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Exam 13: The Statement of Cash Flows

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Question 1

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The following comparative balance sheet and other information relate to Runnels Corporation. Additional information: Depreciation expense $280 Cash dividends declared and paid 70 a.Compute net income,assuming net income and the cash dividends were the only items affecting retained earnings.Show your work. b.Compute net cash flows from operating activities using the indirect method.

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Question 2

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Cash inflows and outflows are netted in the investing activities section of the statement of cash flows in order to simplify the statement.

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Interest received is one item deducted from net income as per the income statement to arrive at net cash flows from operating activities.

Bamberg Corporation repaid a 90-day note payable.Indicate which section,if any,this transaction would appear in,or relate to,on a statement of cash flows.

If the indirect method is used,which of the following would be added to net income to arrive at net cash flows from operating activities?

The primary purpose of the statement of cash flows is to provide information about a company's investing and financing activities during an accounting period.

Repayment of bonds payable would be reflected as a cash outflow in the financing activities section of the statement of cash flows.

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Inventory-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

The statement of cash flows discloses the effect on cash of the purchase and sale of long-term investments and not of short-term investments.

The activity on the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only.

When preparing a statement of cash flows using the indirect method,why is depreciation added back to net income within the operating activities section?

Issuance of notes,either long-term or short-term,would be reflected in the financing activities section of the statement of cash flows.

The activity in the Plant Assets and related Accumulated Depreciation accounts for 2013 is shown below.In addition,the income statement shows a gain on sale of plant assets of $16,000. Based on the information given,compute the amounts to be shown and indicate how they would appear on the statement of cash flows.Assume that the indirect method is being used and that the plant assets were purchased for cash.

It is unethical,and considered a form of manipulation,to classify a cash flow as an investing or financing activity,when it really is an operating activity.

Interest received would be included in the financing activities category on the statement of cash flows.

Royer Corporation engaged in this transaction: Purchased one-year insurance policy for cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

When presenting decreases in long-term investments in the investing activities section of the statement of cash flows,the amount reflected equals the amount of the gain(s)or loss(es)from the transaction(s).

If the indirect method is used to prepare a statement of cash flows,which of the following would be deducted from net income to arrive at net cash flows from operating activities?

Use this information to answer the following question. Oconee Corporation is preparing a statement of cash flows. The following transactions occurred during the year: 1. Sold machinery for $18,000 cash. 2. Purchased a building for $160,000 cash. 3. Issued $140,000 worth of stock to acquire an airplane. 4. Converted long-term bonds by issuing $200,000 worth of stock. 5. Declared and paid a $20,000 cash dividend. Transaction 3 would be found on the statement of cash flows in the

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Income Taxes Payable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following: