Exam 12: Reporting Cash Flows

A company reported net income of $132,000, operating cash flows of $87,000, total cash flows of $112,000, and average total assets of $1,053,000. Calculate its cash flow on total assets ratio.

Information to prepare the statement of cash flows usually comes from three sources: (1) ________, (2) ________, and (3) ________.

The cash flow on total assets ratio is computed by dividing average total assets by operating income.

A spreadsheet can help organize the information needed to prepare a statement of cash flows.

Use the following information about the calendar-year cash flows of Park Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities. Cash and cash equivalents, beginning-year balance \ 18,000 Cash and cash equivalents, year-end balance 78,750 Cash payments for merchandise inventory 75,750 Cash paid for store equipment 15,750 Cash borrowed on three-month note payable 22,500 Cash dividends paid 12,000 Cash paid for salaries 39,000 Cash payments for other operating expenses 48,000 Building purchased and financed by long-term note payable 78,000 Cash received from customers 220,500 Cash interestreceived 8,250

The following information is available for the Brookstone Company: Brookstone Company Income Statement For Year Ended December 31,202 Sales \ 288,000 Cost of goods sold \ 97,080 Depreciation expense 35,280 Other operating expenses 57,600 Interest expense 2,400 (192,360) Other gains (losses): Loss on sale of equipment (10,080) Income before taxes 85,560 Income taxes expense 33,180 Net income \ 52,380 Additional information: (1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. (2) Old machinery with an original cost of $45,060 was sold for $2,520 cash. (3) New machinery was purchased for $81,060 cash. (4) Cash dividends of $40,320 were paid. (5) Additional shares of stock were issued for cash. Prepare a complete statement of cash flows for calendar-year 20X2 using the indirect method.

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from financing activities generally affect:

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

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

Explain the use of a spreadsheet in the preparation of the statement of cash flows.

An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?

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

The full disclosure principle requires that noncash investing and financing activities be disclosed in the financial statements.

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year \ 126,000 Cash dividends declared for the year 46,000 Proceeds from the sale of equipment 81,000 Gain on the sale of equipment 7,000 Cash dividends payable at the beginning of the year 18,000 Cash dividends payable at the end of the year 20,000 Net income for the year 92,000 The amount of cash dividends paid during the year would be:

Use the following company information to calculate net cash provided or used by investing activities: (a) Equipment with a book value of $175,000 and an original cost of $300,000 was sold at a loss of $17,000. (b) Paid $62,000 cash for a new truck. (c) Sold land costing $32,000 for $36,000 cash, realizing a $4,000 gain. (d) Purchased treasury stock for $61,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. Cost of goods sold. Merchandise inventory, January 1 Merchandise inventory, December 31 Accounts payable, January 1 Accounts payable, December 31 \5 00,000 85,000 97,000 68,000 60,000

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

Common uses of the statement of cash flows include all but which of the following?

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

The statement of cash flows is divided into three sections called the ________, ________, and ________ sections.