Question 1

What are the five usual steps involved in the preparation of the statement of cash flows?

Accepted Answer

The preparation of the statement of cash

Question 2

Use the following information to calculate the net cash provided or used by financing activities for the Brooks Corporation:
(a) Net income, $10,000
(b) Sold common stock for $4,000 cash
(c) Paid cash dividend of $3,000
(d) Paid bond payable, $8,000
(e) Purchased equipment for $12,000 cash

Accepted Answer

To calculate the net cash provided or us

Question 3

Use the following financial statements and additional information to (1) prepare a complete statement of cash flows for the year ended December 31, 2011. The cash provided or used by operating activities should be reported using the direct method, and (2) compute the company's cash flow on total assets ratio for 2011.     Additional Information
a. A $20,000 note payable is retired at its carrying value in exchange for cash.
b. The only changes affecting retained earnings are net income and cash dividends paid.
c. New equipment is acquired for $120,000 cash.
d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700.
e. Prepaid expenses relate to Other Expenses on the income statement.
f. All purchases and sales of merchandise inventory are on credit.

Accepted Answer

The answer of Use the following financial statements and additional...

Question 4

Since it is recommended by the FASB, the direct method of preparing the statement of cash flows is most frequently used.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

Accepted Answer

A)  Interest revenue. 
B)  Sale of equipment. 
C)  Interest expense. 
D)  Purchase of treasury stock. 
E)  Purchase of stock in another company. 
A)  Interest revenue. 
B)  Sale of equipment. 
C)  Interest expense. 
D)  Purchase of treasury stock. 
E)  Purchase of stock in another company.

Question 6

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from operating activities generally affect:

Accepted Answer

A)  Net income, current assets, and current liabilities. 
B)  Noncurrent assets. 
C)  Noncurrent liability and the equity accounts. 
D)  Both noncurrent assets and noncurrent liabilities. 
E)  Equity accounts only. 
A)  Net income, current assets, and current liabilities. 
B)  Noncurrent assets. 
C)  Noncurrent liability and the equity accounts. 
D)  Both noncurrent assets and noncurrent liabilities. 
E)  Equity accounts only.

Question 7

Typical cash flows from investing activities include:

Accepted Answer

A)  Payments to purchase property, plant and equipment or other productive assets (excluding inventory). 
B)  Proceeds from collecting the principal amount of notes receivable arising from customer sales. 
C)  Proceeds from collecting the principal amount of notes receivable arising from intercompany transactions. 
D)  Payments to acquire held-to maturity securities of other entities, except cash equivalents. 
E)  Proceeds from the sale of equipment. 
A)  Payments to purchase property, plant and equipment or other productive assets (excluding inventory). 
B)  Proceeds from collecting the principal amount of notes receivable arising from customer sales. 
C)  Proceeds from collecting the principal amount of notes receivable arising from intercompany transactions. 
D)  Payments to acquire held-to maturity securities of other entities, except cash equivalents. 
E)  Proceeds from the sale of equipment.

Question 8

Woodlawn Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Retained earnings balance at the beginning of the year $233,000
Cash dividends declared for the year $50,000
Proceeds from the sale of equipment $85,000
Gain on the sale of equipment $4,500
Cash dividends payable at the beginning of the year $22,000
Cash dividends payable at the end of the year $30,000
Net income for the year $110,000
The ending balance in retained earnings is:

Accepted Answer

A)  $343,000. 
B)  $213,000. 
C)  $293,000. 
D)  $297,500. 
E)  $301,000. 
A)  $343,000. 
B)  $213,000. 
C)  $293,000. 
D)  $297,500. 
E)  $301,000.

Question 9

A company reported operating cash flows in Year 1 of $23,400 and $26,220 in Year 2. Its average total assets in Year 1 were $262,000 and $285,000 in Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

Accepted Answer

The answer of A company reported operating cash flows in...

Question 10

Both the direct and indirect methods yield the identical net cash flow amount provided or used by operating activities.

Accepted Answer

A) True 
 B)False

Question 11

Most managers stress the importance of understanding and predicting cash flows for business decisions.

Accepted Answer

A) True 
 B)False

Question 12

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

Accepted Answer

A) True 
 B)False

Question 13

Noncash financing and investing activities are disclosed in the ____________ or in a separate ____________________________.

Accepted Answer

Notes; schedule incl

Question 14

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Accepted Answer

A)  Financing activities. 
B)  Investing activities. 
C)  Operating activities. 
D)  Direct activities. 
E)  Indirect activities. 
A)  Financing activities. 
B)  Investing activities. 
C)  Operating activities. 
D)  Direct activities. 
E)  Indirect activities.

Question 15

Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ____________________________.

Accepted Answer

The answer of Investments that are readily convertible to a...

Question 16

A company reported average total assets of $496,000 in Year 1 and $604,000 in Year 2. Its net operating cash flow in Year 1 was $41,150 and $55,500 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

Accepted Answer

The answer of A company reported average total assets of...

Question 17

A cash equivalent is an investment that:

Accepted Answer

A)  Is readily convertible to a known amount of cash. 
B)  Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes. 
C)  Generally is within 3 months of its maturity date. 
D)  Is highly liquid. 
E)  All of these. 
A)  Is readily convertible to a known amount of cash. 
B)  Is sufficiently close to its maturity date so its market value is unaffected by interest rate changes. 
C)  Generally is within 3 months of its maturity date. 
D)  Is highly liquid. 
E)  All of these.

Question 18

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

Accepted Answer

A)  $(3,000). 
B)  $(60,000). 
C)  $(57,000). 
D)  Zero. This is an operating activity. 
E)  Zero. This is an investing activity. 
A)  $(3,000). 
B)  $(60,000). 
C)  $(57,000). 
D)  Zero. This is an operating activity. 
E)  Zero. This is an investing activity.

Question 19

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

Accepted Answer

A) True 
 B)False

Question 20

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

Accepted Answer

A) True 
 B)False

Exam 16: Reporting the Statement of Cash Flows

What are the five usual steps involved in the preparation of the statement of cash flows?

Use the following information to calculate the net cash provided or used by financing activities for the Brooks Corporation: (a) Net income, $10,000 (b) Sold common stock for $4,000 cash (c) Paid cash dividend of $3,000 (d) Paid bond payable, $8,000 (e) Purchased equipment for $12,000 cash

Since it is recommended by the FASB, the direct method of preparing the statement of cash flows is most frequently used.

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from operating activities generally affect:

Typical cash flows from investing activities include:

A company reported operating cash flows in Year 1 of $23,400 and $26,220 in Year 2. Its average total assets in Year 1 were $262,000 and $285,000 in Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

Both the direct and indirect methods yield the identical net cash flow amount provided or used by operating activities.

Most managers stress the importance of understanding and predicting cash flows for business decisions.

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

Noncash financing and investing activities are disclosed in the ____________ or in a separate ____________________________.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ____________________________.

A company reported average total assets of $496,000 in Year 1 and $604,000 in Year 2. Its net operating cash flow in Year 1 was $41,150 and $55,500 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

A cash equivalent is an investment that:

A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000. The amount to be reported under cash flows from financing activities is:

When preparing the operating activities section of the statement of cash flows using the indirect method, expenses with no cash outflows are added back to net income.

The FASB recommends that the operating section of the statement of cash flows be reported using the direct method.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost Allocation and Performance Measurement

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Capital Budgeting and Managerial Decisions

Time Value of Money

Filters

Noncash financing and investing activities are disclosed in the or in a separate ________________.