Exam 13: Statement of Cash Flows

Classification of cash flows Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year. Use the following code: O = operating activities, I = investing activities, and F = financing activities. Assume this company uses the direct method. If the event does not involve a cash flow that should be included in the statement of cash flows, use an X. ____ (a) Declared a dividend to be paid early next year. ____ (b) Recorded depreciation expense for the current year. ____ (c) At year-end, paid rent in advance for the next six months. ____ (d) Issued capital stock for cash; management plans to use this cash to invest in marketable securities. ____ (e) Sold a parcel of unused land at a loss. ____ (f) Collected principal amount due on a note receivable. ____ (g) Used the cash received in d, above, to purchase marketable securities. ____ (h) Collected interest due on note receivable described in f, above. ____ (i) Made an adjusting entry to accrue interest payable at year-end. ____ (j) Collected account receivable from a customer who made a large credit purchase in a prior period.

Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used?

How should the transactions involving marketable securities be classified in Kenny's statement of cash flows for 2010?

Format of a cash flows statement-direct method Arrange the following information to complete the statement of cash flows for Jericho Corporation. Place parentheses around those dollar amounts representing cash outlays. Collections on loans made to borrowers \ 104,000 Loans made to borrowers \ 229,000 Interest and dividends received \ 24,000 Interest paid \ 21,500 Income taxes paid \ 91,500 Dividends paid \ 44,000 Payments to retire bonds payable \ 179,000 Payments to settle short-term debts 474,000 Cash received from customers \ 1,709,000 Cash paid to suppliers and employees 41,054,000 Proceeds from issuing capital stock \ 254,000 Purchases of plant assets \ 684,000 Proceeds from sales of plant assets \ 329,000 Cash and cash equivalents, beginning of year \ 481,500

At the end of the first year of operations, Meacham's balance sheet showed the following: Accounts Receivable, $13,400; Inventory, $9,400; and Accounts Payable, $14,650. The company's income statement reports net income of $37,400, including depreciation expense of $10,400. Using only the given information, compute Meacham's net cash flow from operating activities using the indirect method.

Cash flows from operating activities-indirect method The data below are taken from the financial statements of the Spectrum Corporation: Income Statement: 2009 Net income \ 299,000 Depreciation expense 101,000 Amortization of trademark 20,000 Loss on sale of machinery 38,000 Balance Sheet: 12/31/09 12/31/08 Accounts receivable \ 195,000 \ 204,000 Inventory 353,000 321,000 Prepaid expenses 50,000 38,000 Accounts payable 314,000 290,000 Accrued expenses payable 158,000 159,000 Complete the partial statement of cash flows for the year ended December 31, 2009, showing the computation of net cash flows from operating activities by the indirect method:

Place an X in the column signifying whether the activity is an operating, investing, or a financing activity, and if it is a source or a use of funds or if it is a non-cash activity.

Which method will yield the higher cash flows from financing activities?

Rent expense in Marrin Company's 2010 income statement is $420,000. If Prepaid Rent was $70,000 at December 31, 2009, and is $95,000 at December 31, 2010, the cash paid for rent during 2010 is:

When preparing a statement of cash flows, money held in cash equivalents is considered the same as cash.

Which statement is true as to the FASB's position on the presentation of the statement of cash flows?

A net decrease in accounts payable to suppliers indicates that cash payments to suppliers were less than purchases made during the period.

Format of a cash flow statement-direct method Arrange the following information to complete the statement of cash flows for Olympia, Inc. Place parentheses around those dollar amounts representing cash outlays. Purchases of marketable securities \ 48,000 Proceeds from sales of marketable securities \ 75,000 Interest and dividends received \ 19,500 Interest paid \ 18,000 Taxes paid \ 43,500 Dividends paid \ 27,000 Proceeds from short-term borrowing \ 31,500 Payments to settle short-term debts (principal repaid) \ 36,000 Cash received from customers \ 681,000 Cash paid to suppliers and employees \ 531,000 Proceeds from issuing capital stock \ 118,500 Purchases of plant assets \ 201,000 Proceeds from sales of plant assets \ 58,500 Cash and cash equivalents, beginning of year \ 73,500

A stock dividend is reported on the:

Significance of cash flows In the long run, is it more important for a business to have a positive cash flow from its operating activities, investing activities, or financing activities? Why?

Compute the amount of Seldin's cash payments for operating expenses.

The statement of cash flows of Bosley Corporation shows the amount of cash received from customers as $720,000. If net sales in Bosley Corporation's income statement are reported at $670,000 then:

Lester's balance sheet at the end of 2008 showed Investment in Marketable Securities at $250,000. On the basis of the data presented above, compute the amount to be reported for Investment in Marketable Securities in Lester Corporation's balance sheet at December 31, 2009.

Total cash proceeds received by Johnson from sales of plant assets during the current year amounted to:

At the beginning of 2009, Baldwin Corporation bought an automobile for $36,000 by issuing a note payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2009 using the indirect method, net income should be: