Question

36. Below is information for Dakota Corp. for 2016 and 2017:

Bonds payable, December 31, 2016   $500,000
Bonds payable, December 31, 2017   800,000
Loss on bond retirement—2017   15,000
Interest expense on bonds—2017   45,000

At the end of 2017, Dakota issued bonds at par value for $800,000 cash. The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2017 (before their maturity date). All interest expense was paid in cash during 2017.

The following statements describe how Dakota reported the cash flow effects of the items described above on its 2017 statement of cash flows. The indirect method is used to prepare the operating activities section. Which of the following has been reported incorrectly by Dakota?
    a.    Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in the financing activities section.
    b.    The loss on bond retirement of $15,000 was added to net income in the operating activities section.
    c.    Payments of $560,000 were reported as a cash outflow in the investing activities section.
    d.    Interest expense of $45,000 was not reported separately because it is included in net income in the operating activities section.

38. Below are the transactions for the Louisville Company:

Proceeds from issuance of bonds payable   $635,000
Payment to purchase equipment   $275,000
Payment of wages   $115,000
Payment of dividends   $155,000
Payment to pay off notes payable   $195,000

Based on these transactions, what is the net cash flow from financing activities?
    a.    $285,000 net cash provided by financing activities.
    b.    $275,000 net cash used for financing activities.
    c.    $0, because cash inflows equal cash outflows from financing activities.
    d.    $440,000 net cash provided by financing activities.

40. During 2016, the accounts payable balance of Andreas Corp. decreased. Which of the following statements is true?
    a.    This decrease indicates that Andreas paid less during the period than it recognized as expenses on the income statement.
    b.    This decrease is added to net income in the operating activities section of a statement of cash flows prepared under the indirect method.
    c.    This decrease is deducted from net income in the operating activities section of a statement of cash flows prepared under the indirect method.
    d.    This decrease is considered only when the operating activities section of a statement of cash flows is prepared under the direct method.

42. Caler Corp. reported the following information for 2016 and 2017.

Accounts receivable, December 31, 2016   $ 67,000
Accounts receivable, December 31, 2017   63,000
Sales (all on credit)—2017   745,000

How much cash was collected from customers during 2017?
    a.    $741,000
    b.    $745,000
    c.    $749,000
    d.    $753,000

Answer 1

Answer:-36)- The following has been reported incorrectly by Dakota:-Payments of $560,000 were reported as a cash outflow in the investing activities section.

Explanation:- Payment to bonds payable or issuance of bonds relate to a financing activities in cash flow statement not an investing activities.

38)- The net cash flow from financing activities is:- $440,000 net cash provided by financing activities.

Explanation:-Proceeds of issuance of bonds payable    $635000       

Payment to pay off notes payable                                  $195000

Net cash flow from financing activities                      $440000

40)- During 2016, the accounts payable balance of Andreas Corp. Decreased, the following statements is true:- This decrease is considered only when the operating activities section of a statement of cash flows is prepared under the direct method.

Explanation:- Decrease in accounts payable means payment has been to the supplier, hence deducted from cash flow from operating activities.

42)-The cash was collected from customers during 2017 : $749000.

Explanation:- Sales (on credit)+ Decrease in debtors balance

=$745000 +($67000-$63000)

=$749000