flows. Determine the following: (1) If sales for the current year were $695,000 and accounts receivable decreased by $43,500 during the year, what was the amount of cash received from customers? (2) If income tax expense for the current year was $56,000 and income tax payable decreased by $5,200 during the year, what was the amount of cash payments of income tax? (1) Sales $695,000 ANSWER: Plus decrease in accounts receivable balance 43,500 Cash received from customers $738,500 (2) Income tax expense $ 56,000 Plus decrease in income tax payable 5,200 Cash payments for income tax $ 61,200 Moderate DIFFICULTY: Bloom’s: Applying ACCT.WARD.16.16-04 - 16-04 LEARNING OBJECTIVES: - Statement of Cash Flows ACCREDITING STANDARDS: ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Connor Designs Company has cash flows for operating activities of $425,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity. What is the free cash flow for Connor Designs? Cash flows from operating activities $425,000 ANSWER: Less cash paid to maintain current production levels of property, plant, and equipment 45,500* Free cash flow $379,500 *Property, plant, and equipment to maintain productive capacity: $65,000 × 70% = $45,500 Moderate DIFFICULTY: Applying ACCT.WARD.16.16-04 - 16-04 LEARNING OBJECTIVES: ACBSP-APC-23 - Financial Statement Analysis ACCREDITING STANDARDS: ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. increase cash from operating activities decrease cash from operating activities increase cash from investing activities
flows. (1) (2) Determine the following: If sales for the current year were $695,000 and accounts receivable decreased by $43,500 during the year, what was the amount of cash received from customers? If income tax expense for the current year was $56,000 and income tax payable decreased by $5,200 during the year, what was the amount of cash payments of income tax? ANSWER: (1) Sales $695,000 Plus decrease in accounts receivable balance 43,500 Cash received from customers $738,500 (2) Income tax expense $ 56,000 Plus decrease in income tax payable 5,200 Cash payments for income tax $ 61,200 DIFFICULTY: Moderate Bloom’s: Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-04 - 16-04 ACCREDITING STANDARDS: - Statement of Cash Flows ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic Connor Designs Company has cash flows for operating activities of $425,000. Cash flows used for investments in property, plant, and equipment totaled $65,000, of which 70% of this investment was used to replace machinery to maintain existing capacity. What is the free cash flow for Connor Designs? ANSWER: Cash flows from operating activities $425,000 Less cash paid to maintain current production levels of property, plant, and equipment 45,500* Free cash flow $379,500 *Property, plant, and equipment to maintain productive capacity: $65,000 × 70% = $45,500 DIFFICULTY: Moderate Applying LEARNING OBJECTIVES: ACCT.WARD.16.16-04 - 16-04 ACCREDITING STANDARDS: ACBSP-APC-23 - Financial Statement Analysis ACCT.AICPA.FN.03 - Measurement BUSPROG: Analytic For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. increase cash from operating activities decrease cash from operating activities increase cash from investing activities
Test-Bank-for-Managerial-Accounting-13th-Edition-by-Warren.docx