Statement of Cash Flow Paper 5

1

Selected financial information for Kristina Company for the year just ended is shown below.
Net income.................................... $2,000,000
Increase in net accounts receivable ......300,000
Decrease in inventory .......................100,000
Increase in accounts payable............... 200,000
Depreciation expense......................... 400,000
Gain on the sale of available-for-sale securities ......................................................700,000
Cash receivable from the issue of common stock .........................................................800,000
Cash paid for dividends ......................80,000
Cash paid for the acquisition of land ...1,500,000
Cash received from the sale of available-for-sale securities ........................................2,800,000
Assuming the indirect method is used, Kristina’s cash flow from operating activities for the year is






2

At December 31, year 1, Kale Co. had the following balances in the accounts it maintains at First State Bank:
Checking account #101 $175,000
Checking account #201 (10,000)
Money market account 25,000
90-day certificate of deposit, due 2/28/Y2 50,000
180-day certificate of deposit, due 3/15/Y2 80,000
Kale classifies investments with original maturities of three months or less as cash equivalents. In its December 31, year 1 balance sheet, what amount should Kale report as cash and cash equivalents?






3

The primary purpose of a statement of cash flows is to provide relevant information about






4

Mend Co. purchased a three-month US Treasury bill. Mend’s policy is to treat as cash equivalents all highly liquid investments with an original maturity of three months or less when purchased. How should this purchase be reported in Mend’s statement of cash flows?






5

Alp, Inc. had the following activities during year 1:
• Acquired 2,000 shares of stock in Maybel, Inc. for $26,000. Alp intends to hold the stock as a long-term investment.
• Sold an investment in Rate Motors for $35,000 when the carrying value was $33,000.
• Acquired a $50,000, four-year certificate of deposit from a bank. (During the year, interest of $3,750 was paid to Alp.)
• Collected dividends of $1,200 on stock investments.
In Alp’s year 1 statement of cash flows, net cash used in investing activities should be






6

In a statement of cash flows, if used equipment is sold at a gain, the amount shown as a cash inflow from investing activities equals the carrying amount of the equipment






7

On September 1, year 1, Canary Co. sold used equipment for a cash amount equaling its carrying amount for both book and tax purposes. On September 15, year 1, Canary replaced the equipment by paying cash and signing a note payable for new equipment. The cash paid for the new equipment exceeded the cash received for the old equipment. How should these equipment transactions be reported in Canary’s year 1 statement of cash flows?






8

A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance. In a statement of cash flows, what amount is included in investing activities for the above transaction?






9

A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance. In a statement of cash flows, what amount is included in financing activities for the above transaction?






10

On July 1, year 1, Dewey Co. signed a twenty-year building lease that it reported as a capital lease. Dewey paid the monthly lease payments when due. How should Dewey report the effect of the lease payments in the financing activities section of its year 1 statement of cash flows?






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