Exam 16: The Statement of Cash Flows

Companies sometimes obtain financing and do not receive cash.Although such transactions do not directly involve cash,they still must be reported in the financing section of the statement of cash flows.

Wesley,Inc.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet: Wesley, Inc. Comparative Balance Sheet December 31,2019 and 2018 2018 2017 Increase/(Decrease) Cash \ 42,000 \ 25,000 \ 17,000 Accounts Receivable 32,000 55,000 (23,000) Merchandise Inventory 57,000 Total Assets \ 254,000 \ 203,000 \ 51,000 The change in Merchandise Inventory is shown as a negative cash flow in the adjustments to net income.

While preparing a statement of cash flows using the indirect method,an increase in current assets is added to net income to arrive at net cash provided by operating activities.

Which of the following sections of the statement of cash flows is presented differently between the direct method and indirect method?

Georgia Corp.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet: Georgia Corp. Comparative Balance Sheet December 31,2019 and 2018 2019 2018 Increase/(Decrease) Cash \ 45,000 \ 27,000 \ 18,000 Accounts Receivable 48,000 45,000 3,000 Merchandise Inventory Total Assets \ 273,000 \ 204,000 \ 69,000 How will the change in Accounts Receivable be shown on the statement of cash flows?

Tri-City Installations Company uses the direct method to prepare its statement of cash flows.Tri-City has reported sales revenues of $200,000 on its income statement for 2018.If the balance in Accounts Receivable has increased by $10,000 during the year,then $10,000 needs to be added to $200,000 to calculate collections from customers.

Mid-Town Auto Parts Company uses the direct method to prepare its statement of cash flows.Refer to the following information reported for 2019: 1.Sales Revenue,$520,000 2)Accounts Receivable,beginning balance,$99,000 3)Accounts Receivable,ending balance,$62,000 Compute the collections from customers.

Diamond Corp.has provided the following information for the year ended December 31,2018. Additional information provided by the company includes the following: Equipment costing $60,000 was purchased for cash. Equipment with a net book value of $10,000 was sold for $16,000. Depreciation expense of $16,000 was recorded during the year. During 2018,the company repaid $43,000 of long-term notes payable. During 2018,the company borrowed $34,000 on a new long-term note payable. There were no stock retirements during the year. There were no sales of treasury stock during the year. All sales are on credit. Prepare the 2018 statement of cash flows,using the indirect method.

Ohio,Inc.uses the indirect method to prepare the statement of cash flows.Refer to the following income statement: $\begin{array}{c}\text {Ohio, Inc.}\\\text {Income Statement}\\\text {Year Ended December 31, 2018}\\\begin{array}{|l|r|r|}\hline \text { Revenues and Gains: } & & \\\hline \text { Sales Revenue } & \$ 158,000 & \\\hline \text { Interest Revenue } & \underline{6800} & \\\hline \text { Total Revenues and Gains } & & \$ 164,800\\\hline \text { Expenses and Losses: } & \\\hline \text { Cost of Goods Sold } & \$ 150,000 \\\hline \text { Salary Expense } & 21,000 \\\hline \text { Depreciation Expense } & 7200 \\\hline \text { Other Operating Expenses } & 13,100\\\hline \text { Interest Expense } & 16,200 \\\hline \text { Loss on Sale of Plant Assets } & 5200 \\\hline \text { Income Tax Expense } & 6000 \\\hline \text { Total Expenses and Losses } & & 218,700 \\\hline \text { Net Income (Loss) } & & \$(53,900) \\\hline\end{array}\end{array}$ Additional information provided by the company includes the following: Current assets,other than cash,decreased by $5500. Current liabilities increased by $2500. Compute the net cash provided by (used for)operating activities.

When preparing the statement of cash flows using the indirect method,a decrease in current liabilities is added to the net income to arrive at net cash provided by operating activities.

For each of the following items,relating to the adjustments made to reconcile net income to net cash provided by operating activities section,state whether the adjustment is an increase or decrease to net income. Item Adjustment to Net Income on Statement of Cash Flows Depreciation Expense Decreases in Current Liabilities Gains on Disposal of Long-term Assets Increases in Current Assets other than Cash

Merchandise Inventory increased $28,000 and Accounts Payable decreased $19,600 during the year.Accounts Payable relates only to the acquisition of merchandise inventory.Sales were $796,000 and Cost of Goods Sold was $549,700.Compute the payment made to the suppliers for inventory.

Utah Corp.uses the indirect method to prepare the statement of cash flows.Refer to the following section of the comparative balance sheet: Utah Corp. Comparative Balance Sheet December 31,2018 and 2017 2018 2017 Increase/(Decrease) Cash \ 45,000 \ 27,000 \ 18,000 Accounts Receivable 48,000 45,000 3,000 Merchandise Inventory Total Assets \ 273,000 \ 204,000 \ 69,000 How will the change in Merchandise Inventory be shown on the statement of cash flows?

Delaware Coatings Company uses the indirect method to prepare its statement of cash flows.Refer to the following information for the year 2019: Net cash provided by operating activities: $44,000 Net cash used for investing activities: $(27,000) Net cash provided by financing activities: $2000 What is the net change in cash during the year?

Which of the following transactions would be shown in the non-cash investing and financing activities section of the statement of cash flows?

Identify how each of the following items is shown on the statement of cash flows.Identify each as operating (O),investing (I),financing (F),or non-cash investing and financing (N). Item (),(),(),() Cash received for the collection of long-term notes receivable Cash purchase of treasury stock Land received in exchange for issuance of common stock

Maryland Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000.This transaction is shown in the investing activities section of the statement of cash flows.

When preparing the statement of cash flows by the indirect method,it is necessary to adjust for non-cash expenses such as depreciation expense.

Nature Metals Company uses the direct method to prepare its statement of cash flows.Use the following information reported for the year 2018 to compute the cash paid to suppliers for operating expenses. Operating expenses,$29,000 Accrued Liabilities,beginning balance,$3400 Accrued Liabilities,ending balance,$5400

Which of the following sections of the statement of cash flows includes activities that increase and decrease long-term liabilities and stockholders' equity?