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Exam 16: Reporting the Statement of Cash Flows

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Question 81

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In preparing a company's statement of cash flows for the year just ended, the following information is available: $\begin{array} { l r } \text { Loss on the sale of equipment } & \$ 14,000 \\\hline \text { Purchase of equipment } & 225,000 \\\hline \text { Proceeds from the sale of equipment } & 106,000 \\\hline \text { Repayment of outstanding bonds } & 87,000 \\\hline \text { Purchase of treasury stock } & 25,000 \\\hline \text { Issuance of common stock } & 96,000 \\\hline \text { Purchase of land } & 115,000 \\\hline \text { Increase in accounts receivable during the year } & 33,000 \\\hline \text { Decrease in accounts payable during the year } & 75,000 \\\hline \text { Payment of cash dividends } & 35,000\end{array}$ - Net cash flows from financing activities for the year were:

A) $347,000 of net cash used.
B) $26,000 of net cash used.
C) $51,000 of net cash used.
D) $147,000 of net cash used.
E) $340,000 of net cash used.

F) B) and E)
G) A) and E)

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Question 82

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In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: $\begin{array} { l | r } \text { Net income for the year was } & \$ 52,000 \\\hline \text { Accounts payable increased by } & 18,000 \\\hline \text { Accounts receivable decreased by } & 25,000 \\\hline \text { Inventories increased by } & 5,000 \\\hline \text { Depreciation expense was } & 30,000\end{array}$ Net cash provided by operating activities was:

A) $60,000.
B) $70,000.
C) $130,000.
D) $80,000.
E) $120,000.

F) A) and E)
G) A) and D)

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Question 83

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Use the following information to calculate cash paid for income taxes: $\begin{array} { l | r } \text { Income tax expense } & \$ 43,000 \\\hline \text { Income tax payable, January l } & 9,100 \\\hline \text { Income tax payable, December 31 } & 10,200\end{array}$

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 preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are subtracted from net income.

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: $\begin{array} { l | r } \text { Retained earnings balance at the begining of the year } & \$ 126,000 \\\hline \text { Cash dividends declared for the year } & 46,000 \\\hline \text { Proceeds from the sale of equipment } & 81,000 \\\hline \text { Gain on the sale of equipment } & 7,000 \\\hline \text { Cash dividends payable at the beginning of the year } & 18,000 \\\hline \text { Cash dividends payable at the end of the year } & 20,000 \\\hline \text { Net income for the year } & 92,000\end{array}$ - What is the ending balance for retained earnings? A) $352,000. B) $218,000. C) $179,000. D) $172,000. E) $170,000.

A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.

Match the following definitions with the appropriate term

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 financing activities: $\begin{array} { | l | r| } \hline \text { Net in come } & \$ 182,000 \\\hline \text { Gain on the sale of equipment } & 12,300 \\\hline \text { Proceeds from the sale of equipment } & 92,300 \\\hline \text { Depreciation expense - equipment } & 50,000 \\\hline \text { Payment of bonds at maturity } & 100,000 \\\hline \text { Purchase of land } & 200,000 \\\hline \text { Istuance of common stock } & 300,000 \\\hline \text { Increase in merchandise inventory } & 35,400 \\\hline \text { Decrease in accounts receivable } & 28,800 \\\hline \text { Increase in accounts payable } & 23,700 \\\hline \text { Payment of cash dividends } & 32,000\\\hline \end{array}$

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

Accounting standards:

When preparing the operating activities section of the statement of cash flows using the indirect method, depreciation is added to net income.

In preparing a company's statement of cash flows for the year just ended, the following information is available: $\begin{array} { l r } \text { Loss on the sale of equipment } & \$ 14,000 \\\hline \text { Purchase of equipment } & 225,000 \\\hline \text { Proceeds from the sale of equipment } & 106,000 \\\hline \text { Repayment of outstanding bonds } & 87,000 \\\hline \text { Purchase of treasury stock } & 25,000 \\\hline \text { Issuance of common stock } & 96,000 \\\hline \text { Purchase of land } & 115,000 \\\hline \text { Increase in accounts receivable during the year } & 33,000 \\\hline \text { Decrease in accounts payable during the year } & 75,000 \\\hline \text { Payment of cash dividends } & 35,000\end{array}$ - Net cash flows from investing activities for the year were:

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is unaffected by interest rate changes is a(n) :

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $\begin{array} { l | r } \text { Net income } & \$ 85,300 \\\hline \text { Depreciation expense } & 12,000 \\\\\hline & \\\hline \text { Increase in merchandise inventory } & 2,050 \\\hline \text { Increase in accounts payable } & 6 , 1 5 0\end{array}$

Addams Corporation paid cash dividends totaling $75,000 during its most recent fiscal year. How should this information be reported on Addams's statement of cash flows?

The cash flow on total assets ratio is computed by dividing average total assets by operating income.

Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ________.

What are the five usual steps involved in the preparation of the statement of cash flows?

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.