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Exam 16: Statement of Cash Flows

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Question 71

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The cash flow on total assets ratio can be used as an indicator of earnings quality.

A) True
B) False

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Question 72

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Use the following income statement and information about changes in noncash current assets and liabilities to (1) prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method and (2) compute the company's cash flow on total assets ratio for the year assuming that average total assets are $525,250. Changes in current asset and current liability accounts for the year that relate to operations follow.

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Question 73

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Match each of the following items with the appropriate definitions.

Business activities that generate or use cash are classified as operating, investing, or financing activities on the statement of cash flows.

A company reported operating cash flows in Year 1 of $23,400 and $26,220 in Year 2. Its average total assets in Year 1 were $262,000 and $285,000 in Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

The cash flow on total assets ratio is computed by dividing average total assets by operating income.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

Aster Company's 2011 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the direct method. The company also experienced the following during 2011:

The reporting of financing activities in the statement of cash flows is identical under either the direct or indirect methods.

The reporting of investing and financing activities is _________________ under the direct and indirect methods of preparing the statement of cash flows.

Receipts of cash dividends and interest earned on loans are classified as financing activities.

A main purpose of the statement of cash flows is to report all the major cash ________ and cash _____________.

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the indirect method. The company's income is tax-exempt and its management decides to classify interest paid as operating activities. Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

Woodlawn Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $233,000 Cash dividends declared for the year $50,000 Proceeds from the sale of equipment $85,000 Gain on the sale of equipment $4,500 Cash dividends payable at the beginning of the year $22,000 Cash dividends payable at the end of the year $30,000 Net income for the year $110,000 The amount of cash paid for dividends was:

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

Martin, Inc.'s, income statement is shown below. Based on this income statement and the other information provided, calculate the net cash provided by operations using the indirect method. Additional information: Beginning income taxes payable + Income taxes expense - Cash paid for taxes = Ending income taxes payable Cash paid for taxes = $17,200

Stojko Corporation had a net decrease in cash of $10,000 for the current year. Net cash used in investing activities was $52,000 and net cash used in financing activities was $38,000. What amount of cash was provided (used) in operating activities?

The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.