Exam 12: The Statement of Cash Flows

Use the selected data from the consolidated statements of cash flows for College Corporation for the years ended December 31,2014 and 2013,to answer the questions that follow. REQUIRED: (A)What is the significance of the positive amounts shown above,for both years,for accounts payable and accrued liabilities? (B)At the end of each year,College's cash balance was approximately $5 to $7 million.What does this indicate about College's cash management techniques?

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Question 1

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(A)Under the indirect method,net income must be adjusted for the change in the current accounts (other than cash).The positive amounts indicate that for both of the years,the year-end balances for accounts payable and accrued liabilities have increased over that of the previous year.It is added to net income because this means that some of its expenses were not paid in cash by the end of each year.
(B)Companies such as College employ various cash management techniques.Cash balances are often kept to a minimum,and excess funds temporarily invested to generate interest income.Very short-term temporary investments might qualify as cash equivalents,but any temporary investment of more than 90 days would not.Such investments would be included in College's current assets that are not shown here.Another factor is the nature of College's business.For the two years,it has generated approximately $9 million in net cash from operating activities.This would indicate that it has a fairly steady cash flow,and therefore may not have to keep large amounts on hand.This has allowed College to make additional long-term investments to grow its business as shown by the net cash used by investing activities.

Melo's purchased a $25,000 truck for catering from its restaurant.It made a down payment of one-fourth of the price.What combination of amounts would affect the income statement and statement of cash flows for the purchase of the truck? Statement of Income Cash Flow Statement

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Question 2

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The cash flow adequacy ratio is defined as:

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Question 3

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Use the information below for Fargo Corp.for 2013 and 2014 to answer the following question. At the end of 2014,Fargo issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2013 (before their maturity date).All interest expense was paid in cash during 2014. How much did Fargo pay to retire the $500,000 bond issue during 2014?

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Question 4

Iowa Industries Inc. Selected data from the financial statements of Iowa Industries Inc.for the years ended December 31,2014 and 2013,are presented below.Also,certain assumptions are presented.Use these data and assumptions to answer the questions that follow. Assumptions: Review the data and assumptions for Iowa Industries Inc. REQUIRED: (A)What was the cost of the property,plant and equipment which was disposed of during 2014? (B)What was the amount of accumulated depreciation on the property,plant and equipment disposed of during 2014? (C)Assuming that the book value of the property,plant and equipment disposed of during 2014 was $76.9,what were the cash proceeds from the disposal of property,plant and equipment for 2014?

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Question 5

Which of the following activities is most likely to have a cash flow effect?

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Question 6

Cash flows from issuing and repurchasing stock or issuing and repaying (retiring)debt are classified as

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Question 7

O'Bryan Company began the year with a balance of $18,000 in Salaries and Wages Payable and ended the year with $11,000 in the account.Salaries and Wages Expense for the period amounted to $91,000.Under the direct method,O'Bryan will report cash payments for salaries and wages of:

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Question 8

Cash flows from acquiring and disposing of long-term assets are classified as

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Question 9

When using the indirect method,how is the decrease in accounts payable shown on the statement of cash flows?

(Multiple Choice)

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Question 10

Jose Exports Inc.reported net income of $150,000 for 2013,but its cash balance decreased $40,000.Which financial statement should Jose Exports' management refer to for an explanation of this situation?

(Multiple Choice)

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Question 11

\Use the selected information from the statement of cash flows for three actual companies for the last three years to answer the questions that follow. $\Use the selected information from the statement of cash flows for three actual companies for the last three years to answer the questions that follow. REQUIRED: What is meant by the term cash flow adequacy? What other financial information would be necessary in order to make a determination of the cash flow adequacy for these three companies?$ REQUIRED: What is meant by the term "cash flow adequacy"? What other financial information would be necessary in order to make a determination of the cash flow adequacy for these three companies?

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Question 12

The collection of accounts receivable results in a(n)_________________________ reported in the operating activities section of the statement of cash flows using the indirect method.

(Short Answer)

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Question 13

A decrease in retained earnings indicates that a cash dividend has been paid.

(True/False)

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Question 14

Josh Co.reported a net loss of $30,000 for 2014,yet its cash balance increased during the year.Which financial statement should Josh's management refer to for an explanation of this situation?

(Multiple Choice)

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Question 15

___________________________ is a noncash expense related to plant assets.

(Short Answer)

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Question 16

When using the direct method,how are salaries paid to employees reported on the statement of cash flows?

(Multiple Choice)

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Question 17

The statement of cash flows summarizes the operating,investing,and financing activities of a business for a period of time.

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Question 18

Because the cash received from the sale of long-term assets is reported in the investing activities section of the statement of cash flows,any gain or loss is ignored when reporting the cash flow from operating activities under the direct method.

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Question 19

Why do accounting standards require a company to separately disclose income taxes paid and interest paid if it uses the indirect method?

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Question 20

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Melo's purchased a $25,000 truck for catering from its restaurant.It made a down payment of one-fourth of the price.What combination of amounts would affect the income statement and statement of cash flows for the purchase of the truck? Statement of Income Cash Flow Statement

The cash flow adequacy ratio is defined as:

Which of the following activities is most likely to have a cash flow effect?

Cash flows from issuing and repurchasing stock or issuing and repaying (retiring)debt are classified as

O'Bryan Company began the year with a balance of $18,000 in Salaries and Wages Payable and ended the year with $11,000 in the account.Salaries and Wages Expense for the period amounted to $91,000.Under the direct method,O'Bryan will report cash payments for salaries and wages of:

Cash flows from acquiring and disposing of long-term assets are classified as

When using the indirect method,how is the decrease in accounts payable shown on the statement of cash flows?

Jose Exports Inc.reported net income of $150,000 for 2013,but its cash balance decreased $40,000.Which financial statement should Jose Exports' management refer to for an explanation of this situation?

The collection of accounts receivable results in a(n)_________________________ reported in the operating activities section of the statement of cash flows using the indirect method.

A decrease in retained earnings indicates that a cash dividend has been paid.

Josh Co.reported a net loss of $30,000 for 2014,yet its cash balance increased during the year.Which financial statement should Josh's management refer to for an explanation of this situation?

___________________________ is a noncash expense related to plant assets.

When using the direct method,how are salaries paid to employees reported on the statement of cash flows?

The statement of cash flows summarizes the operating,investing,and financing activities of a business for a period of time.

Because the cash received from the sale of long-term assets is reported in the investing activities section of the statement of cash flows,any gain or loss is ignored when reporting the cash flow from operating activities under the direct method.

Why do accounting standards require a company to separately disclose income taxes paid and interest paid if it uses the indirect method?

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, plant, and Equipment, and Intangibles

Current Liabilities, contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

Financial Statement Analysis

International Financial Reporting Standards

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