Exam 24: The Statement of Cash Flows

The statement of cash flows assumes that the ____________________ basis of accounting is used when recording transactions and preparing the balance sheet and income statement.

A corporation received $80,000 in cash when it sold a building and paid $50,000 in cash when it purchased some new machinery. As a result, the statement of cash flows would report

Cash flows from ____________________ activities are the result of routine business transactions such as buying and selling merchandise.

Additional information: Equipment costing $100,000 was sold for $70,000. Accumulated depreciation on this equipment was $20,000. Dividends of $38,000 were declared and paid. Bonds were issued at face value of $300,000. Common stock of $55,000 was issued to acquire land. Investments (stock in IBM) were purchased for $275,000. -Using the information provided, prepare the cash flows from operating activities for The Dolmen Company.

Interest expense is treated as an outflow of cash from a financing activity.

When the net income is reconciled with the net cash provided by operating activities, depreciation expense is added to the net income.

An increase or decrease in accounts payable during a fiscal period has no effect on the net cash provided by operating activities.

Polyglot Services, Inc. sold equipment that cost $45,600 for $12,450. Depreciation on the equipment from purchase to date of sale amounted to $35,000. What amount is reported in the Cash Flows from Investing Activities section of the Statement of Cash Flows?

The payment of cash dividends to stockholders would be classified as a cash outflow resulting from a financing activity.

The payment of maturing bonds would be treated as a cash outflow in the ____________________ activities section of the statement of cash flows.

A corporation received $50,000 in cash when it sold a building and paid $90,000 in cash when it purchased some new machinery. As a result, the statement of cash flows would report

When the net cash provided by operating activities is determined, an increase in income taxes payable should

The current assets and liabilities of the Lionel Corporation on December 31, 2014 and 2013, are listed below. Lionel's net income for 2014 was $75,000. Included in its expenses was depreciation of $17,000. Prepare a schedule of cash flows from operating activities for 2014. Dec. 31,2014 Dec. 31,2013 Cash \ 86,000 \ 70,000 Accounts Receivable (Net) 125,000 101,000 Prepaid Expenses 16,000 19,000 Merchandise Inventory 105,000 86,000 Accounts Payable 110,000 105,000

When the net cash provided by operating activities is determined, a gain on a sale of equipment should

A gain on the sale of equipment is reported in the ____________________ activities section of the statement of cash flows.

Investing activities include

Why are depreciation expense and amortization expense added to Net Income under the indirect method?

Echt Manufacturing sold equipment that originally cost $78,400 for $54,300 cash on April 1^st of 2015. This equipment was purchased on January 2, 2013, had a salvage value of $8,400, a useful life of ten years, and was depreciated under the straight-line method of depreciation. How will this transaction be originally reported on Echt's 2015 Income Statement? How will this transaction be reported on the Statement of Cash Flows for 2015? (Assume that the indirect method was used.)

Additional information: Equipment costing $100,000 was sold for $70,000. Accumulated depreciation on this equipment was $20,000. Dividends of $38,000 were declared and paid. Bonds were issued at face value of $300,000. Common stock of $55,000 was issued to acquire land. Investments (stock in IBM) were purchased for $275,000. -Using the information provided, prepare the cash flows from financing activities for The Dolmen Company.

List some examples of transactions or activities within a company that must be disclosed in the Statement of Cash Flows.