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Exam 12: Reporting Cash Flows

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Question 121

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Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

A) True
B) False

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Question 122

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Which one of the following is an example of cash flows from operating activities?

A) Proceeds from collecting the principal amounts of loans.
B) Repayment of principals on loans.
C) Proceeds from the issuance of bonds and notes payable.
D) Payments to acquire equity securities of other companies.
E) Receipts of cash from sales.

F) C) and D)
G) D) and E)

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Question 123

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Probably the most important section of the statement of cash flows in analyzing the financial performance of a company's ongoing business is the ________ section.

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

Victoria reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Net cash flows from operations were $2,204 million. Calculate the cash flow on total assets ratio.

Companies can use either the direct or indirect method to prepare the operating section of the statement of cash flows.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

________ activities include the cash effects of transactions and events that determine net income.

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

When using a spreadsheet to prepare the statement of cash flows, an increase in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, Year 2 using the indirect method, and (2) compute the company's cash flow on total assets ratio for Year 2. Additional Information a. A $20,000 note payable is retired at its carrying value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $120,000 cash. d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700. e. Prepaid expenses relate to Other Expenses on the income statement. f. All purchases and sales of merchandise inventory are on credit.

Cash flows are essentially the same as net income because they are both measured using accrual accounting principles.

The reporting of investing activities in the statement of cash flows is identical under the direct method and indirect method.

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

The direct method separately lists each major item of operating cash receipts and cash payments.

Use the information provided below to calculate the cash paid for interest for the period.

When preparing the operating activities section of the statement of cash flows using the direct method, revenues and gains with no cash inflows are added back to net income.

When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are ________ net income.

Managers review the statement of cash flows before making business decisions.

The statement of cash flows reports: