Exam 15: The Statement of Cash Flows

Management could use the statement of cash flows to determine whether short-term financing is necessary to pay current liabilities.

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Depreciation Expense-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Even though investing activities center on the long-term assets shown on the balance sheet, they also include any short-term investments shown under current assets on the balance sheet

Cash flows to assets is measured in terms of

The following information relates to Aires Corporation for 2010 and 2009: Additional information: Prepare a statement of cash flows using the indirect method. Include a schedule of noncash investing and financing transactions, if applicable.

For 2010, SCJ Corporation had average total assets of $520,000, sales of $450,000, net income of $50,000, net cash flows from operating activities of $75,000, dividend payments of $25,000, purchases of plant assets of $60,000, and sales of plant assets of $55,000. Using this information, compute (a) cash flow yield, (b) cash flows to sales, (c) cash flows to assets, and (d) free cash flow. Round amounts to one decimal place.

Royer Corporation engaged in this transaction: Repaid ten-year note payable. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

If the indirect method is used, each of the following is a proper adjustment to net income to arrive at net cash flows from operating activities except

Malzone Enterprises is preparing a statement of cash flows using the indirect method. Indicate on the blanks below whether each item is an operating activity (O), an investing activity (I), a financing activity (F), a noncash transaction (N), or an item that would not appear on or with Malzone's statement (NA). _____ 1. The change in Accounts Payable during the period _____ 2. Depreciation expense _____ 3. Exchange of stock for a building _____ 4. Purchase of equipment _____ 5. Purchases of treasury stock _____ 6. Borrowing by issuing bonds _____ 7. A gain on the sale of equipment _____ 8. Collections from customers _____ 9. Dividends paid _____ 10. Income taxes paid _____ 11. Proceeds from sale of long-term investments at a loss _____ 12. The change in Inventory for the period

Use this information to answer the following question. Northbrook Corporation is preparing a statement of cash flows. The following transactions occurred during the year: 1) Sold machinery for $9,000 cash. 2) Purchased a building for $80,000 cash. 3) Issued $70,000 worth of stock to acquire an airplane. 4) Converted long-term bonds by issuing $100,000 worth of stock. 5) Declared and paid a $10,000 cash dividend. Transaction 5 would be found on the statement of cash flows in the

It is unethical, and considered a form of manipulation, to classify a cash flow as an investing or financing activity, when it really is an operating activity.

Management would not use the statement of cash flows to

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Dividend Income (assume that cash received is equal to amount reported)-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Cash flows to assets is measured in "times."

When presenting decreases in long-term investments in the investing activities section of the statement of cash flows, the amount reflected equals the amount of the gain(s) or loss(es) from the transaction(s).

If net cash flows from operating activities were $194,000, net income were $50,000, and net sales were $600,000, the cash flow yield would equal (Round amounts to one decimal place)

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Interest Expense (assume that cash payments are equal to amount reported)-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Royer Corporation engaged in this transaction: Issued long-term note for plant assets. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Royer Corporation engaged in this transaction: Retired long-term debt with cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

The financing activities section of the statement of cash flows does not include any transactions or activities from the income statement but does take into account stockholders' equity.