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Exam 13: Statement of Cash Flows

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Question 51

True/False

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A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is emphasized.

A) True
B) False

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Question 52

Multiple Choice

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Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

E) All of the above
F) A) and B)

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Question 53

Multiple Choice

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If accounts payable have increased during a period,

On the basis of the details of the common stock account presented below, calculate the total amount to be recorded in financing section of the statement of cash flows.Assume any stock issues were at par. Indicate whether the amount results in an increase or decrease in cash.

If a gain of $11,000 is realized in selling for cash office equipment having a book value of $55,000, the total amount reported in the cash flows from investing activities section of the statement of cash flows is

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

Financing activities include

Complete each of the columns on the table below, indicating in which section each item would be reported on the statement of cash flows operating, investing, or financing, the amount that would be reported, and whether the item would create an increase or decrease in cash.For item that affect more than one section of the statement, indicate all affected.Assume the indirect method of reporting cash flows from operating activities. The first item has been completed as an example.

Selected data for the current year ended December 31 are as follows: During the current year, the cost of merchandise sold was $620,000 and the operating expenses other than depreciation were $142,000.The direct method is used for presenting the cash flows from operating activities on the statement of cash flows. Determine the amount reported on the statement of cash flows for a cash payments for merchandise and b cash payments for operating expenses.

The cost of merchandise sold during the year was $45,000.Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year, respectively.Accounts payable were $7,000 and $5,000 at the beginning and end of the year, respectively.Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

On the basis of the following data for Breach Co.for the current and preceding years ended December 31, prepare a statement of cash flows using the indirect method. Assume that equipment costing $25,000 was purchased for cash and no long term assets were sold during the period. Stock was issued for cash-3,200 shares at par.Net income for the current year was $76,000.Cash dividends declared and paid were $13,000.

For each of the following activities that may take place during the accounting period, indicate the effect a-g on the statement of cash flows prepared using the indirect method.Choices may be selected as the answer for more than one question. -amortization of intangible assets

Identify the section of the statement of cash flows a-d where each of the following items would be reported. -Purchase of the stock of another company as investment

Cash flows from investing activities, as part of the statement of cash flows, would include any payments for the purchase of treasury stock.

Sales reported on the income statement were $372,000.The accounts receivable balance declined $4,500 over the year.The amount of cash received from customers was $367,500.

Rarely will the cash flows from operating activities, as reported on the statement of cash flows, be the same as the net income reported on the income statement.

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the net decrease in inventories from the beginning to the end of the period is added to net income for the period.

Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.

For each of the following activities that may take place during the accounting period, indicate the effect a-g on the statement of cash flows prepared using the indirect method.Choices may be selected as the answer for more than one question. -repayment of long-term note payable

Fortune Corporation's comparative balance sheet for current assets and liabilities was as follows: Adjust Year 2 net income of $65,000 for changes in operating assets and liabilities to arrive at cash flows from operating activities using the indirect method.