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Exam 16: Reporting the Statement of Cash Flows

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Question 1

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Noncash investing and financing activities may be disclosed in:

A) The reconciliation of cash balance section.
B) The financing activities section of the statement of cash flows.
C) A note in the financial statements or a schedule attached to the statement of cash flows.
D) The operating activities section of the statement of cash flows.
E) The investing activities section of the statement of cash flows.

F) D) and E)
G) None of the above

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Question 2

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Typical cash flows from investing activities include each of the following except:

A) Proceeds from the sale of equipment.
B) Payments to buy intangible assets.
C) Payments to purchase property, plant and equipment or other productive assets (excluding inventory) .
D) Payments to acquire held-to maturity securities of other entities, except cash equivalents.
E) Proceeds from collecting the principal amount of accounts receivable arising from customer sales.

F) B) and E)
G) C) and E)

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Question 3

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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.

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from operating activities using the indirect method: $\begin{array}{|l|r|}\hline \text { Net income } & \$ 182,000 \\\hline \text { Gain on the sale of equipment } & 12,300 \\\hline \text { Proceeds from the sale of equipment } & 92,300 \\\hline \text { Depreciation expense - equipment } & 50,000 \\\hline \text { Payment of bonds at maturity } & 100,000 \\\hline \text { Purchase of land } & 200,000 \\\hline \text { Issuance of common stock } & 300,000 \\\hline \text { Increase in merchandise inventory } & 35,400 \\\hline \text { Decrease in accounts receivable } & 28,800 \\\hline \text { Increase in accounts payable } & 23,700 \\\hline \text { Payment of cash dividends } & 32,000\\\hline\end{array}$

A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

When using a spreadsheet to prepare the statement of cash flows, a decrease in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

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

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.

A company had net cash flows from operations of $120,000, cash flows from financing of $330,000, total cash flows of $500,000, and average total assets of $2,500,000. The cash flow on total assets ratio equals:

The statement of cash flows helps analysts evaluate all but which of the following?

The appropriate section in the statement of cash flows for reporting the cash payment of wages is:

Explain how cash flows from investing and financing activities are determined.

Cash paid for merchandise is an operating activity.

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:

The cash flow on total assets ratio reflects actual cash flows and is therefore affected by income recognition and measurement.

Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

Jeffreys Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $240,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Jeffreys Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. $\begin{array}{|l|l|l|}\hline \text { At December 31 } &{\text { Y ear 2 }} & \text { Y ear 1 } \\\hline \text { Equipment } & \$ 510,000 & \$ 750,000 \\\hline \text { Accumulated Depreciation-Equipment } & 328,000 & 500,000\\\hline \end{array}$

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

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l } \text {Retained earnings balance at the beginning of the year }&\$126,000 \\ \text {Cash dividends declared for the year }& 46,000\\ \text {Proceeds from the sale of equipment }& 81,000\\ \text {Gain on the sale of equipment }&7,000 \\ \text {Cash dividends payable at the beginning of the year }&18,000 \\ \text { Cash dividends payable at the end of the year}& 20,000\\ \text { Net income for the year}&92,000 \\\end{array}$ What is the ending balance for retained earnings? A) $\$ 352,000$ B) $\$ 218000$ C) $\$ 179.000$ D) $\$ 172,000$ E) $\$ 170,000$

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l } \text {Retained earnings balance at the beginning of the year }&\$233,000 \\ \text {Cash dividends declared for the year }&50,000 \\ \text {Proceeds from the sale of equipment }&85,000 \\ \text { Gain on the sale of equipment}&4,500 \\ \text { Cash dividends payable at the beginning of the year}&22,000 \\ \text {Cash dividends payable at the end of the year }& 30,000\\ \text {Net income for the year }&110,000\\\end{array}$