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##### Accounting quiz

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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#42927 | Written in 18-Jul-2015

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