Exam 15: The Statement of Cash Flows

Royer Corporation engaged in this transaction: Transferred cash to money market account. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Interest 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:

Royer Corporation engaged in this transaction: Paid interest on note. 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: Abandoned fully depreciated equipment. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Assume that the balance of accounts payable does not change during a period. When preparing a statement of cash flows, an increase in ending inventory over beginning inventory will result in an adjustment to net income under the indirect approach because

The purchase of trading securities with cash is considered an investing activity.

Royer Corporation engaged in this transaction: Received interest on an investment in a long-term note. 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: Purchased 30-day U.S. Treasury bill. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Repayment of bonds payable would be reflected as a cash outflow in the investing activities section of the statement of cash flows.

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

If the indirect method is used, which of the following would be subtracted from net income to arrive at net cash flows from operating activities?

Noncash investing and financing transactions

The following 2009 information relates to Raddatz, Inc.: a. Calculate the net cash flows from operating activities. Show your work. b. Calculate the net cash flows from investing activities. Show your work. c. Calculate the net cash flows from financing activities. Show your work. d. Calculate the net change in cash. Show your work.

A schedule of noncash investing and financing activities is not required when a statement of cash flows is prepared using the indirect method.

Purchases and sales of long-term investments for the period should be netted for disclosure in the investing activities section of the statement of cash flows.

How is it possible for a company to show a net loss for a given year, yet produce positive net cash flows from operating activities?

How are transfers between cash and cash equivalents treated on a statement of cash flows?

When preparing a statement of cash flows using the indirect method, an increase in accounts payable is added to net income.

Use the following information to obtain the ratios below. Round amounts to one decimal place a. Cash flow yield = _______________ times b. Cash flows to sales = _______________ % c. Cash flows to assets = _______________ % d. Free cash flow = $ ________________

Platt Company prepares its statement of cash flows using the indirect method. Indicate whether each of the items below would be added to (+) or deducted from (-) net income to determine net cash flows from operating activities. _____ 1. Decrease in Inventory _____ 2. Decrease in Accounts Payable _____ 3. Depreciation Expense _____ 4. Loss on Disposal of Truck _____ 5. Increase in Accounts Receivable _____ 6. Increase in Wages Payable _____ 7. Amortization Expense _____ 8. Increase in Prepaid Rent _____ 9. Gain on Sale of Land _____ 10. Increase in Income Taxes Payable