Exam 16: Statement of Cash Flows

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 amount in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. Cash dividends paid is to be classified under financing activities. 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.

In preparing a company's statement of cash flows for the most recent year on the indirect method, the following information is available: Income before taxes for the year was $60,000 Accounts payable decreased by $18,000 Accounts receivable decreased by $25,000 Inventories increased by $ 5,000 Depreciation expense was $30,000 Income taxes paid was $ 8,000 Net cash provided by operating activities was:

A company's income statement showed the following: income before taxes, $150,000; income taxes paid, $26,000; depreciation expense, $30,000; and gain on sale of property, plant and equipment, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

A statement of cash flows should reconcile the differences between the beginning and ending balances of:

When using the indirect method to calculate and report net cash provided or used by operating activities, which of the following is subtracted from income?

When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts receivable is subtracted from income.

Accounting standards require companies to include a statement of cash flows in a complete set of financial statements.

Castine reports income before taxes of $310,000 and income taxes paid of $5,000 for the year ended December 31, Year 2. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the increase in cash for Year 2.

Use the following company information to calculate its net cash provided or used by investing activities: (a) Equipment with a carrying amount of $125,000 and an original cost of $220,000 was sold at a gain of $22,000. (b) Paid $49,000 cash for a new truck. (c) Sold land costing $30,000 for $26,000 cash, realizing a $4,000 loss. (d) Purchased treasury shares for $53,000 cash. (e) Long-term investments in shares are sold for $41,000 cash, realizing a gain of $3,500.

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

The statement of cash flows helps address questions such as

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

Weston is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from investing activities:

When using the indirect method to calculate and report the net cash provided or used by operating activities, income is adjusted for:

Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold for a $10,000 loss in Year 2. The following selected information is available for Sebring Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

The statement of cash flows reports:

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

Financing activities include receiving cash dividends from investments in other companies' shares.

A company had average total assets of $1,760,000, total cash flows of $1,320,000, cash flows from operations of $205,000, and cash flows from financing of $850,000. The cash flow on total assets ratio equals:

___________________ activities include those transactions that affect long-term liabilities and equity.