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Exam 16: Reporting the Statement of Cash Flows

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Question 51

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When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

A) A decrease in accounts payable.
B) Proceeds from the disposal of a long-term asset with no gain or loss.
C) An increase in accounts receivable.
D) A decrease in accrued expenses payable.
E) An increase in prepaid expenses.

F) B) and C)
G) C) and E)

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Question 52

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A cash equivalent is:

A) Another name for cash.
B) Generally within 12 months of its maturity date.
C) An investment readily convertible to a known amount of cash.
D) Is not considered highly liquid.
E) Close to its maturity date but its market value may still be affected by interest rate changes.

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

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Question 53

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The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

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

A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:

Investing activities include (a)the purchase and sale of long-term assets, (b)the purchase and sale of short-term investments, and (c)lending and collecting on loans.

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

Fernwood Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l } \text {Retained earnings balance at the beginning of the year }&\$233,000 \\ \text {Cash dividends declared for the year }&50,000 \\ \text {Proceeds from the sale of equipment }&85,000 \\ \text { Gain on the sale of equipment}&4,500 \\ \text { Cash dividends payable at the beginning of the year}&22,000 \\ \text {Cash dividends payable at the end of the year }& 30,000\\ \text {Net income for the year }&110,000\\\end{array}$ The amounc of cash paid for dividends was:

For each of the following items, indicate whether it would be classified as either an operating activity, an investing activity, a financial activity, or a significant noncash financing and investing activity.

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

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

When preparing a statement of cash flows using the indirect method, which of the following is correct?

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

Stormer Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $28,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the beginning cash balance is $5,000, what is the ending cash balance?

The purchase of stock in another company is classified as a financing activity.

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

A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals: