Exam 11: The Statement of Cash Flows

A company completed the following transactions involving investments during 2014. The company uses the indirect method to prepare the operating activities section of the statement of cash flows. The following statements describe how the company reported the cash flow effects of the above transactions. Which of the following has been reported incorrectly?

Cash flows from acquiring and selling products are classified as

Selected data from the financial statements for the years ended December 31, 2014 and 2013, are presented below: The following additional information was obtained from the company's records: -Refer to Maritime Marine Services. What was the amount of accumulated depreciation on the property, plant and equipment disposed of during 2014?

Which balance sheet accounts are most affected by operating activities?

-Refer to Merry Maids Company. In 2014, why are depreciation and amortization expenses added back to net income in the operating activities section of the statement of cash flows?

Some companies use a work sheet approach as a tool to aid in preparing the statement of cash flows.

Match these terms with their correct definition. a.Cash flow adequacy ratio b.Cash flows from financing activities c.Cash flows from investing activities d.Cash flow from operating activities e.Direct method f.Free cash flow g.Income statement h.Indirect method i.Noncash investing & financing activities j.Statement of cash flows -Include cash received from the sale of property, plant, and equipment and cash paid to purchase equity securities.

-Refer to Merry Maids Company. Describe the link(s)between a statement of cash flows, the balance sheet, and the income statement if a company uses the indirect method to prepare the operating activities section of the statement of cash flows.

When using the direct method to determine operating cash flows, how are salaries paid to employees reported on the Statement of Cash Flows?

MATCHING Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct method. (Choices may be used more than once.) a.Inflow from operating activity b.Outflow from operating activity c.Inflow from investing activity d.Outflow from investing activity e.Inflow from financing activity f.Outflow from financing activity g.Noncash investing and financing activity h.Not reported on statement of cash flows -Sold common stock for cash.

Both the indirect and direct method arrive at an identical amount of net cash provided (used)by operating activities.

The statement of cash flows summarizes the operating, investing, and financing activities of a business for a period of time.

Which of the following measures can be used to evaluate a company's ability to meet future debt obligations after paying operating expenses, dividends and making capital expenditures?

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. (Choices may be used more than once.) a.Operating activity--add to net income b.Operating activity--deduct from net income c.Inflow from investing activity d.Outflow from investing activity e.Inflow from financing activity f.Outflow from financing activity g.Noncash investing and financing activity h.Not reported on statement of cash flows -Issued long-term bonds.

When using the direct method to determine operating cash flows, how is the purchase of equipment for cash shown on the Statement of Cash Flows?

-Refer to Merry Maids Company. What is the significance of the positive amounts shown in both years for accounts payable and accrued liabilities?

-Refer to McCullow Investment Group. Ignoring the differences in magnitude, comment on the similarities and differences in the cash flows of the three companies.

Match these terms with their correct definition. a.Cash flow adequacy ratio b.Cash flows from financing activities c.Cash flows from investing activities d.Cash flow from operating activities e.Direct method f.Free cash flow g.Income statement h.Indirect method i.Noncash investing & financing activities j.Statement of cash flows -A transaction that represents both an investing and financing activity but that does not involve the receipt or payment of cash.

Information from the company's financial records is presented below: At the end of 2014, the company issued notes at par value for $1,200,000 cash. The proceeds were used to retire the $1,000,000 note issue outstanding at the end of 2013 (before their maturity date). All interest expense was paid in cash during 2014. -Refer to Medstar Ambulance Service. How much was paid to retire the $1,000,000 note issue during 2014?

A company reported net income for the current year. Which of the following business transactions would cause its cash from operating activities to be higher than its net income?