Exam 15: The Statement of Cash Flows

Royer Corporation engaged in this transaction: Sold buildings and equipment for cash. 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-Increase in Accrued Liabilities-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Indicate on the blanks below the letter of the type of activity (O = operating activity, F = financing activity, I = investing activity, N = noncash transaction) each of the following transactions represents. _____ 1. Firm sold 8,000 shares of its own common stock for cash. _____ 2. Sold $200,000 worth of products for cash. _____ 3. Paid $120,000 dividend. _____ 4. Received $1,500 in interest income. _____ 5. Exchanged 6,000 shares of stock for 15-year bonds. _____ 6. Paid $121,000 to the U.S. Treasury for income taxes.

Interest paid would be included in the operating activities category on the statement of cash flows.

Investors and creditors would find the statement of cash flows least useful in assessing

During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $45,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Cash flows to sales equals (Round amounts to one decimal place)

The calculation of free cash flow could include all of the following except

During the year, Ollie's Outdoor Outfitters issued 20,000 shares of common stock in exchange for a prime piece of land. Two employees of the accounting department, Audrey and Neil, disagree as to the appearance of this particular transaction on the statement of cash flows. Audrey believes it to be a significant noncash transaction, and it therefore should be presented as such at the bottom of the statement. Neil contends that because this transaction did not cause any cash to flow in or out of the company, it has no place on the statement of cash flows. Who is correct and why?

Cash inflows and outflows are not netted in the investing activities section of the statement of cash flows but are separately disclosed to give the reader full information.