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Exam 12: Reporting and Analyzing Cash Flows

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Question 51

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

A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Schedule of noncash investing or financing activity.
E) None of these as this is not reported on the statement of cash flows.

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

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Question 52

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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.

A) True
B) False

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Question 53

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The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

The primary purpose of the statement of cash flows is to report all major cash receipts (inflows)and cash payments (outflows)during a period.

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.

The full disclosure principle requires that noncash investing and financing activities be disclosed as part of the statement of cash flows.

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 section of the statement of cash flows using the indirect method, noncash expenses are _____________ net income.

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

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

A company had total assets of $745,000, total cash flows of $230,000, and cash flows from operations of $50,000.The cash flow on total assets ratio is equal to:

The cash flow on total assets ratio is calculated by:

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

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

When preparing the operating section of the statement of cash flows using the indirect method, nonoperating gains are added back to net income.

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

A cash equivalent must be readily convertible to a known amount of cash and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

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

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

A company's cash flow on total assets ratio equals 16%.If average total assets equal $2,937,500 and total cash flows equal $600,000, what is the amount of cash flows from operations?