Exam 15: The Statement of Cash Flows

The statement of cash flows discloses the effect on cash of the purchase and sale of both short- and long-term investments.

Lincoln Company 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.

Noncash investing and financing transactions

During 20x5,Oates Company 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 $36,000,purchases of plant assets of $37,500,and sales of plant assets of $45,000.Cash flows to assets equals (Round amounts to one decimal place)

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

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

Lincoln Company engaged in this transaction: Received 6-month's rent in advance from a tenant in its office building. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

The purchase of treasury stock qualifies as a financing activity,but it is not a cash flow.

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

The acquisition of treasury stock with cash is shown as a financing activity on the statement of cash flows.

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

For 20x5,Sahara Company 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.

The payment of taxes would be included in the operating activities section of the statement of cash flows.

How are cash equivalents treated on a statement of cash flows?

Which of the following statements is correctregarding the statement of cash flows?

Investors could use the statement of cash flows to determine whether the company will be able to pay dividends and interest.

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:

A positive free cash flow indicates that the company has met all its planned cash commitments and has cash available to reduce debt or to expand.

Foxworth Company sold plant assets that had accumulated depreciation of $20,000.These assets cost Foxworth $70,000 when purchased 4 years ago.The sale of the assets resulted in a gain for Foxworth of $2,000.The amount of cash reported for this transaction on Foxworth's statement of cash flows is:

Lincoln Company engaged in this transaction: Collected accounts receivable. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.