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Exam 16: Reporting the Statement of Cash Flows

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Question 91

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

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A spreadsheet can help organize the info...

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Question 92

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An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?

A) The purchase of noncash assets in exchange for equity or debt securities.
B) The retirement of debt by issuing equity stock.
C) The leasing of assets in a transaction that qualifies as a capital lease.
D) A transaction exchanging cash equivalents for cash.
E) The purchase of long-term assets financed by a cash down payment and a note payable to the seller for the balance.

F) B) and E)
G) B) and D)

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Question 93

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All of the following statements related to preparation of the statement of cash flows under U.S. GAAP and IFRS are true except:

When using a spreadsheet to prepare the statement of cash flows, an increase 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.

A purchase of land in exchange for a long-term note payable must be disclosed as a noncash investing and financing activity.

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

The statement of cash flows reports and proves the net change in cash for a reporting period.

Use the following information to calculate cash paid for income taxes: $\begin{array}{ll}\text { Income tax expense }&\$50,000\\\text { Income tax payable, January } 1 & 9,000 \\\text { Income tax payable, December 31 } & 7,000\end{array}$ A) $\$ 57,000$ . B) $\$ 50,000$ . C) $\$ 59,000$ . D) $\$ 52,000$ . E) $\$ 48,000$ .

The indirect method separately lists each major item of operating cash receipts and cash payments.

The cash flow on total assets ratio is calculated by:

Use the following information to calculate cash paid for salaries: $\begin{array}{l|r}\text { Salaries expense } & \$ 175,000 \\\hline \text { Salaries payable, January } 1 & 20,000 \\\hline \text { Salaries payable, December } 31 & 12,000\end{array}$

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:

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.

The purchase of stock in another company is classified as an investing activity.

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

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 cash coverage of growth ratio of less than 1 indicates cash inadequacy to meet asset growth.

The cash flow on total assets ratio:

Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions.

A company's income statement showed the following: net income, $124,000 and depreciation expense, $30,000. 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; and accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.