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Exam 12: Reporting and Analyzing Cash Flows

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Question 121

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Use the following financial statements and additional information to (1)prepare a complete statement of cash flows for the year ended December 31,20X2.The cash provided or used by operating activities should be reported using the direct method,and (2)compute the company's cash flow on total assets ratio for 20X2. 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.

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Question 122

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Use the following information to calculate cash paid for income taxes:

A) $50,000.
B) $59,000.
C) $57,000.
D) $48,000.
E) $52,000.

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

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Question 123

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

All of the following statements related to reporting cash flows from operating activities under U.S.GAAP and IFRS are true except:

Information to prepare the statement of cash flows usually comes from (a)comparative balance sheets,(b)current income statement,and (c)additional information.

The appropriate section in the statement of cash flows for reporting the cash received from customers is:

When preparing the operating activities section of the statement of cash flows using the direct method,non-operating losses are added to net income.

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. $\begin{array}{lcc}\text { At December 31 } & \text { Year 2 } & \text { Year 1 } \\\text { Equipment } & \$ 510,000 & \$ 750,000 \\\text { Accumulated Depreciation-Equipment } & 328,000 & 500,000\end{array}$

For each of the following separate cases,use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

Equipment costing $400,000 with accumulated depreciation of $260,000 is sold at a gain of $10,000.This implies that $130,000 cash was received from the sale.

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the ________ method is used.

Use the following information to calculate cash received from dividends:

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.

Use the following information about the current year's operations of a company to calculate cash provided by operations.

The reporting of financing activities in the statement of cash flows is identical under either the direct or indirect methods.

In preparing a company's statement of cash flows for the most recent year using the indirect method,the following information is available: Net cash provided by operating activities was:

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

In preparing a company's statement of cash flows for the most recent year using the indirect method,the following information is available: $\begin{array}{lr}\text { Net income for the year was } & 52,000 \\\text { Accounts payable increased by } & 18,000 \\\text { Accounts receivable decreased by } & 25,000 \\\text { Inventories decreased by } & 5,000 \\\text { Cash dividends paid were } & 14,000 \\\text { Depreciation expense was } & 20,000\end{array}$ Net cash provided by operating activities was:

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

Explain the value of separating cash flows into operating activities,investing activities,and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.