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Exam 16: Reporting the Statement of Cash Flows

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Question 121

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Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the direct method.

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The direct method for reporting cash flo...

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Question 122

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To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

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Question 123

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Scranton, Inc. reports net income of $230,000 for the year ended December 31. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.

Financing activities include receiving cash dividends from investments in other companies' stocks.

When preparing the operating activities section of the statement of cash flows using the direct method, non-operating losses are added to net income.

Managers only use the cash flow statement to evaluate the net cash increase or decrease, and do not pay much attention to the details of cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities.

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

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

When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from net income.

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

Northington, 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 investing activities: $\begin{array} { | l | r | } \hline \text { Net income } & \$ 182,000 \\\hline \text { Gain on the sale of equipment } & 12,300 \\\hline \text { Proceeds from the sale of equipment } & 92,300 \\\hline \text { Depreciation expense - equipment } & 50,000 \\\hline \text { Payment of bonds at maturity } & 100,000 \\\hline \text { Purchase of land } & 200,000 \\\hline \text { Issuance of common stock } & 300,000 \\\hline \text { Increase in merchandise inventory } & 35,400 \\\hline \text { Decrease in accounts receivable } & 28,800 \\\hline \text { Increase in accounts payable } & 23,700 \\\hline \text { Payment of cash dividends } & 32,000 \\\hline\end{array}$ Payment of cash dividends 32,000

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of both short- and long-term debt are reported as cash flows from:

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating losses are added to net income.

The purchase of stock in another company is classified as an investing activity.