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Exam 11: Statement of Cash Flows

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Question 41

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Which of the following is not true regarding cash flows?

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Question 42

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When preparing a statement of cash flows using the indirect method,a decrease in accounts payable is subtracted from net income.

A) True
B) False

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Question 43

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Data Solutions reports operating expenses of $5 million.Operating expenses include rent expense.Prepaid rent at the beginning and end of the year are $120,000 and $80,000,respectively.All other operating expenses were paid in cash as incurred.What is the amount of cash paid for operating expenses?

We report the purchase of stock in another corporation as a cash outflow from investing activities.

A company's Income Tax Payable account decreased from $14 million to $12 million during the year.If its income tax expense was $80 million,what would be shown as cash paid for income taxes under the direct method?

Under the indirect method,an increase in prepaid rent is added to net income to arrive at net cash flows from operating activities.

We add an increase in interest payable to interest expense in arriving at cash paid for interest under the direct method.

Rachel's Recordings reported net income of $200,000.Beginning balances in Accounts Receivable and Accounts Payable were $15,000 and $20,000,respectively.Ending balances in these accounts were $12,000 and $22,000,respectively.Assuming that all relevant information has been presented,Rachel's cash flows from operating activities would be:

Which of the following is correct about the statement of cash flows?

Discount Computers' accounts receivable increases during the year by $3 million.What is the amount of cash received from customers during the reporting period if its sales are $47 million?

We report interest paid on bonds or notes payable with operating activities rather than financing activities.

Portions of the financial statements for Horizon Telecom are provided below. Prepare the operating activities section of the statement of cash flows for Horizon Telecom using the direct method.

The balance sheet of Sound Designs reports total assets of $750,000 and $800,000 at the beginning and end of the year,respectively.Sales revenues are $1.5 million ($1.2 million in the previous year) ,net income is $150,000,and net cash flows from operating activities are $175,000.What is Sound Designs' cash flow to sales?

Highland Park Homes reports net income of $300,000,and yet its net cash flow from operating activities is a negative $200,000 during the same period.Is this possible? Explain.

During the year, Next Tec Corp. had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for financing cash flows on the Statement of Cash Flows?

Fidelity Systems reports net income of $80 million.Included in that number is depreciation expense of $8 million,and a gain on the sale of equipment of $1 million.Records reveal increases in Accounts Receivable,Inventory,and Accounts Payable of $4 million,$3 million,and $2 million,respectively.Calculate Fidelity's net cash flows from operating activities using the indirect method.

Which of the following is NOT a correct practice when adjusting net income to net operating cash flows?

Portions of the financial statements for Horizon Telecom are provided below. Prepare the operating activities section of the statement of cash flows for Horizon Telecom using the indirect method.

The total of the cash flows from operating,investing,and financing activities equals the net increase or decrease in cash for the year.

The following information pertains to Alpha Computing at the end of 2015: Alpha Computing's Retained Earnings account had a zero balance at the beginning of 2015.What amount of dividends did the company pay in 2015? Alpha Computing’s Retained Earnings account had a zero balance at the beginning of 2015. What amount of dividends did the company pay in 2015?