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Exam 12: Reporting and Analyzing Cash Flows

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Question 51

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The direct method of reporting operating cash flows:

A) Is recommended but not required by the FASB.
B) Must be used by all companies.
C) Is used by most companies.
D) Is considered supplementary disclosure.
E) Is not recommended by the FASB,but is commonly used.

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

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Question 52

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

A) True
B) False

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Question 53

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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.

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

When using the indirect method to calculate and report net cash provided or used by operating activities,which of the following is subtracted from net income?

The appropriate section in the statement of cash flows for reporting the cash received from the issuance of a long-term note payable is:

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

Alvez reports net income of $305,000 for the year ended December 31.It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment.Its comparative balance sheet reveals a $40,200 increase in accounts receivable,a $10,200 decrease in prepaid expenses,a $15,200 increase in accounts payable,a $12,500 decrease in wages payable,a $75,000 increase in equipment,and a $100,000 decrease in notes payable.Calculate the net increase in cash for the year.

When preparing the operating activities section of the statement of cash flows using the indirect method,an increase in income taxes payable is 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.

An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?

A statement of cash flows explains the differences between the beginning and ending balances of:

Use the following company information to prepare a schedule of significant noncash investing and financing activities: (a)Sold a building with a book value of $300,000 for $225,000 cash and sold land with a book value of $40,000 for $65,000 cash. (b)Issued 15,000 shares of $10 par value common stock in exchange for equipment with a market value of $175,000. (c)Retired a $100,000,8% bond by issuing another $100,000,7% bond issue. (d)Acquired land by issuing a twenty-year,5%,$73,000 note payable.

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

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

A company's Inventory balance decreased by $18,000 during the year.Its Accounts Payable balance decreased by $6,000,and its cost of goods sold for the year was $340,000.The company's total amount of cash payments for merchandise during the year equals:

Use the following information about the current year's operations of a company to calculate cash provided by operations.

Use the information provided below to calculate the cash paid for interest for the period.

Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions.

In preparing a company's statement of cash flows for the most recent year,Ransom Corp.reported the following information: Net cash flows from financing activities for the year were: