Exam 23: Statement of Cash Flows

The income statement for Chin Consulting is shown below. Assume that all revenues and expenses were for cash and that land was sold for $48,000. There were no other investing or financing activities during the year. The cash balances at the beginning and end of the year were $63,000 and $142,000. Prepare a statement of cash flows.

(Appendix) A decrease in Accounts Receivable is deducted from net sales to compute cash collected from customers.

(Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, a decrease in Accounts Receivable is

The investing activities section of the statement of cash flows includes the purchasing and selling of long-term assets, investing in the debt and equity securities of other businesses, making loans, and collecting the principal on loans.

Those transactions dealing primarily with selling a product or providing a service related to the revenues and expenses reported on the income statement are called

(Appendix) Payments to employees and to the government are examples of cash outflows resulting from operating activities.

(Appendix) Northern Lights Company's cost of goods sold for the calendar year 20-B amounted to $540,000. The beginning and ending balances of Merchandise Inventory and Accounts Payable were as follows: ​ Required: Compute the amount of cash paid for merchandise in 20-B.

An example of a cash outflow from operating activities is

The method of reporting cash flows from operating activities under which income is adjusted for transactions impacting both net income and cash flows, but in different ways, is called the

Financing activities are those transactions involving the purchase and sale of long-term assets, investing in equity securities, lending money, and collecting the principal on the related loans.

Which activities represent the company's primary source of cash over the life of the business?

Financing activities are those transactions dealing with the exchange of cash between the firm and its owners (stockholders) and creditors.

(Appendix) Magic Wand, Inc.'s sales for the calendar year 20-B amounted to $745,000. The Accounts Receivable balance as of December 31, 20-A was $67,000. This same account had a balance of $79,000 as of December 31, 20-B.​ Required: Calculate the amount of cash received from customers in 20-B.

Match the terms with the definitions. -Short-term, highly liquid investments that are considered the same as cash when preparing the statement of cash flows.

The income statement adequately reflects all operating, investing, and financing activities.

(Appendix) When preparing a schedule for the calculation of cash generated from operating activities under the direct method, an increase in Depreciation Expense is

Probably the most important indicator of an organization's financial health is the net cash flow from operating activities.

A noncash expense is an expense that does not require an outflow of cash.

(Appendix) Although the formats are different, the amount of cash flows from operating activities reported under the direct and indirect methods is always equal.

(Appendix) Pro Line Communication Company's sales for the calendar year 20-B amounted to $825,000. The Accounts Receivable balance as of December 31, 20-A was $77,000. This same account had a balance of $62,000 as of December 31, 20-B.​ Required: Calculate the amount of cash received from customers in 20-B.