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Exam 12: Reporting Cash Flows

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Question 71

True/False

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The direct method of preparing the statement of cash flows is usually viewed as user friendly since it requires less accounting knowledge to understand it.

A) True
B) False

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Question 72

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The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Schedule of noncash investing or financing activity.
E) None of these as this is not reported on the statement of cash flows.

F) None of the above
G) A) and C)

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Question 73

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Depreciation expense is not reported on the statement of cash flows when the direct method is used.

When preparing the operating section of the statement of cash flows using the indirect method,a decrease in accounts receivable is subtracted from net income.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash.The amount that should be reported as a source of cash under cash flows from investing activities is:

The payment of cash dividends never changes the balance of retained earnings.

A company had cost of goods sold of $150,000 during a given period.Compute cash paid for merchandise during this period given the following data: $\begin{array}{|l|r|r|}\hline &\begin{array}{c}\text { Beginning } \\\text { Balance }\end{array} & \begin{array}{c}\text { Ending } \\\text { Balance }\end{array} \\\hline \text { Accounts payable } & \$ 20,000 & \$ 17,500 \\\hline \text { Merchandise inventory } & 35,000 & 42,000 \\\hline\end{array}$

A statement of cash flows should reconcile the differences between the beginning and ending balances of:

The cash flow on total assets ratio reflects the company's actual cash flows and,therefore,is affected by the accounting constraints of recognition and measurement for net income.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash,resulting in a loss of $3,000.The amount to be reported under cash flows from financing activities is:

Selected information from Jet Company's 2013 financial statements is shown below (in millions) : Inventory decreased $6.0 $\quad$$\quad$$\quad$ Accounts payable increased by $7.0 Cost of goods sold $36.50 $\quad$$\quad$$\quad$ Salaries expense $24.0 Salaries payable decreased $6.0 $\quad$ Accounts receivable increased by $10.0 Sales $56.4 What is the amount of cash paid for salaries by Jet during 2013?

Explain how to determine cash flows from investing and financing activities.

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

Walker Company reports net income of $420,000 for the year ended December 31,2013.It also reports $75,600 depreciation expense and a gain of $11,000 on the sale of machinery.Its comparative balance sheets reveal a $33,600 decrease in accounts receivable,$17,220 increase in accounts payable,$9,240 increase in prepaid expenses,and $13,020 increase in wages payable.What is the net cash flows provided (used) by operating activities using the indirect method?

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 reporting of investing and financing activities is _________________ under the direct and indirect methods of preparing the statement of cash flows.

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

Describe the format of the statement of cash flows,including the reporting of significant noncash investing and financing activities.

Use the following information to calculate the net cash provided or used by financing activities for the Brooks Corporation: (a)Net income,$10,000. (b)Sold common stock for $4,000 cash. (c)Paid cash dividend of $3,000. (d)Paid bond payable,$8,000. (e)Purchased equipment for $12,000 cash.