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Exam 12: Reporting and Analyzing Cash Flows

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Question 31

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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.

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The cash flow on total assets ratio is d...

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Question 32

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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:

A) $50,000
B) $5,000
C) $45,000
D) Zero.This is an operating activity
E) Zero.This is a financing activity

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

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Question 33

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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.

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array}{|l|r|}\hline \text { Cost of good sold } & \$ 536,000 \\\hline \text { Merchandise inventory, January 1 } & 64,800 \\\hline \text { Merchandise inventory, December 31 } & 57,000 \\\hline \text { Accounts payable, January 1 } & 64,400 \\\hline \text { Accounts payable, December 31 } & 59,000\\\hline \end{array}$

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:

The payment of cash dividends to shareholders is classified as a financing activity.

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

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

A purchase of land in exchange for shares of stock is disclosed on the statement of cash flows or in a note to the statement.

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

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

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.

The statement of cash flows reports the total change in cash in the period.

The cash flow on total assets ratio is defined as the total cash flows from operations divided by the average total assets.

A statement of cash flows should reconcile the differences between the beginning and ending balances of:

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

Cash paid out for merchandise is considered to be an operating activity.

The payment of cash dividends never changes the balance of retained earnings.

If a company borrows money from a bank,the interest paid on this loan should be reported on the statement of cash flows as a(n) :