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Exam 12: Reporting Cash Flows

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Question 71

Multiple Choice

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The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: What is the ending balance for retained earnings?

A) $218,000.
B) $170,000.
C) $352,000.
D) $172,000.
E) $179,000.

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

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Question 72

Multiple Choice

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Use the following information to calculate cash paid for income taxes:

A) $23,700.
B) $52,100.
C) $53,200.
D) $41,900.
E) $43,000.

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

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Question 73

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

Both the direct and indirect methods yield the identical net cash flow amount provided or used by operating activities.

The statement of cash flows is divided into three sections called the ________, ________, and ________ sections.

To effectively evaluate cash flows, we separately analyze investing, financing, and operating activities.

Information to prepare the statement of cash flows usually comes from three sources: (1) ________, (2) ________, and (3) ________.

Managers primarily use the statement of cash flows to determine the amount of the company's assets relative to the amount of its debt.

The purchase of a long-term asset using a long-term note payable is an example of a noncash investing and financing activity, which should be disclosed in a note or separate schedule.

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

A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

Common uses of the statement of cash flows include all but which of the following?

Use the following information to calculate cash paid for salaries:

Computing operating cash flows by adjusting accrual-based net income is done when the ________ method is used.

A machine with a cost of $130,000, accumulated depreciation of $85,000, and current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

Financing activities include receiving cash dividends from investments in equity securities.

Use the following calendar-year information to prepare Adam Company's statement of cash flows using the direct method. $\begin{array}{|l|r|}\hline\text { Cash paid to purchase machinery } & \$ 124,000 \\\hline \text { Cash paid for merchandise inventory } & 220,000 \\\hline \text { Cash paid for operating expenses } & 280,000 \\\hline \text { Cash paid for interest } & 4,000 \\\hline \text { Cash received for interest } & 10,000\\\hline \text { Cash proceeds from sale of land } & 100,000 \\\hline \text { Cash balance at beginning of year } & 15,000 \\\hline \text { Cash balance at end of year } & 77,000 \\\hline \text { Cash borrowed on a short-term note } & 25,000 \\\hline \text { Cash dividends paid } & 24,000 \\\hline \text { Cash received from stock issuance } & 57,000 \\\hline \text { Cash collections from customers } & 522,000 \\\hline\end{array}$

Use the following financial statements and additional information to (1) prepare a complete statement of cash flows for the year ended December 31, Year 2. The cash provided or used by operating activities should be reported using the direct 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.

A company had net cash flows from operations of $341,000, net income of $286,000 and average total assets of $1,850,000. The cash flow on total assets ratio equals:

Northeast Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities: