Exam 16: The Cash Flow Statement

The cash flow statement covers the same period of time as the income statement and the statements of comprehensive income, retained earnings and changes in shareholders' equity.

If a company is a start-up company, the expectation would be that there would be negative cash used by investing and operating activities and positive cash provided by financing activities.

The direct method of calculating cash flows from operating activities converts total profit from an accrual basis to a cash basis.

Potter Limited reported a net loss of $10,000 for the year ended December 31, 2013. During the year, accounts receivable decreased $5,000, merchandise inventory increased $8,000, accounts payable increased by $10,000, and depreciation expense of $5,000 was recorded. During 2013, operating activities

A profitable company would always have a positive cash flow.

When using the indirect method, which of the following would NOT be needed to determine net cash provided by operating activities?

Under ASPE, receipt of interest and dividends are classified as an operating activity.

Generally, the most important category on the cash flow statement is cash flows from

Typical cash payments classified under operating activities include all of the following payments EXCEPT

A $12,000 increase in prepaid expenses combined with an $8,000 increase in accrued expenses payable will cause the cash payments for operating expenses to

Showing a decrease in accounts receivable as an addition on the cash flow statement implies that a company can increase its cash by collecting its receivables.

Under IFRS, companies have a choice on the classification of interest received. Which of the following outlines the choice?

Using the indirect method, depreciation expense for the period

By reporting cash receipts and cash payments, the direct method provides information that is useful to investors and creditors in predicting future cash flows that is NOT available under the indirect method.

When common shares are issued in exchange for land, this transaction is reported in both the financing and investing sections of the cash flows.

Patton Industries Ltd.'s 2014 single step income statement and comparative balance sheet are provided below: Additional information: 1. No new long-term debt was taken during the year. 2. New equipment was purchased, and none was sold. 3. Common shares were issued for cash. 4. Cash dividends were paid to common shareholders. Instructions Prepare the cash flow statement for 2014, using the indirect method.

The cash flow statement will NOT report the

The information in the cash flow statement should help customers and employees evaluate the company's financial position.