Exam 11: The Statement of Cash Flows

If the December 31, 2014, balance of accounts receivable is lower than the January 1, 2014, balance, then the amount of cash collections will be more than the sales on account for the year.

-Refer to McCullow Investment Group. What is meant by the term "cash flow adequacy"? What other financial information would be necessary in order to make a determination of the cash flow adequacy for these three companies?

-Refer to Merry Maids Company. Give some examples of circumstances that would result in net cash used by investing activities as shown above.

Operating cash flows generally involve income statement items (which are reflected in Retained Earnings)and balance sheet items (such as changes in current assets and current liabilities).

A company reported the following information in its 2014 annual report: What is the cash flow adequacy ratio for 2014?

Presented below is the operating activities section of a statement of cash flows for 2014: Which method of preparing the operating activities section was used?

A company reported the following information: An analysis of records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above. How should the changes in these accounts be reported on a statement of cash flows?

Under the indirect method, instead of reporting cash receipts and payments, net income is reconciled with net cash from operating activities.

The indirect method of preparing a statement of cash flows begins with net income and then adjusts it for noncash items to produce net cash flow from ____________________.

Occasionally, companies engage in important investing and financing activities which do not affect cash. If the amount of the transaction is significant, how should it be disclosed when financial statements are prepared?

If the December 31, 2014, balance of accounts payable is lower than the January 1, 2014, balance, then the amount of cash payments will exceed the purchases on account for the year.

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 -Represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets and the payment of dividends.

Presented below is the operating activities section of a statement of cash flows for 2014: Which method of preparing the operating activities section was used?

If the beginning balance in Accounts Receivable is $11,000 and the ending balance is $9,000, then credit sales must have exceeded collections on account.

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 -Resold treasury stock for cash.

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 -Recognized a gain on the sale of securities.

Depreciation is a noncash expense that is subtracted from net income in determining cash provided from operating activities under the indirect method.

Selected data and additional information from the company's records are presented below: Additional information: -Refer to Mary Kay Cosmetics. What amount was declared and paid for dividends during 2014?

Refer to Metz Vets. Which of the following activities results in a cash outflow?

Which method of preparing the operating activities section of a statement of cash flows reports major classes of gross cash receipts and cash payments for revenues and expenses?