Exam 16: Reporting the Statement of Cash Flows

On a spreadsheet used to prepare the operating activities section of the statement of cash flows,depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

To be classified as a cash equivalent,the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

The direct method of reporting operating cash flows:

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the ______________ method is used.

The direct method for the preparation of the operating activities section of the statement of cash flows:

The cash flow on total assets ratio is computed by dividing _____________ by ____________.

A cash equivalent must be readily convertible to a known amount of cash,and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

Receipts of cash dividends and interest earned on loans are classified as investing activities.

Define and discuss the differences between operating,investing,and financing activities.

Business activities that generate or use cash are classified as operating,investing,or financing activities on the statement of cash flows.

The cash flow on total assets ratio can be used as an indicator of earnings quality.

When preparing a statement of cash flows on the indirect method,each of the following should be classified as an operating activity cash flow except:

A company reported operating cash flows in Year 1 of $23,400 and $26,220 in Year 2.Its average total assets in Year 1 were $262,000 and $285,000 in Year 2.Calculate the cash flow on total assets ratio for both years.Comment on the results.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

Since it is recommended by the FASB,the direct method of preparing the statement of cash flows is most frequently used.

A company reported net income of $112,000,operating cash flows of $57,000,total cash flows of $97,000,and average total assets of $962,000.Calculate its cash flow on total assets ratio.

_____________ activities include the cash effects of transactions and events that determine net income.

___________________ activities generally include those transactions and events that affect long-term assets.

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash,resulting in a loss of $3,000.The amount to be reported under cash flows from financing activities is: