Question

1 Prepaid rent and prepaid insurance are assets that eventually become expenses.

True  False

The statement of cash flows reports noncash investing and financing activities.

True  False

Use the following data to compute net cash flows from financing activities.

Cash paid for dividends	($10,000)
Cash paid for income taxes	($15,000)
Cash paid for interest expense	($5,000)
Cash paid for salaries	($400,000)
Cash paid to loan funds to a top manager	($100,000)
Cash paid to purchase inventory	($50,000)
Cash paid to purchase investments	($120,000)
Cash paid to purchase machinery	($150,000)
Cash paid to purchase treasury stock	($25,000)
Cash paid to repay principal on a bank loan	($100,000)
Cash received for interest and dividends earned	$6,000
Cash received for loan repayment from manager	$100,000
Cash received from a bank loan	$100,000
Cash received from customers	$750,000
Cash received on the sale of a building	$250,000
Cash received on the sale of an investment	$10,000
Cash received on the sale of our company's stock	$120,000

Answer 1

Answers

1.Prepaid rent and prepaid insurance are assets that eventually become expenses.

True.

These are recorded as Rent Expense and Insurance expense, respectively as the period for rent and Insurance expires.

2. The statement of cash flows reports noncash investing and financing activities.

True.

The last part of the statement of cash flows includes details of 'non cash investing and financing activities."

3. Use the following data to compute net cash flows from financing activities.

Cash paid for dividends($10,000)

Cash paid to loan funds to a top manager($100,000)

Cash paid to purchase treasury stock($25,000)

Cash paid to repay principal on a bank loan($100,000)

Cash received for loan repayment from manager$100,000

Cash received from a bank loan$100,000

Cash received on the sale of our company's stock $ 120,000

Answer: Net cash flows from financing activities = $ 85,000