ACC 312 Study Guide - Midterm Guide: Cash Flow, Current Asset, Negative Number

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greenwalrus59

1 Dec 2017

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Cash flow from investing activities: an investment (see chapter 4) can be understood simply as the acquisition of an asset for the purpose of increasing future financial return or benefits. The exception to this is marketable securities, which is a current asset that belongs in investing activities. Cash flow from financing activities: the third and final of the three cash inflow and outflow activity summaries that make up a complete scf relates to the financing activities of a business. Sources of funds are shown as a positive number on the statement of cash flows and uses of funds are shown as a negative number of the statement of cash flows. In general, the sources and uses of funds needed for cash flow from financing activities come from long-term debt and equity. The exception to this is notes payable (short-term debt), which is a current liability that belongs in financing activities.

Related Questions

Erroneous Statement of Cash Flows

Ryan Company's bookkeeper prepared the following 2016 statement of cash flows:

Flows of Cash Statement December 31, 2016
Sources (Inflows) of Cash
Net Source from Operations
Net income	$47,800
Add: Cash receipt from sale of land	6,500
Inflow from issuing 10% bonds payable	25,000
Depreciation expense	13,200
Reduction in inventory	1,900
Less: Outflow to buy equipment	(16,400)
Increase in prepaid expenses	(700)
Cash (principal) paid on long-term note	(9,500)
ordinary gain	(2,000)
Total source from operations		$65,800
Other Sources (Inflows) of Cash
Loss on sale of land	$2,300
Increase in accounts payable	1,000
Cash from issuing preferred stock	38,700
Patent amortization expense	2,100
Total other sources of cash		44,100
Sources (Financing) Not Affecting Cash
Issuance of common stock for patent		11,000
Total inflows of cash		$120,900
Uses (Outflows) of Cash
To purchase building	$(62,000)
Increase in accounts receivable	(7,800)
For acquiring marketable securities	(7,100)
Decrease in income taxes payable	(1,400)
Total uses of cash		(78,300)
Uses (Investing) Not Affecting Cash
Acquisition of patent by issuing common stock		(11,000)
Net inflow before dividends		$ 31,600
Less: Cash dividends		(24,000)
Net increase in cash		$7,600
Cash, January 1, 2016		15,300
Cash, December 31, 2016		$22,900

After a thorough investigation, you have determined that the amounts of the items listed on the statement are correct. However, you notice several items that are incorrectly classified and reported.

Required

Prepare a corrected 2016 statement of cash flows for the Ryan Company. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

Operating Activities

________________ __________

Adjustment for non cash income items:

________________ __________

Adjustments for cash flow effects from working capital items:

________________ __________

Net cash provided by operating activities ____________

Investing Activities:

________________ __________

Net cash used for investing activities _________

Financing Activities:

________________ __________

Net cash provided by financing activies _________

Net increase in cash _________

Cash, january 1, 2016 _________

Cash, december 31, 2016 _________

Investing and Financing Activities not Affecting Cash

Investing Activities:

Acquistion of patent by issuing commons stock ______________

Financing Activities:

Issuance of common stock for patent ____________

ivorymallard438

The comparative balance sheet of Canace Products Inc. forDecember 31, 2016 and 2015, is shown as follows:

1		Dec. 31, 2016	Dec. 31, 2015
2	Assets
3	Cash	$643,460.00	$679,530.00
4	Accounts receivable (net)	566,490.00	548,320.00
5	Inventories	1,010,720.00	982,600.00
6	Investments	0.00	240,910.00
7	Land	519,510.00	0.00
8	Equipment	879,710.00	680,990.00
9	Accumulated depreciation-equipment	(243,750.00)	(200,970.00)
10	Total assets	$3,376,140.00	$2,931,380.00
11	Liabilities and Stockholdersâ Equity
12	Accounts payable (merchandise creditors)	$772,290.00	$748,770.00
13	Accrued expenses payable (operating expenses)	63,970.00	69,800.00
14	Dividends payable	8,000.00	7,040.00
15	Common stock, $2 par	56,000.00	32,000.00
16	Paid-in capital: Excess of issue price over parâcommon stock	408,000.00	192,000.00
17	Retained earnings	2,067,880.00	1,881,770.00
18	Total liabilities and stockholdersâ equity	$3,376,140.00	$2,931,380.00

The income statement for the year ended December 31, 2016, is asfollows:

1	Sales		$5,974,620.00
2	Cost of merchandise sold		2,451,470.00
3	Gross profit		$3,523,150.00
4	Operating expenses:
5	Depreciation expense	$42,780.00
6	Other operating expenses	3,099,440.00
7	Total operating expenses		3,142,220.00
8	Operating income		$380,930.00
9	Other expense:
10	Loss on sale of investments		(64,890.00)
11	Income before income tax		$316,040.00
12	Income tax expense		102,160.00
13	Net income		$213,880.00

Additional data obtained from an examination of the accounts inthe ledger for 2016 are as follows:

A.	Equipment and land were acquired for cash.
B.	There were no disposals of equipment during the year.
C.	The investments were sold for $176,020 cash
D.	The common stock was issued for cash.
E.	There was a $27,770 debit to Retained Earnings for cashdividends declared.

Prepare a statement of cash flows, using the direct method ofpresenting cash flows from operating activities. Be sure tocomplete the heading of the statement. Refer to the Labels andAmount Descriptions list provided for the exact wording of theanswer choices for text entries. Use the minus sign only toindicate the net cash outflows for each section. âDeductâ, âLessâor colons (:) will automatically appear if required.

Labels and Amount Descriptions

Cash paid for dividends

Cash paid for purchase of equipment

Cash paid for purchase of land

Cash paid for purchase of treasury stock

Cash payments for income taxes

Cash payments for merchandise

Cash payments for operating expenses

Cash received from customers

Cash received from sale of common stock

Cash received from sale of investments

December 31, 2016

Decrease in cash

Depreciation

For the Year Ended December 31, 2016

Gain on sale of investments

Increase in cash

Issuance of common stock for acquisition of land

Issuance of common stock for purchase of equipment

Loss on sale of investments

Net cash flow from financing activities

Net cash flow from investing activities

Net cash flow from operating activities

Net cash flow used for financing activities

Net cash flow used for investing activities

Net cash flow used for operating activities

Canace Products Inc.

Statement of Cash Flows

1	Cash flows from operating activities:
2
3
4
5
6
7
8	Cash flows from investing activities:
9
10
11
12
13
14	Cash flows from financing activities:
15
16
17
18
19	Cash at the beginning of the year
20	Cash at the end of the year

blushmarten502

Which of the following statement is incorrectregarding the investing activities section of the statement of cashflows?

		Investing activities deal with long-term liabilities (debt) andequity accounts.
		Increases in long-term asset balances suggest cash outflows topurchase assets.
		Decreases in long term asset balances suggest cash inflows fromselling assets.
		Investing activities involve cash purchases and cash disposalsof long-term assets.

Which of the following statements iscorrect?

		Investors need to understand that the value of a company'searnings per share is affected by its choices of accountingprinciples and assumptions.
		Earnings per share is calculated for a company's preferredstock.
		The most widely quoted measure of a company's earningsperformance is return on equity.
		The book value per share measures the market value of acorporation's stock.

Which of the following statements is incorrectregarding preparing a statement of cash flows using the directmethod?

		The direct method shows adjustments to net income.
		The direct method shows the specific sources and uses of cashthat are associated with operating activities.
		Noncash expenses, gains, and losses are not used in thedetermination of net cash flow from operating activities.
		A majority of companies use the indirect method rather than thedirect method.

Which of the following statements regarding a process costsystem is false?

		Use of a process cost system would be appropriate for a companythat manufactures luxury yachts.
		Unit costs are computed for each department.
		The number of equivalent whole units for a period takes intoaccount the stage of completion of ending work in processinventory.
		Unit cost is determined for a designated period of time.

salmoncat986

ACC 312 Study Guide - Midterm Guide: Cash Flow, Current Asset, Negative Number

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