Exam 12: Reporting Cash Flows

When preparing a statement of cash flows using the indirect method, which of the following is correct?

Investing activities include receiving cash dividends from investments in other companies' stocks.

Faster Freight Co. reported net cash provided by operating activities of $142.7 million and average total assets of 1,762.5 million at the end of the year. Calculate the cash flow on total assets ratio for Faster Freight.

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

In preparing a company's statement of cash flows for the most recent year, the following information is available: Loss on the sale of equipment \ 14,000 Purchase of equipment 225,000 Proceeds from the sale of equipment 106,00 Repayment of outstanding bonds 87,000 Purchase of treasury stock 25,000 Issuance of common stock 96,000 Purchase of land 115,00 Decrease in accounts receivable during the year 33,000 Payment of cash dividends 75,000 Net cash flows from investing activities for the year were:

Most managers stress the importance of understanding and predicting cash flows for business decisions.

A machine with a cost of $130,000, accumulated depreciation of $85,000, and current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available: Net income for the year was \ 52,000 Accounts payable increased by 18,000 Accounts receivable decreased by 25,000 Inventories decreased by 5,000 Cash dividends paid were 14,000 Depreciation expense was 20,000 Net cash provided by operating activities was:

The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

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.

Use the following information to calculate cash paid for salaries: Salaries expense \ 175,000 Salaries payable, January 1 20,000 Salaries payable, December 31 12,000

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

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

Cash paid for merchandise is an operating activity.

A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

Tate Company's 20X2 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the direct method. \begin{array}{c} \text {Tate Company}\\ \text {Income Statement}\\ \text {For Year Ended December 31, 20 \mathrm{X} 2 }\\\begin{array}{|ll|c|c|} \hline \text {Sales } & \text { } & \text { }&\$248,000\\\hline \text {Cost of goods sold } & \text { } & \text { }&\underline{116,000}\\\hline \text { Gross profit } & \text { } & \text { }&\$132,000\\ \hline\text { Operating expenses:} & \text { } & \text { }\\\hline \text { Wages and salaries expense } & \text { } & \$44,000\\\hline \text {Rent expense } & \text { } & 16,000\\ \hline \text { Depreciation expense } & \text { } & 30,000\\\hline \text { Amortization expense } & \text { } & 12,000\\\hline \text { Other expenses } & \text { } &\underline{18,000 }&\underline{120,000}\\ \hline\text {Income from operations } & \text { } & \text { }&\$12,000\\\hline \text { Gain on sale of equipment} & \text { } & \text { }&\underline{26,000}\\\hline \text { Income before taxes} & \text { } & \text { }&\$38,000\\\hline &&&\underline{\quad\quad}\\ \text {Income tax expense } & \text { } & \text { }&\underline{13,300}\\\hline \text { Net Income } & \text { } & \text { }&\underline{\$24,700}\\\hline \text { } & \text { } & \text { }\\\hline \end{array}\end{array} The company also experienced the following during 20X2: Increase in accounts receivable \ 4,000 Increase in accounts payable (all accounts payable transactions are for inventory) 16,000 Increase in income taxes payable 300 Decrease in prepaid expenses 10,000 Decrease in merchandise inventory 14,000 Decrease in long-term notes payable 0,000

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. This implies that $40,000 cash was received from the sale.

In preparing a company's statement of cash flows for the most recent year, Ransom Corp. reported the following information: Repayriert of outstardirg bords \1 07,000 Purchase of treasury stock 62,000 Issuarnce of contruon stock 46,000 Payment of cash dividends 15 Net cash flows from financing activities for the year were: