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Holly Oaks, 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 operating activities using the indirect method: Holly Oaks, 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 operating activities using the indirect method: A) $373,200. B) $170,000. C) $267,000. D) $329,900. E) $256,000.


A) $373,200.
B) $170,000.
C) $267,000.
D) $329,900.
E) $256,000.

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

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A company reported average total assets of $501,000 in Year 1 and $611,000 in Year 2. Its net operating cash flow in Year 1 was $41,500 and $55,250 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

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blured image Comment: The company had an increase in...

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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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Cash flows from interest received on loans are reported in the statement of cash flows as part of:


A) Operating activities.
B) Financing activities.
C) Investing activities.
D) Noncash activities.
E) This is not reported in the statement of cash flows.

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

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Accounting standards require companies to include a statement of cash flows in a complete set of financial statements.

A) True
B) False

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Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

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The statement of cash flows involves rep...

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Investing activities do not include the:


A) Purchase of plant assets.
B) Lending and collecting on notes receivable.
C) Issuance of common stock.
D) Sale of plant assets.
E) Sale of short-term investments other than cash equivalents.

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

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Bagwell's net income for the year ended December 31, Year 2 was $175,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. Bagwell's net income for the year ended December 31, Year 2 was $175,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. A) $79,000. B) $201,000. C) $95,000. D) $50,000. E) $69,000.


A) $79,000.
B) $201,000.
C) $95,000.
D) $50,000.
E) $69,000.

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

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The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:


A) Cash.
B) Cash received from customers.
C) Increase (decrease) in accounts receivable.
D) Net income.
E) Adjustments to net income.

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

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Which one of the following is representative of typical 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 by a merchandiser to acquire equity securities of other companies.
E) Receipts of cash sales.

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

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The statement of cash flows cannot help address questions such as:


A) How is the increase in investments financed?
B) What is the source of cash for new plant assets?
C) How much cash is generated from or used in operations?
D) How much of the company's revenues have been retained as profit?
E) Why is cash flow from operations different from income?

F) A) and B)
G) C) and D)

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Use the following information to calculate cash received as dividends from investments in other companies' stock: Use the following information to calculate cash received as dividends from investments in other companies' stock: A) $63,500. B) $63,000. C) $64,000. D) $67,100. E) $60,400.


A) $63,500.
B) $63,000.
C) $64,000.
D) $67,100.
E) $60,400.

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

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

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comparative balance ...

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

A) True
B) False

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A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.

A) True
B) False

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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.


A) $376,450.
B) $351,450.
C) $356,450.
D) $319,950.
E) $263,750.

F) B) and D)
G) B) and C)

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The full disclosure principle requires that noncash investing and financing activities be disclosed in the financial statements.

A) True
B) False

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A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow on total assets ratio equals:


A) 41.04%.
B) 41.97%.
C) 26.43%.
D) 17.23%.
E) 64.39%.

F) B) and D)
G) A) and E)

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The statement of cash flows helps analysts evaluate all but which of the following?


A) Ability of the company to generate profit.
B) Source of cash used for plant expansion.
C) Differences between net income and net operating cash flow.
D) Source of cash used to finance investing activities.
E) Source of cash used for debt repayments.

F) A) and C)
G) None of the above

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


A) Declaration of a cash dividend.
B) Payment of a cash dividend.
C) Declaration of a stock dividend.
D) Payment of a stock dividend.
E) Stock split.

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

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