Exam 16: Reporting the Statement of Cash Flows

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. Tate Company Income Statement For Year Ended December 31, 20X2 Sales \ 248,000 Cost of goods sold 116,000 Gross profit \ 132,000 Operating expenses: Wages and salaries expense \ 44,000 Rent expense 16,000 Depreciation expense 30,000 Amortization expens 12,000 Other expenses 18,000 120,000 Income from operations \ 12,000 Gain on sale of equipment 26,000 Gain on sale of equipment 26,000 Income before taxes \ 38,000 Income tax expense 13,300 Net Income \ 24,700 The company also experienced the following during 20X2: 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

If a company is using the indirect method to prepare the statement of cash flows, identify where an increase in the accounts receivable account should be reported:

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. (a) Accounts receivable balances: Beginning of year \ 60,000 End of year 57,000 Sales revenue (all on credit) 375,000 Cash received from \ (b) Accounts payable balances: Beginning of year \ 42,000 End of year 45, Merchandise inventory balances: Beginning of year 50,000 End of year 47,500 Cost of goods sold 250,000 Cash paid for merchandise inventory \ (c) Interest payable balances: Beginging of year \ 7,500 End of year 9,200 Interest expense 35,000 Cash paid for interest \

Cash flows are essentially the same as net income because they are both measured using accrual accounting principles.

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

Receipts of cash dividends and interest earned on loans are classified as investing activities.

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as:

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 \ 522,000 Merchandise inventory, beginning year 70,000 Accounts payable, beginning year. 53,000 Merchandise inventory, end-of-year 57,000 Accounts payable, end-of-year.. 48,000

Accounting standards require companies to include a statement of cash flows in a complete set of financial statements.

The cash flows from operating activities section of an indirect method of cash flows begins with net income or loss.

Use the following information to calculate cash received from dividends: Dividends revenue \ 63,500 Dividends receivable, January 1 3,600 Dividends receivable, December 31 3,100

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n):

Of the following, which one affects cash during a period?

In preparing Marjorie Company's statement of cash flows for the most recent year, the following information is available: Purchase of equipment \2 60,000 Proceeds from the sale of equipment 87,000 Purchase of land 91,000 Net cash flows from investing activities for the year were:

Internal users of the statement of cash flows often use cash flow information to plan day-to-day operating activities and make long-term investment and financing decisions.

Use the following company information to calculate net cash provided or used by investing activities: (a) Equipment with a book value of $175,000 and an original cost of $300,000 was sold at a loss of $17,000. (b) Paid $62,000 cash for a new truck. (c) Sold land costing $32,000 for $36,000 cash, realizing a $4,000 gain. (d) Purchased treasury stock for $61,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

Probably the most important section of the statement of cash flows in analyzing the financial performance of a company's ongoing business is the ________ section.

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. ________ (1) Received cash dividends from investments in trading securities. ________ (2) Collected accounts receivable from customers. (3) Issued bonds payable for cash. ________ (4) Paid wages to employees. ________ (5) Issued stock for cash. ________ (6) Sold equipment for cash. ________ (7) Purchased land in exchange for a note payable. ________ (8) Paid cash dividends. (9) Received interest from investments in trading securities. (10) Purchases of land for cash.