$145,800. \hspace{23pt}\text{contract rate is less than the market rate of interest? ( True False) Question 14. It depends if the acquiring company is public or private. The following selected information is available for Ford Company from its comparative balance sheet. Venture debt financing is a type of loan given to startups and other early-stage companies that offers more flexibility than other forms of capital, but often at higher cost. Operating cash inflows. -Bad debts expense. In real estate, the portion of the property's value is not secured by a mortgage or line . There could be many different combinations with the above example that would result in different outcomes. Multiple Choice Depreciation on the machines for the year is $9,000. The different types and sources for each type of financing are described in more detail below. $150,000 $20,000 $(140,000) 3,000 Securing equity financing can be a simpler process than debt financing, but you need to have an extremely attractive product or financial projections, as well as being able to surrender a portion of your company and oftentimes a good amount of control. Study with Quizlet and memorize flashcards containing terms like When assessing the creditworthiness of new entrepreneurs, lending institutions review the "Five C's". Equipment. Common Stock, $5 par value. intermediate accounting ifrs, chapter 5, conc, ACCOUNTING 301, CHAPTER 7 QUIZ MULTIPLE CHOICE, Fundamentals of Financial Management, Concise Edition, Claudia Bienias Gilbertson, Debra Gentene, Mark W Lehman, Carl S Warren, James M Reeve, Jonathan E. Duchac. \hline\text { Interest Expense } & -0- & \\ Cash equity is the percentage of an investment that is easily convertible to cash. Cash flows due to operations arise from customer collections and cash paid to suppliers, employees and others, and reports cash paid for income tax and interest Company ABC is looking to expand its business by building new factories and purchasing new equipment. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The primary purpose of a statement of cash flows is to provide relevant information about. \text{3. Financial Ratios to Spot Companies Headed for Bankruptcy. Dividends paid to shareholders are shown on the statement of cash flows as The gain on the sale of plant assets is an investing cash flow. $38,500. Cash flows from financing activities. The asset has a fair value of$30,000, a book value of $27,000, and a useful life of 8 years. Journalizetheentriestorecordthefollowing:a. The primary purpose of a statement of cash flows is to provide information about the cash receipts and payments of an entity during a period. \text{5. -A decrease in cash flows from investing activities )}\\ a.capitalgoodsf.opportunitycostb.consumergoodsg.scarcityc.economicsh.servicesd.factorsofproductioni.utilitye. \hline \text { Todd Pinkston } & \text { Wide receiver } & 169 & 4.37 & 7 \\ Equity financing places no additional financial burden on the company, however, the downside can be quite large. Finally, although you may be a limited liability company (LLC)or other business entity that provides some separation between the company and personal funds, the lender may still require you to guarantee the loan with your family'sfinancial assets. The National Football League rates prospects position by position on a scale that ranges from 5 to 9. Operating cash outflows. par. Cash payments include; i) payments to acquire fixed assets ii) payments to acquire investments in subsidiary net of balances of cash and cash equivalents acquired iii) payments to acquire investments in other entities iv) loans made and payments to acquire debt of other entities. $50,400. Explain the required disclosure of significant non-cash investing and financing activities. Cash management includes the investment of excess cash in cash equivalents. The main phases of the life cycle can be categorized into the initial phase, the growth phase, the maturity phase and the declining phase. Show details of net sales and The purchase of debt or equity instruments the (available-for-sale securities) is an investing activity. \hline \text { Service Revenue } & & 220,000 \\ 12/31/Year 1859,300 $600,000 Lists cash flows in the operations section of the cash flow statement \hline \text { Darnell Alford } & \text { Offensive tackle } & 334 & 5.55 & 6.4 \\ $150,000. \hline \text { Damion McIntosh } & \text { Guard } & 328 & 5.31 & 5.3 \\ 150 )\begin{array}{lr} The indirect method begins with net income and then removes the effects of (1) deferrals of past operating cash receipts and payments, (2) accruals of estimated future operating cash receipts and payments, and (3) net income items not affecting operating cash flows (e.g., depreciation). The problem in trying to use the direct method is that a company might not keep the information in the required form. However, because the parties can bargain over which assets will be acquired and which liabilities will be assumed, the transaction can be very . Depreciation exp. ), b. Net income$56,000 Accounts payable decreased by 22,000 Accounts receivable increased by 29,000 Inventories increased by 9,000 Cash dividends paid 14,800 Depreciation expense 24,000 Net cash used by operations$98,500, ACG2071 Ch 13 Analysis of Financial Statements, Business Information Systems Midterm (BUS430), 1. (Appendix1)Computethepriceof$26,646,292receivedforthebondsbyusingthepresentvaluetablesinAppendixAattheendofthetext. When the direct method of preparing a statement of cash flows is used, an enterprise should provide a reconciliation of net income to net cash flows from which activity? Conversely, if they decided to use only debt financing, their monthly expenses would be higher, leaving less cash on hand to use for other purposes, as well as a larger debt burden that it would have to pay back with interest. - Interest paid A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from: A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as: An increase in cash flows from operating activities. Store Salaries Expense, Advertising Expense, Store Supplies Expense, and Depreciation ExpenseStore Equipment are selling expenses. ThefirstsemiannualinterestpaymentonDecember31,2016,andtheamortizationofthebonddiscount,usingthestraight-linemethod. $14,000 $40,000. That investor now owns 10% of the company and has a voice in all business decisions going forward. Z02. Required: Investing activities are the acquisition and disposal of long-term assets and other investments not included in cash equivalents. Exercised and vested shares usually are paid out. Mortgage repayment petty cash) and demand deposits (e.g. Operating activity. Explanation Inventory Calculate the net cash provided or used by operating activities. Net income $56,000 \hline \text { Sylvester Morris } & \text { Wide receiver } & 216 & 4.59 & 8.3 \\ \text{Instructions}\\ Answer :- The correct answer is option - b. 4. -Source of cash used to finance investing activities. read more. Decrease in A/P (22,000) b. Dividends paid to Barber shareholders 400,000 -Depreciation expense. -A decrease in cash flows from financing activities, A decrease in cash flows from financing activities. Multiple Choice \hline \text { Salaries Payable } & & -0 \\ What amount should Paper report as net cash provided by operating activities in its statement of cash flows for the year? bank accounts). Disbursements for loans made by the enterprise and payments to acquire debt instruments of other entities (other than cash equivalents). The same net operating cash flow is reported under both methods. Balance at the end of the period. Gain on sale of plant assets (8,000) Cash received from customers The payment and collection of interest are treated as cash flows from operating activities. Cash receipts from Sales of equity or debt instruments and interest in joint venture. For example, if Company ABC decided to raise capital with just equity financing, the owners would have to give up more ownership, reducing their share of future profits and decision-making power. The \hspace{23pt}\text{the bond discount, using the straight-line method. provides that an investment normally qualifies as a cash equivalent only when it has a short maturity of three months or less from the date of acquisition. Use the following information and the indirect method to calculate the net cash provided or used by operating activities: -This is not reported on the statement of cash flows. Journalize the entry to record the amount of cash proceeds from the issuance of}\\ \hline \text { Blaine Saipaia } & \text { Guard } & 321 & 5.25 & 6 \\ Journalize the entries to record the following:}\\ In this process, all cash flows are classified into three categories:- 1. Debt financing sometimes comes with restrictions on the company's activities that may prevent it from taking advantage of opportunities outside the realm of its core business. $34,000. Multiple Choice A significant noncash transaction that need not be reported in disclosures related to the statement of cash flows is The amount of income taxes paid. Acquiring assets by assuming directly related liabilities, such as purchasing a building by incurring a mortgage to the seller; Explanation Gain on sale of plant assets (10,500) Obtaining a building by donation. (Roundtothenearestdollar.)b. Choosing which one works for you is dependent on several factors such as your current profitability, future profitability, reliance on ownership and control, and whether you can qualify for one or the other. $20,000 $900,000. -Ability of the company to generate profit. A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities. This online pronouncement Financial Analysis Multiple Choice Questions Pdf can be one of the options to accompany you later than having new time. Of course, a company's owners want it to be successful and provide the equity investors with a good return on their investment, but without required payments or interest charges, as is the case with debt financing. It determines that it needs to raise $50 million in capital to fund its growth. b. What amount should the company report as net cash provided by operating activities in its statement of cash flows? \text{1. Report all assets at gross carrying amount. Plus the gain. \hspace{23pt}\text{of the bonds July 1, 2016. Should be presented using the direct method, but use of the indirect method of disclosure is allowed. Explanation -Another name for the statement of financial position. Lending activities C. Financing activities. The management of Rosenquist Corp. is considering the effects of various inventorycosting methods on its financial statements and its income tax expense. David Kindness is a Certified Public Accountant (CPA) and an expert in the fields of financial accounting, corporate and individual tax planning and preparation, and investing and retirement planning. The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is: An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is unaffected by interest rate changes is a(n): If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported: A decrease in cash flows from operating activities, A cash dividend payment to shareholders during the year should be reported on the statement of cash flows as: Financing activities. All of the following are classifications on the statement of cash flows except Purchase of treasury stock -A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date. \hline \text { Common Stock } & & 25,000 \\ $85,000. Which of the following items is included in the financing activities section of the statement of cash flows? The December 31, 2012, trial balance (before any adjusting entries) appears below, AccountsDebitsCreditsCash$17,000AccountsReceivable14,000Supplies22,000PrepaidInsurance18,000Equipment85,000AccumulatedDepreciation$27,000AccountsPayable11,000SalariesPayable0UtilitiesPayable0InterestPayable0NotesPayable30,000CommonStock25,000RetainedEarnings9,000Dividends2,000ServiceRevenue220,000SalariesExpenseDepreciationExpense0InsuranceExpense0SuppliesExpense0UtilitiesExpense11,000InterestExpense0Totals$322,000$322,000\begin{array}{|l|c|c|} Cash Flows from Operating Activities: The amount of cash flows arising from operating . Flows from (used for) financing activities. The principal is due in five years. Thus, its effect must be subtracted from net income in the operating section of the cash flow statement. PE firms will also kill your company's sacred cows early on - those things that you have considered important to the running of the business which might not look as . \hline\text { Depreciation Expense } & & -0- & \\ iii. $146,400. 3) Cash payments to govt for taxes, duties, fines, and other fees or penalties. It removes the effects of (1) all deferrals of past operating cash flows, (2) all accruals of estimated future operating cash flows, and (3) items included in net income that do not affect net operating cash flow (including items with cash effects that are investing or financing cash flows). \text{Store Salaries Expense} & 215,100\\ 60,000 At December 31 Year 2 Year 1 \hline \text { Tutan Reyes } & \text { Offensive tackle } & 299 & 5.35 & 6.1 \\ \hline \text { Accounts Payable } & & 11,000 \\ SalesSalesReturnsandAllowancesCostofGoodsSoldFreight-InStoreSalariesExpenseOfficeSalariesExpenseAdvertisingExpenseRentExpenseInsuranceExpenseUtilitiesExpenseStoreSuppliesExpenseOfficeSuppliesExpenseDepreciationExpenseStoreEquipmentDepreciationExpenseOfficeEquipment22,500442,37020,156215,10053,00036,40028,8005,60017,5204,9283,6283,6003,700867,824. Use the key terms from the list below to complete the sentences that follow. 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