Exam 23: Statement of Cash Flows

When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities?

Hager Company sold some of its plant assets during 2015. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $75,000. The information concerning the sale of the plant assets should be shown on Hager's statement of cash flows (indirect method) for the year ended December 31, 2015, as a(n)

Statement of cash flows (indirect method).The following information is taken from French Corporation's financial statements: InstructionsPrepare a statement of cash flows for French Corporation for the year 2015. (Use the indirect method.)

When numerous adjustments are necessary, companies often use a cash flow worksheet instead of preparing a statement of cash flows.

In the "On the Horizon" feature in the text, which of the following is discussed regarding convergence of U.S. GAAP with IFRS?

The net increase (decrease) in cash reported on the statement of cash flows should reconcile the beginning and ending cash balances reported in the comparative balance sheets.

Effects of transactions on statement of cash flows.Indicate for each of the following what should be disclosed on a statement of cash flows (indirect method). If not disclosed, write "Not shown." There may be more than one answer for some items. For an item that is added to net income, write "Add," and for an item that is deducted from net income, write "Deduct." Show financing and investing outflows in parentheses. For example, an answer might be: Deduct $4,700 or Investing ($31,000). If the item is a noncash transaction that should be disclosed separately, write "Noncash."(a) The deferred tax liability increased $10,000.(b) The balance in Investment in Hoyt Co. Stock increased $12,000 as a result of using the equity method.(c) Issuance of a stock dividend increased common stock $40,000 and paid-in capital $16,000.(d) Amortization of bond discount, $1,600.(e) Machinery that cost $100,000 and had accumulated depreciation of $48,000 was sold for $54,000.(f) Issued 9,000 shares of common stock ($10 par) with a market price of $15 per share for machinery. (Show the amount, too.)(g) Amortization of patents, $3,000.(h) Cash dividends paid, $60,000.

Direct and indirect methods.Compare the direct method and the indirect method by explaining each method.

Surf Company follows IFRS for its external financial reporting. The following amounts were available at December 31, 2015: Interest paid \ 25,000 Dividends paid 16,000 Taxes paid on operations 37,000 Under IFRS, what is the maximum amount that could be reported for cash used by financing activities for Surf Company for the year ended December 31, 2015?

Use the following information for questions 51 through 55. Harlan Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Harlan Mining Co. for 2015 and 2014 are provided below. The following additional data were provided: 1. Dividends for the year 2015 were $144,000. 2. During the year, equipment was sold for $180,000. This equipment cost $264,000 originally and had a book value of $216,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales. 3. All depreciation expense is in the selling expense category. -Under the direct method, the total taxes paid is

Preparation of statement of cash flows (format provided).The balance sheets for Kinder Company showed the following information. Additional information concerning transactions and events during 2015 are presented below. Additional data:1. Net income for the year 2015, $71,000.2. Depreciation on plant assets for the year, $12,700.3. Sold the long-term investments for $28,000 (assume gain or loss is ordinary).4. Paid dividends of $30,000.5. Purchased machinery costing $21,500, paid cash.6. Purchased machinery and gave a $60,000 long-term note payable.7. Paid a $40,000 long-term note payable by issuing common stock.

In preparing Titan Inc.'s statement of cash flows for the year ended December 31, 2015, the following amounts were available: Collect note receivable \ 410,000 Issue bonds payable 426,000 Purchase treasury stock 200,000 What amount should be reported on Titan, Inc's statement of cash flows for financing activities?

Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015. Included in net income was a gain on early extinguishment of debt of $60,000 related to bonds payable with a book value of $1,200,000. Each of the following accounts increased during 2015: Notes receivable \ 45,000 Deferred tax liability \ 10,000 Treasury stock \ 120,000 What is the amount of cash used by financing activities for Jarvis, Inc. for the year ended December 31, 2015?

A statement of cash flows typically would not disclose the effects of

Ocean Company follows IFRS for its external financial reporting. Which of the following methods of reporting are acceptable under IFRS for the items shown?

A company should add back bond premium amortization to net income to arrive at net cash flow from operating activities.

Use the following information for questions 63 through 67. Financial statements for Kiner Company are given below: Total assets on the balance sheet at December 31, 2015 are $4,432,000. Accumulated deprecia-tion on the equipment sold was $224,000. -When the equipment was sold, the Buildings and Equipment account received a credit of

Classification of cash flows and transactions.Give:(a) Three distinct examples of investing activities.(b) Three distinct examples of financing activities.(c) Three distinct examples of significant noncash transactions.(d) Two examples of transactions not shown on a statement of cash flows.

Use the following information for questions 115 and 116. Peavy Corp.'s transactions for the year ended December 31, 2015 included the following: $\bullet$ Acquired 50% of Gant Corp.'s common stock for $200,000 cash which was borrowed from a bank. $\bullet$ Issued 5,000 shares of its preferred stock for land having a fair value of $320,000. $\bullet$ Issued 500 of its 11% debenture bonds, due 2020, for $392,000 cash. $\bullet$ Purchased a patent for $220,000 cash. $\bullet$ Paid $120,000 toward a bank loan. $\bullet$ Sold available-for-sale securities for $796,000. $\bullet$ Had a net increase in returnable customer deposits (long-term) of $88,000. -Peavy's net cash provided by financing activities for 2015 was

The FASB encourages the use of the indirect method over the direct method.