Exam 16: The Statement of Cash Flows

A debtor of Adams Company owes $500,000 but does not have enough cash to repay the debt.Following lengthy negotiations,the parties agreed that the debtor will issue 200,000 shares of common stock to settle the debt.This transaction will be reported in the investing activities section of the statement of cash flows for Adams Company.

Truesdell Brewery Company uses the direct method for its statement of cash flow.Assume Accrued Liabilities relate to Operating Expenses.It reports the following information regarding the year ending December 31,2017: Assume that there were no sales of long-term assets,no interest revenue,and no expenses other than the expenses shown above.Also,assume that Accounts Payable is for purchases of merchandise inventory only.Prepare the operating activities section of the statement of cash flows.

The cash paid for the purchase of equipment will typically be shown in the investing activities section of the statement of cash flows.

Jelly Bean Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet: Note: 1.There were no stock retirements during the year. 2.There were no sales of treasury stock during the year. Compute the cash flow from transactions involving treasury stock.

Selling property,plant,and equipment for $10,000 cash is considered a cash inflow from investing activities on the statement of cash flows.

Message Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet: Note: 1.There was no retirement of stock during the year. 2.There were no sales of treasury stock during the year. Which of the following statements is correct?

The indirect and direct methods use different computations but produce the same amount of net cash flow from operating activities.

Crossword,Inc.uses the direct method to prepare its statement of cash flows.Refer to the following financial statement information for the year ended December 31,2017: Use the direct method to compute the payments to suppliers for Merchandise Inventory and other operating expenses.(Accrued Liabilities relate to other operating expense. )

Lopez Corp.uses the indirect method to prepare its statement of cash flows.Refer to the following information for 2017: 1.Long-Term Notes Payable,beginning balance,$80,000 2.Long-Term Notes Payable,ending balance,$75,000 3.Common Stock,beginning balance,$3,200 4.Common Stock,ending balance,$26,000 5.Retained Earnings,beginning balance,$79,000 6.Retained Earnings,ending balance,$116,000 7.Treasury Stock,beginning balance,$5,900 8.Treasury Stock,ending balance,$10,000 9.No stock was retired. 10.No treasury stock was sold. 11.During 2016,the company repaid $37,000 of long-term notes payable. 12.During 2016,the company borrowed $42,000 on a new note payable. 13.Net income for the year was $55,000. 14.Assume all dividends declared during the year were paid. What is the net cash flow from financing activities?

Cash borrowed on a mortgage note is a(n)________ activity on the statement of cash flows.

Allen Services purchased 20 delivery vehicles by issuing a 20-year installment note payable for $720,000.On the statement of cash flows,this transaction would be shown in the ________.

Which of the following describes the operating activities section of the statement of cash flows?

The direct method restates the income statements in terms of cash.

Rubin Installations Company uses the direct method to prepare its statement of cash flows.Rubin has reported cost of goods sold of $95,000 on its income statement for 2017.If the balance in the Merchandise Inventory account decreased by $6,000 during the year,then $6,000 needs to be added to $95,000 to calculate payments to suppliers for inventory purchases.

What does free cash flow represent? How is it used to evaluate business performance?

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

Interest expense paid on a note payable is included in the operating activities section of the statement of cash flows.

Issuing preferred stock to stockholders in exchange for cash is shown under the financing activities section of the statement of cash flows.

Planned investments and cash dividends are deducted from ________ to arrive at free cash flow.

Mars Chemicals Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet: Net Income for the year was $57,000. Which of the following statements is true of Taylor's statement of cash flows for 2016?