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Exam 12: Statement of Cash Flows

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Question 1

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If a company sells equipment at a loss, the loss from selling the equipment is reported in the investing activities section of the statement of cash flows.

A) True
B) False

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Question 2

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Mayes Corporation reported utilities expense of $28,200 on its income statement for 2013. For the year, the beginning balance in Utilities Payable was $2,000 and the ending balance was $1,000. The amount of cash that Mayes paid for utilities in 2013 was $29,200.

A) True
B) False

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Question 3

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On the statement of cash flows, cash receipts from interest and dividends are classified as investing activities.

Cash flow from operating activities is often less stable from year to year than is the amount of net income reported on the income statement.

The following data is supplied from the comparative balance sheets and income statement information from Westerman, Inc. Westerman uses the indirect method to prepare the statement of cash flows. Net income for 2013 was $20,000. No long term assets were sold during the year. During 2013, Westerman paid dividends of $12,000. -Prepare the operating activities section of Westerman's statement of cash flows.

The final or bottom line on the statement of cash flows is the net increase or decrease in cash for the period.

On January 1, 2013, the Adams Company purchased equipment for $36,000 cash. On December 31, 2013, depreciation of $9,000 was recorded. Which of the following correctly shows the combined effect of these two events on the income statement and statement of cash flows? Adams uses the direct method.

During the 2013 accounting period the Maynard Company earned $155,000 of sales revenue on account and accrued $112,500 of operating expenses. The company also earned $16,400 of service revenue that had previously been recorded as unearned revenue. In addition, a $12,200 stock dividend was issued to the stockholders. What can be said about cash flows considering these transactions?

Which of the following is the correct sequence for the major components of the Statement of Cash Flows?

A cash payment to purchase treasury stock is reported on the statement of cash flows as a financing activity.

What is the major advantage of using the direct method of preparing the statement of cash flows?

Ellison Company began the accounting period with $54,000 in accounts receivable. The ending balance in accounts receivable was $20,000. If the credit sales during the period were $88,000, what is the amount of cash received from customers?

When using the indirect method to prepare the statement of cash flows, a decrease in current liabilities is:

The investing activities section of the statement of cash flows distinguishes between acquisitions of long-term assets that expand operating capacity and those that replace old, worn-out assets.

Woodstock Company uses the indirect method to prepare its statement of cash flows. Indicate whether each of the following statements is true or false. _____ a) Depreciation expense would be subtracted from net income when determining the amount of cash flow from operating activities. _____ b) Losses would be added to net income when determining the amount of cash flow from operating activities. _____ c) Cash flow from investing activities would be reported the same as if the direct method were used. _____ d) The amount of net cash flow from operations will be higher than it would be if the direct method were used. _____ e) With the indirect method, a decrease in accounts receivable is added to net income in calculating the amount of cash flows from operating activities.

Jarvis Company requires prepayment from all customers. Jarvis Company reported revenue of $248,000 on its 2013 income statement. The balance in its Unearned Revenue account was $12,000 at the start of 2013 and $4,000 at the end of the year. Based on this information alone, the amount of cash that Jarvis collected from customers for 2013 was $240,000.

The indirect method for preparing the statement of cash flows begins with the amount of sales revenue reported on the income statement.

Assuming accounts payable is used for inventory purchases only, the amount of cash paid for inventory purchases during 2013 was:

Which of the following is an incorrect statement of one of the rules for converting net income to the cash flow from operating activities using the indirect method?

What are the two methods used to prepare the statement of cash flows?