation expense of $13,000 and a gain on the sale of equipment of $4,000. In addition, accounts receivable increased by $16,000, inventory decreased by $5,090, accounts payable decreased $4,330, and interest payable increased $1,200. Based on the above information, what is Crystal Bell's net cash inflow from operating activities?

1. $43,860
2. $48,900
3. $54,120
4. $71,940

8._____Transportation Inc. incurred rent expense of $98,000 during the year on a large warehouse. During that same period, prepaid rent increased by $34,000. How much cash did Transportation pay for rent during the year?

1. $34,000
2. $64,000
3. $98,000
4. $132,000

1. Skip

10._____Note: This Q is slightly modified from how it appears in the text.A building is bought on October 1, Year One, for $500,000 in cash. It is depreciated using the straight-line method over an expected life of twenty years. A residual value of $20,000 is anticipated. The half-year convention is applied. On April 1, Year Four, the building is sold for cash at a loss of $13,000 when the net book value of the building was $428,000.Which of the following appears on the company's Year Four statement of cash flows?

1. Investing activities cash inflow of $395,000
2. Investing activities cash inflow of $415,000
3. Investing activities cash inflow of $428,000
4. Investing activities cash inflow of $441,000

11._____The Hamster Company determines its cash flows from operating activities by the indirect method. Net income is reported for the current period as $400,000, which included depreciation expense of $70,000 and a gain on sale of land of $30,000. In addition, accounts receivable went down $2,000 during the year while accounts payable went up $7,000. What is the amount of cash generated by the Hamster Company's operating activities this year?

1. $431,000
2. $435,000
3. $445,000
4. $449,000

12._____

1. $291,000
2. $297,000
3. $303,000
4. $309,000

13._____Use the same information as presented in problem 12. Using the indirect method, how much cash did Karsenti generate this year from its operating activities?

1. $57,000
2. $65,000
3. $69,000
4. $71,000