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Exam 12: Reporting and Analyzing Cash Flows

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Question 111

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Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

A) Interest revenue.
B) Sale of equipment.
C) Interest expense.
D) Purchase of treasury stock.
E) Purchase of stock in another company.

F) D) and E)
G) C) and D)

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Question 112

Multiple Choice

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

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

F) A) and D)
G) A) and C)

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Question 113

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Receipts of cash dividends and interest earned on loans are classified as investing activities.

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the indirect method. Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:

The statement of cash flows is divided into three sections called the _____________, _____________, and _______________ sections.

Probably the most important section of the statement of cash flows in analyzing the financial performance of a company's ongoing business is the ____________ section.

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

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

Use the following information to calculate cash received as dividends from investments in other companies' stock:

Tate Company's 2017 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the direct method. The company also experienced the following during 2017:

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

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

Use the following company information to calculate net cash provided or used by investing activities: (a) Equipment with a book value of $175,000 and an original cost of $300,000 was sold at a loss of $17,000. (b) Paid $62,000 cash for a new truck. (c) Sold land costing $32,000 for $36,000 cash, realizing a $4,000 gain. (d) Purchased treasury stock for $61,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow 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: The amount of cash dividends paid during the year would be:

Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, 2017 using the indirect method, and (2) compute the company's cash flow on total assets ratio for 2017. Additional Information: a. A $20,000 note payable is retired at its carrying value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $120,000 cash. d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700. e. Prepaid expenses relate to Other Expenses on the income statement. f. All purchases and sales of merchandise inventory are on credit.

The direct method for the preparation of the operating activities section of the statement of cash flows:

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

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.

Financing activities include receiving cash dividends from investments in other companies' stocks.