Exam 11: The Statement of Cash Flows

A decrease in retained earnings represents dividends that were ____________________ during the period, not necessarily those that were paid.

____________________ represents the cash flow that a company is able to generate after considering the maintenance or expansion of its assets (capital expenditures)and payment of dividends.

Significant noncash transactions are not reported on the statement of cash flows, but in a separate schedule shown either at the bottom of the statement of cash flows or in a note to the financial statements.

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 -Determines operating cash flow which begins with net income and then adjusts it for noncash items.

Selected information from the company's financial records is presented below: During 2014, the company sold equipment with a cost of $50,000 and accumulated depreciation of $30,000. A gain of $10,000 was recognized on the sale of the equipment. This was the only equipment sale during the year. -Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to prepare the operating activities section?

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. The following statements describe how the company reported the cash flow effects of the items described above on its 2014 statement of cash flows. The indirect method is used to prepare the operating activities section. Which of the following has been reported incorrectly?

Issuing stock increases the company's cash flows from investing activities.

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 -Increase in the unearned revenue balance.

A company reported the following information: If the indirect method is used to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2014?

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 -Repaid a long-term bonds payable.

The information in a statement of cash flows helps investors, creditors and others judge a company's ability to meet its obligations and pay ____________________.

When using the indirect method to determine operating cash flows, how would the declaration and payment of cash dividends be shown 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 -Issued long term mortgage to acquire land and a building.

Under the ____________________ method of preparing a statement of cash flows, the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments, and all accruals of future operating cash receipts or payments.

Mustard Seed Gifts had the following results for December 31, 2013 and 2014, respectively: What was the amount of cash flows from investing activities for 2014?

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 a twenty-year mortgage note for cash.

Upon reviewing Mack's Truck Stop's Statement of Cash Flows, the following was noted: From this information, the most likely explanation is that this company is

The primary purpose of the statement of cash flows is to provide information about

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 cost of the property, plant and equipment which was disposed of during 2014?

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 -Paid cash dividends.