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Exam 12: Reporting and Analyzing Cash Flows

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Question 31

True/False

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The statement of cash flows reports the total change in cash in the period.

A) True
B) False

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Question 32

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When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from investing activities generally affect:

A) Net income,current assets and current liabilities
B) Noncurrent assets
C) Noncurrent liability and the equity accounts
D) Both noncurrent assets and noncurrent liabilities
E) Equity accounts only

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

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Question 33

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Define and discuss the differences between operating,investing and financing activities.

A purchase of land in exchange for shares of stock is disclosed on the statement of cash flows or in a note to the statement.

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:

Explain the use of a spreadsheet in the preparation of the statement of cash flows.

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

The payment of cash dividends to shareholders is classified as a financing activity.

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

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

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from operating activities generally affect:

Cash paid out for merchandise is considered to be an operating activity.

If a company borrows money from a bank,the interest paid on this loan should be reported on the statement of cash flows as a(n) :

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

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:

On a spreadsheet used to prepare the operating section of the statement of cash flows,depreciation expense does not require an entry in the Analysis of Changes column as it is a noncash item.

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

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

Companies have the option of using either the direct or indirect method to prepare the operating section of the statement of cash flows.