Cashflow Statements

Question #1
Determine the cash flow from financing given the following table.

Item Amoun
Cash payment of dividends t$30
Sale of equipment $10
Net income $25
Purchase of land $15
Increase in accounts payable
$20 Sale of preferred stock $25
Increase in deferred taxes $5
Profit on sale of equipment $15

A) $15.
B) $5.
C) $20.

Question #2

Darth Corporation's most recent income statement shows net sales of $6,000, and Darth's marginal tax rate is 40%.
The total expenses reported were $3,200, all of which were paid in cash. In addition, depreciation expense was
reported at $800. A further examination of the most recent balance sheets reveals that accounts receivable during
that period increased by $1,000. The cash flow from operating activities reported by Darth should be:

A) $1,000.

B) $2,200.

C) $1,200.

Question #3

An analyst contemplates using the indirect methods to create the projected statement of cash flows. She decides to
research the differences between the direct and indirect methods. Which of the following statements is most accurate?
Under the:

A) indirect method, changes in accounts receivable are already included in the net
income figure.
B) indirect method, depreciation must be added to net income, because it is a non-
cash expense.
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 C) direct method, depreciation must be added to cash collections because it is a
non cash expense.

Question #4

A firm has net sales of $3,500, earnings after taxes (EAT) of $1,000, depreciation expense of $500, cost of goods
sold (COGS) of $1,500, and cash taxes of $500. Also, inventory decreased by $100, and accounts receivable
increased by $300. What is the firm's cash flow from operations?

A) $1,300.

B) $1,200.

C) $1,800.

Question #5

To convert an indirect statement of cash flows to a direct basis, the analyst would:

A) reduce cost of goods sold by any decreases in inventory.

B) increase cost of goods sold by any depreciation that was included.

C) reduce cost of goods sold by any decreases in accounts payable.

Question #6

An examination of the cash receipts and payments of Xavier Corporation reveals

the following: Cash paid to suppliers for purchase of merchandise $5,000

Cash received from customers 14,000
Cash paid for purchase of equipment 22,000
Dividends paid 2,000
Cash received from issuance of preferred stock 10,000
Interest received on shortterm investments 1,000
Wages paid 4,000
Repayment of loan to the bank 5,000

Cash from sale of land 12,000

Under U.S. GAAP, Xavier's reported cash flow from operations will be:
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 A) $5,000.

B) $5,000.

C) $6,000.

Question #7

An analyst has gathered the following information about a company:

Income Statement for the Year 20X4

Sales $1,500
Expenses
COGS $1,300
Depreciation 30
Int. Expenses 40
Total expenses 1,370
Income from cont. op. 130
Gain on sale 30
Income before tax 160
Income tax 64
Net Income $96

Additional Information:
Dividends paid $30
Common stock sold 20
Equipment purchased 50
Bonds issued 80
Fixed asset sold for (original cost of $100 with accumulated depreciation of $70) 60
Accounts receivable decreased by 30
Inventory decreased by 20
Accounts payable increased by 20
Wages payable decreased by 10
What is the cash flow from operations?
A) $156.
B) $170.
C) $150.

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Question #8

Which of the following would NOT be a component of cash flow from investing?

A) Sale of land.

B) Purchase of equipment.

C) Dividends paid.

Question #9

Which of the following best describes a ratio that measures a firm's ability to acquire longterm assets with cash flows
from operations, and a performance ratio, respectively?

Acquire assets with CFO Performance ratio

A)
Reinvestment ratio Cashtoincome ratio
B)
Reinvestment ratio Debt payment ratio

C)
Investing and
Cashtoincome ratio
financing ratio

Question #10

Convenience Travel Corp.'s financial information for the year ended December 31, 20X4 included the following:

Property Plant & Equipment $15,000,000

Accumulated Depreciation 9,000,000

The only asset owned by Convenience Travel in 20X5 was a corporate jet airplane. The airplane was being depreciated
over a 15year period on a straightline basis at a rate of $1,000,000 per year. On December 31, 20X5 Convenience Travel
sold the airplane for $10,000,000 cash. Net income for the year ended December 31, 20X5 was $12,000,000. Based on
the above information, and ignoring taxes, what is cash flow from operations (CFO) for Convenience Travel for the year
ended December 31, 20X5?

A) $8,000,000.
B) $11,000,000.
C) $13,000,000.

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Question #11

When using the indirect method for computing cash flow from operating activities, a change in accounts payable will
require which of the following?

A) A positive (negative) adjustment to net income when accounts payable increases (decreases).

B) A negative (positive) adjustment to net income when accounts payable increases (decreases).

C) A negative adjustment to net income regardless of whether accounts payable

increases or decreases.

Question #12

Consider the following:

Argument #1:The indirect method presents a firm's operating cash receipts and payments
and is thus more consistent with the objectives of the cash flow statement.

Argument #2:The indirect method provides more information than the direct method and
is more useful to analysts in estimating future operating cash flows.

Which of these arguments support the use of the indirect method for presenting cash flow from operating activities in the
cash flow statement?

A) Argument #2 only.

B) Neither argument.

C) Argument #1 only.

Question #13

Capital Corp.'s activities in the year 20X5 included the following:

At the beginning of the year, Capital purchased a cargo plane from Aviation Partners for $10 million in exchange for
$2 million cash, $3 million in Capital Corp. bonds and $5 million in Capital Corp. preferred stock.
Interest of $150,000 was paid on the bonds, and dividends of $250,000 were paid on the preferred stock.
At the end of the year, the cargo plane was sold for $12,000,000 cash to Standard Company. Proceeds from the sale
were used to pay off the $3 million in bonds held by Aviation Partners.

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 On Capital Corp.'s U.S. GAAP statement of cash flows for the year ended December 31, 20X5, cash flow from
investments (CFI) related to the above activities is:

A) $6,750,000.
B) $10,000,000.
C) $9,750,000.

Question #14

Juniper Corp. has the following transactions in 20X5.

Juniper's equipment with a book value of $55,000 was sold for $85,000
cash. A parcel of land was purchased for $100,000 worth of Juniper
common stock. ABC company paid Juniper preferred dividends of
$40,000.
Juniper declared and paid a $100,000 cash dividend.

Under U.S. GAAP, what is cash flow from financing (CFF) for Juniper for 20X5?

A) −$100,000.
B) −$60,000.
C) −$115,000.

Question #15

Which of the following items is least appropriately described as a liability arising from an operating activity for a non-
financial company?

A) The current portion of longterm debt.

B) Trade payables.

C) Cash advances from customers.