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Exam 13: Statement of Cash Flows

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Question 31

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Cigna Corporation's 2015 net income is smaller than net cash flow from operating activities.Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?

A) Cigna paid dividends to shareholders during 2015.
B) Cigna's accounts payable increased during 2015.
C) Cigna recognized depreciation expense in 2015.
D) Cigna sold equipment at a loss in 2015.

E) All of the above
F) A) and B)

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Question 32

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During the current year,Atkins,Inc.sold a parcel of land for $840,000 cash.The land had been purchased by Atkins several years ago for $410,000.Atkins,Inc.uses the indirect method to prepare its statement of cash flows.In order to reconcile net income to net cash flow from operating activities,net income must be:

A) Decreased by $410,000.
B) Decreased by $430,000.
C) Increased by $430,000.
D) Not adjusted because the sale of land is classified as an investing activity.

E) C) and D)
F) A) and C)

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Question 33

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In a statement of cash flows,collections of accounts receivable are classified as:

Accounting terminology Listed below are eight technical accounting terms introduced in this chapter: Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ____ (a)Cash sales and collections of accounts receivable. ____ (b)The classification of cash flows which includes issuing capital stock and paying dividends. ____ (c)The financial statement which best describes the profitability of a business. ____ (d)The section of a statement of cash flows summarizing the cash effects of most transactions entering into the determination of net income. ____ (e)An expense that reduces net cash flow but does not reduce net income. ____ (f)The classification of cash flows that includes purchases and sales of plant assets. ____ (g)Transactions shown in a supplementary schedule accompanying a statement of cash flows.

Cash flows from operating activities include all of the following except:

Net cash flows from operating activities will have the same total no matter which method is used,direct or indirect.

Craig Corporation's reported net income for 2015 is less than its net cash flow from operating activities.One reason for this could be:

Place an X in the column signifying whether the activity is an operating,investing,or a financing activity,and if it is a source or a use of funds or if it is a non-cash activity.

Peak pricing charges:

Hines Cannery issued capital stock in 2015 for $700,000.During 2015 the company paid dividends of $250,000.What is the effect of these events in Hines' statement of cash flows for 2015?

The statement of cash flows of Bosley Corporation shows the amount of cash received from customers as $720,000.If net sales in Bosley Corporation's income statement are reported at $670,000 then:

The comparative balance sheets of Apollo Rocket,Inc.show a net increase in inventory of $79,000 and a net decrease in accounts payable of $42,000 during 2015.In computing net cash flow from operating activities under the indirect method,net income for 2015 should be:

Hamilton Company reported an increase of $370,000 in its accounts receivable during the year 2015.The company's statement of cash flows for 2015 reported $1 million of cash received from customers.What amount of net sales must Hamilton have recorded in 2015?

Significance of cash flows In the long run,is it more important for a business to have a positive cash flow from its operating activities,investing activities,or financing activities? Why?

Classification of cash flows Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year.Use the following code: O = operating activities,I = investing activities,and F = financing activities Assume this company uses the direct method.If the event does not involve a cash flow that should be included in the statement of cash flows,use an X. ____ (a)Declared a dividend to be paid early next year. ____ (b)Recorded depreciation expense for the current year. ____ (c)At year-end,paid rent in advance for the next six months. ____ (d)Issued capital stock for cash; management plans to use this cash to invest in marketable securities. ____ (e)Sold a parcel of unused land at a loss. ____ (f)Collected principal amount due on a note receivable. ____ (g)Used the cash received in d,above,to purchase marketable securities. ____ (h)Collected interest due on note receivable described in f,above. ____ (i)Made an adjusting entry to accrue interest payable at year-end. ____ (j)Collected account receivable from a customer who made a large credit purchase in a prior period.

Which of the following is an investing activity?

A cash dividend paid to shareholders is reported on the:

Whether one uses the direct or the indirect method of presentation of the statement of cash flows,the totals from each of the three sections (activities)will be the same regardless of the method used.

Alexander Company reported an increase of $185,000 in its accounts receivable during the year.The company's statement of cash flows reported $500,000 of cash received from customers.What amount of net sales must Alexander have recorded?

Chapin Company reported net income of $410,000 for 2015.Balances of selected current asset and current liability accounts are as shown on the indicated dates: Depreciation expense for 2015 amounted to $65,000.Using only the above information,compute Chapin's net cash flow from operating activities (indirect method) for 2015: