Exam 15: The Statement of Cash Flows

The activity on the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only.

In preparing a statement of cash flows using the indirect method,a decrease in an unearned revenue account should

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

Freewalt Co.purchased investments for $160,000 cash.The journal entry to record this transaction that correctly shows the outflow of cash is:

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

Issuance of notes,either long- or short-term,would be reflected in the financing activities section of the statement of cash flows.

Analysis of the financing activities section of the statement of cash flows will disclose

Lincoln Company engaged in this transaction: Purchased treasury stock with cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Converted loans payable to stock. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Cash equivalents do not include

Bailey Corp.sold investments for $204,000 cash that cost $180,000.The journal entry to record the transaction which correctly shows the increase in cash flow is:

During 20x5,Oates Company had sales of $500,000,net income of $50,000,average total assets of $700,000,dividend payments of $35,000,net cash flows from operating activities of $90,000,purchases of plant assets of $75,000,and sales of plant assets of $90,000.Cash flows to sales equals (Round amounts to one decimal place)

Lincoln Company 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.

Cash equivalents include money market accounts,commercial paper,and U.S.Treasury bills.

Interest paid on bonds payable would be included in the financing activities category on 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-Increase in Accounts Payable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Lincoln Company engaged in this transaction: Sold land it was holding for speculation. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Acquired long-term investment by issuance of long-term debt. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Payment of dividends would be reflected as a cash outflow in the investing activities section of the statement of cash flows.

Using the indirect method,calculate the amount of net cash flows from operating activities from the following data.Show your work.