Exam 12: The Statement of Cash Flows

Two methods are available to prepare the operating activities section of a statement of cash flows. Which of the following statements regarding these two methods is false?

Under the direct method, depreciation expense is treated as an outflow in the Investing Activities section of the statement of cash flows.

Which method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses?

Many companies report cash flow per common share on the statement of cash flows.

Use the following selected data and additional information from the records of Utah Corp. to answer the questions that follow. 1 Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000 during 2016. 2 Common stock was issued to retire bonds payable during 2016. 3 The only items affecting retained earnings in 2016 were net income and dividends declared and paid. -Review the data for Utah Corp. REQUIRED: Prepare the operating activities section of statement of cash flows for Utah Corp. for 2016 if the direct method is used to determine net cash flow from operating activities.

The purchase of merchandise is an important activity for a retailer.

If the December 31, 2016, balance of accounts receivable is higher than the January 1, 2016, balance, then the amount of cash collections will be less than the sales on account for the year.

Which balance sheet accounts are most affected by operating activities?

In terms of the statement of cash flows, cash includes actual cash items plus certain cash equivalents such as commercial paper, money market funds, and Treasury bills.

A decrease in retained earnings represents dividends that were during the period, not necessarily those that were paid.

Which of the following is an addition to net income when the indirect method is used?

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method. -Declared cash dividends.

Turtle Island Music Store reported net income of $200,000. Cash from operations

Use the selected data from the consolidated statements of cash flows for Vancouver Corporation for the years ended December 31, 2016 and 2015, to answer the questions that follow. REQUIRED: A What method does Vancouver use to calculate the net cash provided by operating activities? B In 2016, why are depreciation and amortization expenses added back to net income in the operating activities section of the statement of cash flows?