Exam 12: Reporting Cash Flows

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

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. 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 20,000

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

On a spreadsheet used to prepare the operating activities section of the statement of cash flows,depreciation expense does not require an entry in the Analysis of Changes columns because it is a noncash item.

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Paid wages to employees.

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:

For each of the following separate cases,use the information provided to calculate the missing cash inflow or cash outflow using the direct method. (a) Accounts receivable balances: Beginning of year \ 60,000 End of year 63,000 Sales revenue (all on credit) 395,000 Cash received from customers \ $\begin{array}{|c|l|c|}\hline \text { (b) } & \text { Accounts payable balances: } & \\\hline & \text { Beginning of year } & \$ 42,000 \\\hline & \text { End of year. } & 31,000 \\\hline & \text { Merchandise inventory balances: } & \\\hline & \text { Beginning of year } & 50,000 \\\hline & \text { End of year ...... } & 52,500 \\\hline & \text { Cost of goods sold. } & 250,000 \\\hline & \text { Cash paid for merchandise inventory } & \$\\\hline\end{array}$ (c) $\begin{array}{|c|c|}\hline \text { Interest payable balances:} & \\\hline \text { Beginning of year } & \$ 7,500 \\\hline \text { End of year } & 8,200 \\\hline \text { nterest expense } & 31,000 \\\hline\text { Cash paid for interest }&\$\\\hline\end{array}$

Match each of the following items with the appropriate definitions. -Transactions that include making and collecting notes receivable or purchasing and selling plant assets,or investments in other than cash equivalents and trading securities.

Bagwell's net income for the year ended December 31,Year 2 was $185,000.Information from Bagwell's comparative balance sheets is given below.Compute the cash received from the sale of its common stock 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

For each of the following items, indicate whether it would be classified as either an (O) operating activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash financing and investing activity. -Reissued treasury stock.

For each of the following items, indicate whether it would be classified as either an (O) operating activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash financing and investing activity. -Purchased equipment in exchange for a 6-month note payable.

The cash flow on total assets ratio compared to the total assets ratio can be used as an indicator of earnings quality.

A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2.Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2.Calculate the cash flow on total assets ratio for both years.Comment on the results.

What are the five usual steps involved in the preparation of the statement of cash flows?

Jamison Company reports depreciation expense of $35,000 for Year 2.Also,equipment costing $140,000 was sold for a $5,000 gain in Year 2.The following selected information is available for Jamison Company from its comparative balance sheet.Compute the cash received from the sale of the equipment. At December 31 Year 2 Year 1 Equipment \ 610,000 \ 750,000 Accumulated Depreciation-Equipment 428,000 500,000

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used (which can be reported in the notes).

Which of the following items is reported on the statement of cash flows under financing activities?

In preparing a company's statement of cash flows for the most recent year,Ransom Corp.reported the following information: Repayment of outstanding bonds \ 107,000 Purchase of treasury stock 62,000 Issuance of common stock 46,000 Payment of cash dividends 15, Net cash flows from financing activities for the year were:

For each of the following items, indicate whether it would be classified as either an (O) operating activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash financing and investing activity. -Cash sales of merchandise.

Financing activities include receiving cash from issuing debt and paying cash dividends to shareholders.