Exam 12: Statement of Cash Flows

When the direct method is used to determine the cash flows from operating activities, which of the following adjustments must be made to income tax expense to determine total income tax payments?

When using the T-account approach to preparing the indirect method of the statement of cash flows, which of the following would be associated with amounts entered on the credit side of the Cash T-account?

Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?

Depreciation is added back to net income in a statement of cash flows prepared using the indirect method because it:

Which of the following statements best describes the reason Depreciation Expense is added to net income when preparing the statement of cash flows?

Which of the following items would not be classified as a cash flow from financing activities?

Match each item with the correct letter below to indicate how each revenue or expense account on the income statement is adjusted when using the direct method to determine net cash flow provided by operating activities. Account Balance Change _____ Increase in Accrued Expenses _____ Decrease in Accounts Receivable _____ Decrease in Unearned Income _____ Increase in Prepaid Expenses _____ Decrease in Accounts Payable _____ Increase in Long-Term Notes Payable _____ Decrease in Prepaid Insurance _____ Increase in Inventory _____ Increase in Interest Payable _____ Increase in Accumulated Depreciation Type of Adjustment A - Add item to related revenue or expense account balance S - Subtract item from related revenue or expense account balance N - No adjustment necessary

Which of the following variations of the accounting equation describes the preparation of the statement of cash flows?

The purchase of $100,000 of equipment by issuing a note would be reported:

Choose the appropriate letter to match the term and the definition. Not all definitions will be used. Term _____ Operating Activities _____ Indirect Method _____ Working Capital _____ Cash Equivalents _____ Investing Activities _____ Supplemental Disclosures _____ Direct Method _____ Financing Activities Definition Cash inflows and outflows related to components of net income. Include assets that are very liquid and are purchased by the entity within three months of maturity. These activities include only purchases made with borrowed funds. Reports the components of cash flows from operating activities as gross receipts and gross payments. This ratio uses net income instead of operating cash flow to analyze a company's ability to finance the cost of its debt. Measures the ability of a company to finance its interest payments with its operating cash flow before taxes and interest. A measure of the amount by which current assets exceed current liabilities. These activities include money lent by a company as well as money borrowed by a company. Must include cash paid for interest and income tax in a separate schedule. Cash inflows and outflows related to the sale or purchase of investments and long-lived assets. Cash inflows and outflows related to financing sources external to the company (owners and lenders). Presents the operating activities section of the cash flow statement by adjusting net income to compute cash flows from operating activities.

Equipment with a cost of $10,000 and a book value of $3,000 was sold during the year for cash of $9,000. Additional equipment was purchased during the year for cash. The company uses the indirect method in preparing the statement of cash flows. What is the amount of depreciation expense that will be reported in the operating activities section of the statement?

During the current year, a company paid $4,500 which it owed from its prior year income tax liability and $30,000 for its current year tax liability. The company still owes $6,000 at the end of the current year. How much should the company report as cash paid for income taxes on its statement of cash flows for the current year?

Cash flows from investing activities include cash:

When preparing the operating activities section of the statement of cash flows using the direct method, a gain or loss from selling equipment is reported in the operating activities section of the statement of cash flows

Consider the following information: Required: Use the direct method to compute the amount of net cash flows provided by (used in) operating activities.

The receipts of dividends and interest are both reported as cash inflows from investing activities on the statement of cash flows

A company's income statement for the year shows a net loss of $90,000. Additional information for the year follows: What is the net cash provided by (used in) operating activities?

Which of the following would be reported on the statement of cash flows, using the direct method, as a cash flow from operating activities?

Which of the following items would be reported on a statement of cash flows using the indirect method, but not on a statement prepared using the direct method?

Cash flows from financing activities can include: