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Exam 16: Reporting the Statement of Cash Flows

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Question 101

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When preparing the operating activities section of the statement of cash flows using the direct method, non-operating gains are added to net income.

A) True
B) False

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Question 102

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A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable. The entire transaction is disclosed to users in the financing section of the statement of cash flows.

A) True
B) False

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Question 103

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Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l | r } \text { Retained earnings balance at the begining of the year } & \$ 126,000 \\\hline \text { Cash dividends declared for the year } & 46,000 \\\hline \text { Proceeds from the sale of equipment } & 81,000 \\\hline \text { Gain on the sale of equipment } & 7,000 \\\hline \text { Cash dividends payable at the beginning of the year } & 18,000 \\\hline \text { Cash dividends payable at the end of the year } & 20,000 \\\hline \text { Net income for the year } & 92,000\end{array}$ -The amount of cash dividends paid during the year would be:

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

Keita Co. reported net income of $213.4 million, net cash provided by operating activities of $151.3 million, total cash flows of $187.7 million, and average total assets of 2,314.8 million at the end of the year. Calculate the cash flow on total assets ratio for Keita.

The cash flow on total assets ratio:

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes).

A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are ________ net income.

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.

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

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.

Which one of the following is representative of typical cash flows from operating activities?

Investing activities include: (a) the purchase and sale of long-term assets, (b) lending and collecting on notes receivable, and (c) the purchase and sale of short-term investments in the securities of other entities, other than cash equivalents and trading securities.

_____________activities include the cash effects of transactions and events that determine net income.

A spreadsheet can help organize the information needed to prepare a statement of cash flows.