Exam 12: Reporting Cash Flows

A company's Inventory balance at the end of the year was $188,000 and $200,000 at the beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and $80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The company's total amount of cash payments for merchandise during the year equals:

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

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

Use the following financial statements and additional information to (1) prepare a complete statement of cash flows for the year ended December 31, 20X2. The cash provided or used by operating activities should be reported using the direct method, and (2) compute the company's cash flow on total assets ratio for 20X2. Derby Company Balance Sheets At December 31 202 20X1 Assets: \& \ Cash \ 85,600 \ 65,200 Accounts receivable, net 72,850 56,750 Merchandise inventory 157,750 144,850 Prepaid expenses 6,080 12,680 Equipment 280,600 145,600 Accumulated depreciation-Equipment Total assets Liabilities: \& \ Accounts payable 52,850 45,450 Income taxes payable 15,240 12,240 Notes payable (long term) Total liabilities \1 27,290 \1 36,890 Equity: Common stock 200,000 150,000 Paid-in capital in excess of par 53,000 40,000 Retained earnings Total equity Total liabilities and equity Derby Company Income Statement For Year Ended December 31,20X2 Sales \4 88,000 Cost of goods sold \2 12,540 Depreciation expense 43,000 Other operating expenses 106,260 Interest expense (368,200) Other gains (losses): Gain on sale of equipment Income before taxes 124,500 Income taxes expense underline Net income Additional Information a. A $20,000 note payable is retired at its carrying value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $120,000 cash. d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700. e. Prepaid expenses relate to Other Expenses on the income statement. f. All purchases and sales of merchandise inventory are on credit.

Preparation of the statement of cash flows does not involve:

The following transactions and events occurred during the year. Assuming that this company uses the indirect method to report cash provided by operating activities, indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.

The payment of cash dividends to shareholders is classified as a financing activity.

Northington, Inc. is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from investing activities: Net income \ 182,000 Gain on the sale of equipment 12,300 Proceeds from the sale of equipment 92,300 Depreciation expense- equipment 50,000 Payment of bonds at maturity 100,000 Purchase of land 200,000 Issuance of common stock 300,000 Increase in merchandise inventory 35,400 Decrease in accountsreceivable 28,800 Increase in accounts payable 23,700 Payment of cash dividends 32,000

Bagwell's net income for the year ended December 31, Year 2 was $175,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2. At December 31 Year 2 Year 1 Common Stock, \ 5 par value \ 500,000 \ 450,000 Paid-in capital in excess of par 948,000 853,000 Retained earnings 688,000 582,000

Based on the information in the following income statement and balance sheet for Monterey Corporation, determine the cash flows from operating activities using the direct method. Monterey Corporation Income Statement For Year Ended December 31, 20X2 Sales \5 04,000 Cost of goods sold 327,600 Depreciation 42,000 Other operating expenses (495,100) Other gains (losses): Gain on sale of equipment Income before taxes 16,100 Income tax expense Net income Monterey Corporation Balance Sheets At December 31 202 201 Cash \ 64,650 \ 55,800 Accounts receivable 21,000 29,000 Inventory 58,000 52,100 Equipment 440,000 222,000 Accumulated depreciation Total assets Liabilities: Accounts payable \ 28,400 \ 23,700 Income taxes payable 1,050 1,200 Total liabilities \ 29,450 \ 24,900 Equity: Common stock \ 106,000 \ 106,000 Paid-in Capital in Excess of Par.......... 18,000 18,000 Retained earnings Total equity Total liabilities and equity

Use the following information to calculate cash received from dividends: Divdends reveruse \2 9,800 Dividends receivable, January I 2,600 Dividends receivable, December 31 3,400

The cash flow on total assets ratio is calculated by:

When preparing the operating section of the statement of cash flows using the indirect method, noncash expenses are ________ net income.

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

Use the following company information to prepare a schedule of significant noncash investing and financing activities: (a) Sold a building with a book value of $300,000 for $225,000 cash and sold land with a book value of $40,000 for $65,000 cash. (b) Issued 15,000 shares of $10 par value common stock in exchange for equipment with a market value of $175,000. (c) Retired a $100,000, 8% bond by issuing another $100,000, 7% bond issue. (d) Acquired land by issuing a twenty-year, 5%, $73,000 note payable.

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating assets are subtracted from net income.

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of $10,000. This implies that $30,000 cash was received from the sale.

When preparing the operating activities section of the statement of cash flows using the direct method, non-operating gains are added to net income.