[calicpa]

Is cash received from the sale of equipment included in operatin cash flows?

I’m not sure why the answer to the 2nd question is wrong when the answer states that it’s a operating CF. Please clarify these two answers. Thank you

A company calculated the following data for the period:

Cash received from customers $25,000

Cash received from sale of equipment 1,000

Interest paid to bank on note 3,000

Cash paid to employees 8,000

What amount should the company report as net cash provided by operating activities in its Statement of Cash Flows?

A. $14,000

B. $15,000

C. $18,000

D. $26,000

A is Correct!

Cash received from the customers and paid to employees are operating activities. Interest paid on a bank note is also an operating activity. Therefore, the cash for from operating activities is $25,000 – 3,000 – 8,000 = $14,000.

Which of the following transactions is included in the operating activities section of a cash flow statement prepared using the indirect method?

A. Gain on sale of plant asset.

B. Sale of property, plant and equipment.

C. Payment of cash dividend to the shareholders.

D. Issuance of common stock to the shareholders.

B is Incorrect…

The cash received on the sale of PPE is included in the operating section of the statement of cash flows.

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[barelystayingsane]

I believe A, not B, is the correct answer for that second question. The gains and losses are related to operating activities, while the cash proceeds are related to investing activities. Seems to be an incorrect answer.

[barelystayingsane]

I believe A, not B, is the correct answer for that second question. The gains and losses are related to operating activities, while the cash proceeds are related to investing activities. Seems to be an incorrect answer.

[Anonymous]

B should be worded “Cash from sale of PP&E”. And yes, A should be the correct answer for #2. Gains are deducted from operating activities, if I remember correctly. Seems like a typo>?

[Anonymous]

B should be worded “Cash from sale of PP&E”. And yes, A should be the correct answer for #2. Gains are deducted from operating activities, if I remember correctly. Seems like a typo>?

[calicpa]

great. thanks for the feedback guys, really appreciate it.

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[calicpa]

great. thanks for the feedback guys, really appreciate it.

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[Optimistic]

A is the correct answer for the 2nd one because it ask for the cash flow with the indirect method.

[Optimistic]

A is the correct answer for the 2nd one because it ask for the cash flow with the indirect method.

[calicpa]

What about this one? Is B the right answer? Now I can't trust any of these….

Karr, Inc. reported net income of $300,000 for 2004. Changes occurred in several Balance Sheet accounts as follows:

Equipment $25,000 increase

Accumulated depreciation 40,000 increase

Note payable 30,000 increase

Additional information:

During 2004, Karr sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.

In December 2004, Karr purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.

Depreciation expense for the year was $52,000.

In Karr's 2004 Statement of Cash Flows, net cash provided by operating activities should be:

A. $340,000

B. $347,000

C. $352,000

D. $357,000

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[calicpa]

What about this one? Is B the right answer? Now I can't trust any of these….

Karr, Inc. reported net income of $300,000 for 2004. Changes occurred in several Balance Sheet accounts as follows:

Equipment $25,000 increase

Accumulated depreciation 40,000 increase

Note payable 30,000 increase

Additional information:

During 2004, Karr sold equipment costing $25,000, with accumulated depreciation of $12,000, for a gain of $5,000.

In December 2004, Karr purchased equipment costing $50,000 with $20,000 cash and a 12% note payable of $30,000.

Depreciation expense for the year was $52,000.

In Karr's 2004 Statement of Cash Flows, net cash provided by operating activities should be:

A. $340,000

B. $347,000

C. $352,000

D. $357,000

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[HappyDayss]

Yes it is B

300,000 – 5000 + 52000 = 347,000

Done ^_^

[HappyDayss]

Yes it is B

300,000 – 5000 + 52000 = 347,000

Done ^_^

[calicpa]

why do you only use the gain and dep expense?

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[calicpa]

why do you only use the gain and dep expense?

BEC - 84, 4/6/13
AUD - 77, 5/28/13
REG - 83, 4/12/14
FAR - 83, 10/3/13

Ethics - 90% 4/24/13

150 unit education requirement met!
Work experience met!

[NYCaccountant]

We know Net Income was 300,000 after recording a depreciation expense of 52,000, which means that because this is a non – cash charge, it needs to be added back to net income. You have to reverse out the gain of 5,000 because this is not an operating activity on the statement of cash flows. 300,000+52,000-5,000=347,000. The rest of the information is irelevant because they are either investing,financing activities, or don't matter at all.

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NYC born and raised.

FAR - 93
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AUD - 99!!!!!! CPA exam complete.

[Author]

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