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Exam 12: Accounting for Cash Flows

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Question 61

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Given the following information, determine the amount of cash flows from investing and financing activities. $\begin{array} { | l | r | } \hline \text { Net income } & \$ 50,000 \\\hline \text { Loss on sale of plant assets } & 15,000 \\\hline \text { Cash received from sale of plarit assets } & 26,000 \\\hline \text { Cash received from issuine stock } & 70,000 \\\hline \text { Increase in income taxes payable } & 120,000\\\hline\end{array}$

A)
$\begin{array}{|l|}\hline\text{Cash provided by investing activities,}~ \$ 11,000\\\hline\text{Cash provided by finanicing activities,}~\$ 70,000\\\hline\end{array}$

B)
$\begin{array}{|l|}\hline\text{Cash used by investing activities,}~ \$ 11,000\\\hline\text{Cash used by finanicing activities,}~\$ 70,000\\\hline\end{array}$

C)
$\begin{array}{|l|}\hline\text{Cash used by investing activities,}~ \$ 26,000\\\hline\text{Cash used by finanicing activities,}~\$ 55,000\\\hline\end{array}$ .

D)
$\begin{array}{|l|}\hline\text{Cash used by investing activities,}~ \$ 26,000\\\hline\text{Cash used by finanicing activities,}~\$ 55,000\\\hline\end{array}$

E)
$\begin{array}{|l|}\hline\text{Cash provided by investing activities,}~ \$ 26,000\\\hline\text{Cash provided by finanicing activities,}~\$ 70,000\\\hline\end{array}$

F) A) and D)
G) All of the above

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Question 62

Multiple Choice

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A corporation prepares its statement of cash flows using the indirect method to report operating activities. Net income for the 2014 fiscal year was $634,000. Depreciation and amortization expense of $60,000 and $30,000 respectively were included with operating expenses in the income statement. The following information describes the changes in current assets and liabilities other than cash: $\begin{array} { l r } \text { Decrease in accounts receivable } & \$ 22,000 \\\text { Increase in inventories } & 9,400 \\\text { Increase prepaid expenses } & 8,900 \\\text { Increase in salaries payable } & 10,400 \\\text { Decrease in income taxes payable } & 14,400\end{array}$ Determine the net cash flow provided (used) by operating activities.

A) ($692,500)
B) $692,500
C) $723,700
D) ($536,300)
E) ($723,700)

F) C) and D)
G) B) and D)

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Question 63

Multiple Choice

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The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

A company had total assets of $1,760,000, total cash flows of $1,320,000, and cash flows from operations of $205,000. The cash flow on total assets ratio is equal to:

When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are _____________ net income.

The cash flow on total assets ratio is defined as the total cash flows from operations divided by the average total assets.

Cash flow amounts and their timing should be examined when planning and analyzing operating activities.

The statement of cash flows explains how transactions and events impact the end-of-period cash balance to produce the end-of-period net income balance.

To be classified as a cash equivalent, an investment must be readily convertible to an unknown amount of cash because the market value may be affected by interest rate changes.

The following information is available for the Arthur Corporation: Additional information: (1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. (2) Old equipment with an original cost of $37,550 was sold for $2,100 cash. (3) New equipment was purchased for $67,550 cash. (4) Cash dividends of $33,600 were paid. (5) Additional shares of stock were issued for cash. Required: Prepare a complete statement of cash flows for the 2013 calendar year using the direct method.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { | l | r | } \hline \text { Cost of good sold } & \$ 536,000 \\\hline \text { Merchandise inventory, Jaruary 1 } & 64,800 \\\hline \text { Merchandise inventory, December 31 } & 57,000 \\\hline \text { Accounts payable, January 1 } & 64,400 \\\hline \text { Accounts payable, December 31 } & 59,000 \\\hline\end{array}$

Given the following information, determine the amount of cash flows from investing and financing activities. $\begin{array} { | l | r | } \hline \text { Net income } & \$ 70,000 \\\hline \text { Loss on sale of plart assets } & 25,000 \\\hline \text { Cash received from sale of plart assets } & { 3 6 , 0 0 0 } \\\hline \text { Cash received from issuing stock } & { 8 0 , 0 0 0 } \\\hline \text { Increase in income taxes payable } & { 2 0 , 0 0 0 } \\\hline\end{array}$

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Wessen Company reports net income of $200,000 for the year ended December 31, 2013. It also reports $40,000 depreciation expense, $22,500 amortization expense, and a $15,000 loss on the sale of machinery. Its comparative balance sheets reveal a $225,700 increase in accounts receivable, $31,600 decrease in accounts payable, $15,000 decrease in prepaid expenses, and $48,100 decrease in wages payable. What net cash flows are provided (used) by operating activities using the indirect method?

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

The cash flow on total assets ratio can be used as an indicator of earnings quality.

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

A company reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. The company's net cash flows from operations was $2,204 million. Calculate the cash flow on total assets ratio.

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity or a significant, (N) noncash financing and investing activity.

Under IFRS, cash outflows for interest expense are classified as