wiL25761_QC_ch12.indd Page 1 17/09/14 5:30 PM f-500
/203/MH02230/wiL25761_disk1of1/0078025761/wiL25761_pagefiles
Chapter 12
Reporting Cash Flows
Quick Check—Chapter 12
QC1
12-1. Does a statement of cash flows report the cash payments to purchase cash equivalents?
Does it report the cash receipts from selling cash equivalents?
12-2. Identify the three categories of cash flows reported separately on the statement of cash
flows.
12-3. Identify the cash activity category for each transaction: (a) purchase equipment for cash,
(b) cash payment of wages, (c) sale of common stock for cash, (d) receipt of cash dividends
from stock investment, (e) cash collection from customers, (f ) notes issued for cash.
QC2
12-4. Determine the net cash provided or used by operating activities using the following
data: net income, $74,900; decrease in accounts receivable, $4,600; increase in
inventory, $11,700; decrease in accounts payable, $1,000; loss on sale of equipment,
$3,400; payment of cash dividends, $21,500.
12-5. Why are expenses such as depreciation and amortization added to net income when cash
flow from operating activities is computed by the indirect method?
12-6. A company reports net income of $15,000 that includes a $3,000 gain on the sale of
plant assets. Why is this gain subtracted from net income in computing cash flow from
operating activities using the indirect method?
QC3
12-7. Equipment costing $80,000 with accumulated depreciation of $30,000 is sold at a loss
of $10,000. What is the cash receipt from this sale? In what section of the statement of
cash flows is this transaction reported?
QC4
12-8. Net sales in a period are $590,000, beginning accounts receivable are $120,000, and ending
accounts receivable are $90,000. What cash amount is collected from customers in the period?
12-9. The Merchandise Inventory account balance decreases in the period from a beginning
balance of $32,000 to an ending balance of $28,000. Cost of goods sold for the period
is $168,000. If the Accounts Payable balance increases $2,400 in the period, what is the
cash amount paid for merchandise inventory?
12-10. This period’s wages and other operating expenses total $112,000. Beginning-of-period
prepaid expenses totaled $1,200, and its ending balance is $4,200. There were no
beginning-of-period accrued liabilities, but end-of-period wages payable equal $5,600. How
much cash is paid for wages and other operating expenses?
1
wiL25761_QC_ch12.indd Page 2 17/09/14 5:30 PM f-500
2
Chapter 12
/203/MH02230/wiL25761_disk1of1/0078025761/wiL25761_pagefiles
Reporting Cash Flows
Guidance Answers to Quick Checks—Chapter 12
12-1. No to both. The statement of cash flows reports changes
12-2.
12-3.
12-4.
12-5.
in the sum of cash plus cash equivalents. It does not report transfers between cash and cash equivalents.
The three categories of cash inflows and outflows are
operating activities, investing activities, and financing
activities.
a. Investing
c. Financing
e. Operating
b. Operating
d. Operating
f. Financing
$74,900 1 $4,600 2 $11,700 2 $1,000 1 $3,400 5
$70,200
Expenses such as depreciation and amortization do not
require current cash outflows. Therefore, adding these
expenses back to net income eliminates these noncash
items from the net income number, converting it to a
cash basis.
12-6. A gain on the sale of plant assets is subtracted from net
income because a sale of plant assets is not an operating
activity; it is an investing activity for the amount of cash
received from its sale. Also, such a gain yields no cash
effects.
12-7. $80,000 2 $30,000 2 $10,000 5 $40,000 cash receipt.
The $40,000 cash receipt is reported as an investing
activity.
12-8. $590,000 1 ($120,000 2 $90,000) 5 $620,000
12-9. $168,000 2 ($32,000 2 $28,000) 2 $2,400 5 $161,600
12-10. $112,000 1 ($4,200 2 $1,200) 2 $5,600 5 $109,400