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Exam 12: Reporting Cash Flows

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Question 81

True/False

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

A) True
B) False

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Question 82

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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) D) and E)
G) None of the above

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Question 83

True/False

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Conversion of preferred stock to common stock is disclosed in the financing section of the statement of cash flows.

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

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) :

A company's income statement showed the following: net income,$134,000; depreciation expense,$30,000; and gain on sale of plant assets,$4,000.An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400.Calculate the net cash provided or used by operating activities.

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

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Issued stock for cash.

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

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

The reporting of investing and financing activities is ________ under the direct and indirect methods of preparing the statement of cash flows.

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

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Issued bonds payable for cash.

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

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

Use the information provided to calculate the missing cash paid for merchandise for the period. $\begin{array}{|l|c|}\hline \text { Accounts payable, beginning-year} & \$ 60,000 \\\hline \text { Cost of goods sold. } & 244,000 \\\hline \text { Merchandise inventory, beginning-year } & 35,000 \\\hline \text { Merchandise inventory, year-end} & 40,500 \\\hline \text { Accounts payable, year-end. } & 64,800 \\\hline\text { Cash paid for merchandise }\\\hline\end{array}$

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $\begin{array} { | l | r | } \hline \text { Net income } & \$ 85,300 \\\hline \text { Depreciation expense } & 12,000 \\\hline & \\\hline \text { Gain on sale of land } &7,500 \\\hline \text { Increase in merchandise inventory } & 2,050 \\\hline \text { Increase in accounts payable } & 6,150\\\hline\end{array}$

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

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?