Exam 12: Reporting Cash Flows

Based on the following information provided about a company's operations,calculate its cost of goods purchased and its cash paid for merchandise. Cost of goods sold \ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots \ 522,000 Merchandise inventory, beginning year \ldots\ldots\ldots\ldots\ldots\ldots\ldots 70,000 Accounts payable, beginning year \ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots 53,000 Merchandise inventory, end-of-year \ldots\ldots\ldots\ldots\ldots\ldots\ldots 57,000 Accounts payable, end-of-year \ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots 48,000

Match each of the following items with the appropriate definitions. -A financial statement that reports the cash inflows and cash outflows for an accounting period,and classifies those cash flows as operating,investing,or financing activities.

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

Match each of the following items with the appropriate definitions. -Transactions with a company's owners and creditors that include obtaining cash from issuing debt and repaying the amounts borrowed,and obtaining cash from or distributing cash to owners.

Use the following information about the calendar-year cash flows of Park Company to prepare a statement of cash flows (direct method)and a schedule of noncash investing and financing activities. Cash and cash equivalents, beginning-year balance \ 18,000 Cash and cash equivalents, year-end balance 78,750 Cash payments for merchandise inventory 75,750 Cash paid for store equipment 15,75 Cash borrowed on three-month note payable 22,500 Cash dividends paid 12,000 Cash paid for salaries 39,000 Cash payments for other operating expenses 48,000 Building purchased and financed by long-term note payable 78,000 Cash received from customers 220,500 Cash interest received 8,250

When preparing the operating activities section of the statement of cash flows using the indirect method,a decrease in accounts receivable is subtracted from net income.

A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.

For each of the following separate cases,use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Financing activities include (a)the purchase and sale of long-term assets, (b)the purchase and sale of short-term investments,and (c)lending and collecting on loans.

Explain the purpose and format of the statement of cash flows.Also describe its relevance to decision makers.

Noncash investing and financing activities may be disclosed in:

Based on the following income statement and balance sheet for Bankowski Corporation,determine the cash flows from operating activities using the indirect method.

Use the following information to calculate the net cash provided or used by financing activities for the Streams Corporation: (a)Net income,$10,000 (b)Sold common stock for $40,000 cash (c)Paid cash dividend of $13,000 (d)Paid bond payable,$28,000 (e)Purchased equipment for $12,000 cash

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

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. Cost of goods sold \ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots \ 500,000 Merchandise inventory, January 1\ldots\ldots\ldots\ldots\ldots\ldots 85,000 Merchandise inventory, December 31\ldots\ldots\ldots\ldots\ldots 97,000 Accounts payable, January 1\ldots\ldots\ldots\ldots\ldots\ldots\ldots\ldots 68,000 Accounts payable, December 31\ldots\ldots\ldots\ldots\ldots\ldots 60,000

The statement of cash flows is divided into three sections called the ________,________,and ________ sections.

The following information is available for the Brookstone Company: \begin{array}{c} \text {Brookstone Company}\\ \text {Income Statement}\\ \text {For Year Ended December 31,20 \mathrm{X} 2 }\\\begin{array}{|l|r|r|}\hline \text { Sales } &&\$4288,000\\\hline \text { Cost of goods sold } & \$ 97,080 & \\\hline \text { Depreciation expense } &35,280& \\\hline \text { Other operating expenses } & 57,600 \\\hline \text { Interest expense } & 2,400 & (192,360) \\\hline \text { Other gains (losses): } & & \\ \hline \text { Loss on sale of equipment } & &(10,0800) \\\hline \text { Income before taxes } & & 85,560 \\\hline \text { Income taxes expense } & & 33,180\\\hline \text { Net income } & & \$ 52,380 \\\hline\end{array}\end{array} Additional information: (1)There was no gain or loss on the sales of the long-term investments,nor on the bonds retired. (2)Old machinery with an original cost of $45,060 was sold for $2,520 cash. (3)New machinery was purchased for $81,060 cash. (4)Cash dividends of $40,320 were paid. (5)Additional shares of stock were issued for cash. Prepare a complete statement of cash flows for calendar-year 20X2 using the indirect method.

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

When using the indirect method to calculate and report net cash provided or used by operating activities,which of the following is subtracted from net income?