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Exam 13: Statement of Cash Flows

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Question 91

Multiple Choice

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Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of cash flows as a use of cash?

A) purchase of noncurrent assets
B) purchase of treasury stock
C) discarding an asset that had been fully depreciated
D) payment of cash dividends

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

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Question 92

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If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

A) True
B) False

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Question 93

Multiple Choice

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Net income for the year was $45,500. Accounts receivable increased $5,500, and accounts payable increased by $11,200. Under the indirect method, the cash flow from operations is

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported.a.Operating activities b.Financing activities c.Investing activities d.Schedule of noncash financing and investing -Sale of machinery held for use by the company

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.

Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current operations.

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.a.Increase cash from operating activities b.Decrease cash from operating activities c.Increase cash from investing activities d.Decrease cash from investing activities e.Increase cash from financing activities f.Decrease cash from financing activities g.Noncash investing and financing activity -Acquisition of treasury stock

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.

Kennedy, Inc. reported the following data: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

The declaration and issuance of a stock dividend would be reported on the statement of cash flows.

Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400.

Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

The comparative balance sheets of Posner Company, for Years 1 and 2 ended December 31, appear below in condensed form: Additional data for the current year are as follows: (a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for $183,200.(b) Bonds payable for $100,000 were retired by payment at their face amount.(c) 5,000 shares of common stock were issued at $13 for cash.(d) Cash dividends declared and paid, $25,000.​ What are the net cash flows from operating, investing, and financing activities for Year 2?

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.a.Increase cash from operating activities b.Decrease cash from operating activities c.Increase cash from investing activities d.Decrease cash from investing activities e.Increase cash from financing activities f.Decrease cash from financing activities g.Noncash investing and financing activity -Decrease in accounts payable balance

Each of the events below may have an effect on the statement of cash flows. Designate how the event should be reported within the statement of cash flows using the codes provided below. Codes may be used more than once, or not at all.Codes: Events:

Under the direct method of preparing a statement of cash flows, the gain on the sale of land is not adjusted or reported as part of cash flows from operating activities.

A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should be shown on the statement of cash flows as follows:

The following selected account balances appeared on the financial statements of the Washington Company. Use these balances to answer the questions that follow. The Washington Company uses the direct method to calculate net cash flow from operating activities. Assume that all accounts payable are owed to merchandise suppliers.​ -The operating cash flow available for company use after purchasing the fixed assets that are necessary to maintain current operations is called the

Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of the year, respectively. Net income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is