Free CFA-Level-I Exam Braindumps (page: 391)

Page 391 of 991

Purchases of marketable securities are:

  1. operating cash flows.
  2. investing cash flows.
  3. financing cash flows.
  4. either financing cash flows or investing cash flows.

Answer(s): B

Explanation:

The purchase of investment securities is clearly an investing cash flow.



Which of the following is NOT involved in calculating the operating cash flow from net income from operations?

  1. Increase in current assets in the form of receivables.
  2. Increase in current liabilities in the form of payables.
  3. Gain from retirement of debt.
  4. None of these answers.

Answer(s): C

Explanation:

Gain from retirement of debt is an extraordinary item under GAAP and is not a part of operating cash flow.
Indeed, the gain is a non-cash item.



The following financial data on CashCow, Inc. have been taken from its financial statements for 1996:

  1. Dividends paid$25,000
  2. Sale of land$64,000
  3. Inventory purchases$29,000
  4. Purchase of a warehouse$208,000
  5. Bonds issued$90,000
  6. Dividends received from investments$17,000
  7. Interest paid on bonds$2,400
  8. Salaries paid$107,400
  9. Cash collection from customers$28,400
  10. Loss on land sale$18,000
  11. Beginning cash balance$312,000
    The operating cash flow for 1998 was ________.
  12. -$101,200
  13. -$75,400
    N. -$111,400
    O. -$93,400

Answer(s): D

Explanation:

Items c, f, g, h, i are operating events.



Marine Corp. uses the direct method to prepare its statement of cash flows. Marine's trial balance at December 31, 1996 and 1995 are as follows:

Dec. 31, 1996 Dec. 31, 1995
Debits:

Cash $35,000 $32,000
Accounts receivable 33,000 30,000
Inventory 31,000 47,000
Property, plant & equipment 100,000 95,000
Unamortized bond discount 4,500 5,000
Cost of goods sold 250,000 380,000
Selling expenses 141,500 172,000
General and administrative expenses 137,000 151,300
Interest expense 4,300 2,600
Income tax expense 20,400 61,200
Total debits $756,700 $976,100

Credits:
Allowance for doubtful accounts $1,300 $1,100
Accumulated depreciation 16,500 15,000
Trade accounts payable 25,000 17,500
Income taxes payable 21,000 27,100
Deferred income taxes 5,300 4,600
8% callable bonds payable 45,000 20,000
Common stock 50,000 40,000
Additional paid-in capital 9,100 7,500
Retained earnings 44,700 64,600
Sales 538,800 778,700
Total credits $756,700 $976,100

Marine purchased $5,000 in equipment during 1996. Marine allocated one-third of its depreciation expense to selling expenses and the remainder to general and administrative expenses. What amount should Marine report in its statement of cash flows for the year ended December 31, 1996 for cash collected from customers?

  1. $535,800
  2. $601,800
  3. $536,000
  4. $541,600
  5. $541,800

Answer(s): A

Explanation:

To calculate cash collected from customers we do a T-account analysis of the gross accounts receivable. The beginning balance was $30,000 debit, we add the sales for 1996 (by debiting the accounts receivable) which were $538,800 and we subtract cash collections (the unknown here) by crediting accounts receivable to derive the ending balance of $33,000. Therefore, cash collections are $535,800.



Page 391 of 991



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