Exam 16: The Cash Flow Statement

On the cash flow statement using the indirect method, a loss on the sale of equipment will

Continental Merchandising Inc.'s current assets and liabilities at December 31, 2014 are as follows: Continental had profit of $83,500 in 2014. Included in the calculation of profit is depreciation of building and equipment in the amount of $45,000 and amortization of a patent in the amount of $1,000. Instructions Prepare the operating section of Continental's cash flow statement for the year ended December 31, 2014, using the indirect method.

The financial statements of Granger Inc. appear below: The following additional data were provided: 1. Dividends declared and paid were $14,000. 2. During the year, equipment was sold for $12,000 cash. This equipment cost $28,000 originally and had a carrying amount of $12,000 at the time of sale. 3. All depreciation expense is in the operating expenses category. 4. All sales and purchases are on account. 5. Accounts payable pertain to merchandise suppliers. 6. All operating expenses except for depreciation were paid in cash. Instructions a. Prepare a cash flow statement for Granger Inc., using the direct method. b. Calculate free cash flow.

The cash flow statement gives information on the operating, gross profit and investing activities of a company.

In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will appear as

Sale of an asset at a loss will affect which activities?

An issuance of debt to purchase long lived assets would be an investing activity.

The following information is taken from the cash flow statements for two competing companies in the same industry, one of which is approximately 10 times larger than the other: Instructions Which company do you believe is in better financial condition? Which company appears to be in a growth phase, and which is not growing? Explain the basis for your conclusions.

Cash equivalents include money market instruments that are due within one year.

Which of the following would NOT appear in the operating activities section of a cash flow statement prepared under the direct method?

Lazarus Ltd. had total operating expenses of $120,000 in 2014, which included depreciation expense of $20,000. Also, during 2014, prepaid expenses increased by $5,000 and accrued liabilities decreased by $6,700. Instructions Calculate the amount of cash payments for operating expenses in 2014, using the direct method.

If accounts receivable have increased during the period,

If there is a net decrease in cash we say that cash was

Regardless of whether the indirect or direct method is used to calculate operating activities, investing and financing activities are measured and reported in the same way.

Which of the following items does NOT appear in the cash flow statement under the direct method?

Operating activities of a company show the cash effects of revenues and expense transactions.

The general ledger of Hubert Corporation provides the following information: The company's net sales for the year were $2,850,000 and cost of goods sold amounted to $1,650,000. Instructions Calculate the following: a. Cash receipts from customers. b. Cash payments to suppliers.

Investing activities include

The first step in preparing the cash flow statement is to determine the net cash provided by operating activities.

The income statement of Stewart Limited is shown below: Additional information: 1. Accounts receivable decreased $300,000 during the year. 2. Inventory decreased $175,000 during the year. 3. Prepaid expenses increased $200,000 during the year. 4. Accounts payable to merchandise suppliers increased $160,000 during the year. 5. Accrued expenses payable increased $120,000 during the year. Instructions Prepare the operating activities section of the cash flow statement for the year ended December 31, 2014, for Stewart Limited, using the direct method.