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Question;Under;the direct method of determining net cash provided by operating activities on;the statement of cash flows, the net income figure is adjusted for changes in;current assets and liabilities.;True;False;Bennett Company reported sales on its income statement last year;of $420,000. On the company's statement of cash flows, sales adjusted to a;cash basis were $412,000. (The company uses the direct method to determine;the net cash provided by operating activities.) Bennett Company reported the following;account balances on its comparative balance sheet;Ending;Balance;Beginning;Balance;Accounts;receivable;$45,000;?;Prepaid;expenses;$38,000;$35,000;Inventory;$45,000;$50,000;Based;on this information, the beginning accounts receivable balance was;$37,000;$42,000;$53,000;$39,000;Last year Lawsby Company reported sales of $330,000 on its;income statement. During the year, accounts receivable increased by $34,000;and accounts payable increased by $39,000. The company uses the direct method;to determine the net cash provided by operating activities on the statement;of cash flows. The sales revenue adjusted to a cash basis for the year would;be;$325,000;$335,000;$296,000;$291,000;If;accounts receivable increase during a period, then the amount of cash collected;from customers will be greater than the amount of sales reported on the income;statement for the period.;True;False;Under;the direct method of determining the net cash provided by operating activities;on the statement of cash flows, an increase in income taxes payable would be;subtracted from income tax expense to convert income tax expense to a cash;basis.;True;False;Kelln Corporation's;most recent comparative balance sheet and income statement appear below;Kelln Corporation;Comparative Balance Sheet;Ending;Balance;Beginning;Balance;Assets;Cash;and cash equivalents;$37;$35;Accounts;receivable;85;75;Inventory;64;77;Property;plant and equipment;898;760;Less;accumulated depreciation;331;285;Total;assets;$753;$662;Liabilities;and stockholders' equity;Accounts;payable;$84;$50;Bonds;payable;463;500;Common;stock;30;10;Retained;earnings;176;102;Total;liabilities and stockholders' equity;$753;$662;Income Statement;Sales;$750;Cost;of goods sold;450;Gross;margin;300;Selling;and administrative expense;161;Net;operating income;139;Income;taxes;49;Net;income;$90;The company paid a;cash dividend and it did not dispose of any property, plant, and equipment.;The company did not issue any bonds payable or repurchase any of its own;common stock. The company uses the direct method to determine the net cash;provided by operating activities.;The;net cash provided by (used in) operating activities for the year was;$83;$173;$7;$139;Free;cash flow is net cash provided by operating activities less dividends.;True;False;Under;the direct method of determining the net cash provided by operating activities;on the statement of cash flows, an increase in accounts payable would be added;to cost of goods sold to convert cost of goods sold to a cash basis.;True;False;Last year Burford Company's cash account decreased by $29,000.;Net cash used in investing activities was $8,400. Net cash provided by;financing activities was $26,500. On the statement of cash flows, the net;cash flow provided by (used in) operating activities was;$(47,100);$(29,000);$(10,900);$18,100;The;change in the cash balance must equal the changes in all other balance sheet;accounts besides cash.;True;False;A newly;formed company with enormous growth prospects would be expected to have;negative free cash flow during its start-up phase.;True;False;A;company can increase its net cash flow by increasing the depreciation expense;it records during the period.;True;False;Negative;free cash flow suggests that the company did not generate enough cash flow from;its operating activities to fund its capital expenditures and dividend;payments.;True;False;A gain;on the sale of equipment would be included as part of a company's financing;activities on the statement of cash flows.;True;False;Last year Cumber Company reported a cost of goods sold of;$74,000. Inventories decreased by $16,000 during the year, and accounts;payable increased by $14,000. The company uses the direct method to determine;the net cash provided by operating activities on the statement of cash flows.;The cost of goods sold adjusted to a cash basis would be;$60,000;$104,000;$44,000;$58,000;The changes in Tener;Company's balance sheet account balances for last year appear below;Increases;(Decreases);Asset;and Contra-Asset Accounts;Cash;$(8,000);Accounts;receivable;$(5,000);Inventory;$0;Prepaid;expenses;$12,000;Long-term;investments;$42,000;Property;plant and equipment;$17,000;Accumulated;depreciation;$57,000;Liability;and Equity Accounts;Accounts;payable;$5,000;Accrued;liabilities;$(15,000);Income;taxes payable;$16,000;Bonds;payable;$(20,000);Common;stock;$13,000;Retained;earnings;$13,550;The company's income;statement for the year appears below;Income Statement;Sales;$770,000;Cost;of goods sold;460,000;Gross;margin;310,000;Selling;and administrative expenses;263,000;Net;operating income;47,000;Income;taxes;16,450;Net;income;$30,550;The company declared and paid $17,000 in cash dividends during;the year. It did not dispose of any property, plant, and equipment during the;year. The company uses the direct method to determine the net cash provided;by operating activities.;On;the statement of cash flows, the cost of goods sold adjusted to a cash basis;would be;$465,000;$450,000;$460,000;$455,000;Kelln;Corporation's most recent comparative balance sheet and income statement;appear below;Kelln Corporation;Comparative Balance Sheet;Ending;Balance;Beginning;Balance;Assets;Cash;and cash equivalents;$41;$39;Accounts;receivable;95;79;Inventory;72;81;Property;plant and equipment;958;800;Less;accumulated depreciation;339;289;Total;assets;$827;$710;Liabilities;and stockholders' equity;Accounts;payable;$97;$54;Bonds;payable;499;540;Common;stock;69;45;Retained;earnings;162;71;Total;liabilities and stockholders' equity;$827;$710;Income Statement;Sales;$790;Cost;of goods sold;470;Gross;margin;320;Selling;and administrative expenses;155;Net;operating income;165;Income;taxes;58;Net;income;$107;The company paid a;cash dividend and it did not dispose of any property, plant, and equipment.;The company did not issue any bonds payable or repurchase any of its own;common stock.;The;net cash provided by (used in) investing activities for the year was;$108;$158;$(158);$(108);A;company can have a net loss and still generate a positive net cash provided;by operating activities in its statement of cash flows.;True;False;Cridman Company's selling and administrative expenses for last;year totaled $310,000. During the year the company's prepaid expense;account balance decreased by $27,000 and accrued liabilities increased by;$30,000. Depreciation for the year was $31,000. Based on this information;selling and administrative expenses adjusted to a cash basis under the;direct method on the statement of cash flows would be;$398,000;$336,000;$284,000;$222,000;Under;the indirect method of determining the net cash provided by operating;activities on the statement of cash flows, a decrease in accounts receivable;is added to net income.;True;False;The;investing and financing sections of the statement of cash flows record net;cash flows rather than gross cash flows.;True;False;Free;cash flow increases when a company issues common stock for cash.;True;False;Kelln;Corporation's most recent comparative balance sheet and income statement;appear below;Kelln Corporation;Comparative Balance Sheet;Ending;Balance;Beginning;Balance;Assets;Cash;and cash equivalents;$41;$39;Accounts;receivable;95;79;Inventory;72;81;Property;plant and equipment;958;800;Less;accumulated depreciation;339;289;Total;assets;$827;$710;Liabilities;and stockholders' equity;Accounts;payable;$97;$54;Bonds;payable;499;540;Common;stock;69;45;Retained;earnings;162;71;Total;liabilities and stockholders' equity;$827;$710;Income Statement;Sales;$790;Cost;of goods sold;470;Gross;margin;320;Selling;and administrative expense;155;Net;operating income;165;Income;taxes;58;Net;income;$107;The company paid a;cash dividend and it did not dispose of any property, plant, and equipment.;The company did not issue any bonds payable or repurchase any of its own;common stock.;The;net cash provided by (used in) financing activities for the year was;$(16);$(41);$(33);$24;Baldock;Corporation's balance sheet and income statement appear below;Baldock Corporation;Comparative Balance Sheet;Ending;Balance;Beginning;Balance;Asset;Cash;and cash equivalents;$43;$38;Accounts;receivable;34;29;Inventory;46;57;Property;plant and equipment;445;330;Less;accumulated depreciation;211;189;Total;assets;$357;$265;Liabilities;and stockholders' equity;Accounts;payable;$66;$58;Accrued;liabilities;22;15;Income;taxes payable;38;33;Bonds;payable;31;35;Common;stock;49;40;Retained;earnings;151;84;Total;liabilities and stockholders' equity;$357;$265;Income Statement;Sales;$756;Cost;of goods sold;473;Gross;margin;283;Selling;and administrative expenses;166;Net;operating income;117;Gain;on sale of plant and equipment;16;Income;before taxes;133;Income;taxes;48;Net;income;$85;Cash dividends were $18. The company sold equipment for $16;that was originally purchased for $12 and that had accumulated depreciation;of $12. The company uses the direct method to determine the net cash;provided by operating activities. The net cash provided by (used in);operating activities for the year was;$151;$129;$147;$117

 

Paper#42654 | Written in 18-Jul-2015

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