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Exam 12: Reporting and Analyzing Cash Flows

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Question 91

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A company had net cash flows from operations of $120,000,total cash flows of $500,000 and average total assets of $2,500,000.The cash flow on total assets ratio equals:

A) 4.8%
B) 5.0%
C) 20.0%
D) 20.8%
E) 24.0%

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

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Question 92

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Business activities that either generate or use cash are classified as operating,investing or financing activities on the statement of cash flows.

A) True
B) False

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Question 93

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The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.

Use the cash flow on total assets ratio to determine which of these three companies is most efficiently using its assets.

A company reported average total assets of $496,000 in 2009 and $604,000 in 2010.Its net operating cash flow in 2009 was $41,150 and $55,500 in 2010.Calculate its cash flow on total assets ratio for both years.Comment on the results.

Which of the following items is reported on the statement of cash flows under financing activities?

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.

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.

To be classified as a cash equivalent,an investment must be readily convertible to an unknown amount of cash,because the market value may be affected by interest rate changes.

The indirect method reports individual operating cash outflows and cash inflows by activity.

Polaroid reported net cash provided by operating activities of $131.4 million.Assets at the beginning of the year totaled $2,197.7 million and totaled $2,040.0 million at the end of the year.Calculate Polaroid's cash flow on total assets ratio.

Noncash financing and investing activities are disclosed in the ____________ or in a separate ______________________________.

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Use the following company information to calculate its net cash provided or used by investing activities: (a)Equipment with a book value of $125,000 and an original cost of $220,000 was sold at a gain of $22,000. (b)Paid $49,000 cash for a new truck. (c)Sold land costing $30,000 for $26,000 cash,realizing a $4,000 loss. (d)Purchased treasury stock for $53,000 cash. (e)Long-term investments in stock are sold for $41,000 cash,realizing a gain of $3,500.

Kodak reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year.Kodak's net cash flows from operations was $2,204 million.Calculate Kodak's cash flow on total assets ratio.

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 relatively insensitive to interest rate changes is a(n) :

The purchase of stock in another company is considered to be a financing activity.

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

The accounting records of Miller Company provided the data below ($ in 000s) . $\begin{array}{lr}\text { Net income } & \$ 17,500 \\ \text { Depreciation expense } & 8,400 \\ \text { Increase in accounts receivable } & 4,400 \\ \text { Decrease in inventory } & 6,400 \\ \text { Decrease in prepaid insurance } & 1,500 \\ \text { Decrease in salaries payable } & 2,700 \\ \text { Increase in interest payable } & 900\end{array}$ What is the net cash provided (used) by operating activities?

Spirit Company,a merchandiser,recently completed its 2010 calendar year.For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory,and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.The company's balance sheet and income statement follow: Additional Information on Year 2010 Transactions a. The loss on the cash sale of equipment was $\$ 5,875$ (details in $b$ ) . b. Sold equipment costing $\$ 46,500$ , for a loss of $\$ 5,875$ . c. Purchased equipment costing $\$ 99,000$ by paying $\$ 35,000$ cash and signing a long-term note payable for the balance. d. Borrowed $\$ 2,000$ cash by signing a short-term note payable. e. Paid $\$ 47,500$ cash to reduce the long-term notes payable. f. Issued 2,400 shares of common stock for $\$ 20$ cash per share. g. Net income and dividends were the only items that affected retained earnings. What is the net cash flows provided (used) by operating activities using the indirect method?