Exam 12: Reporting Cash Flows

Ford Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Ford Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

Applying the direct method, the gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows.

When preparing the operating activities section of the statement of cash flows using the indirect method, depreciation is added back to net income.

Noncash investing and financing activities may be disclosed in:

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.

Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

A company's income statement showed the following: net income, $134,000; depreciation expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. This implies that $40,000 cash was received from the sale.

A company reported net income of $318,000, operating cash flows of $218,000, total cash flows of $184,000, and average total assets of $898,000. Calculate its cash flow on total assets ratio.

A noncash investing activity should be disclosed in a note to the statement of cash flows or on a separate schedule.

All cash transactions eventually affect noncash ________ accounts.

A company's income statement showed the following: net income, $124,000 and depreciation expense, $30,000. An examination of the company's current assets and current liabilities showed the following changes: accounts receivable decreased $9,400; merchandise inventory increased $18,000; and accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

The indirect method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

Use the following company information to calculate net cash provided or used by investing activities: (a) Equipment with a book value of $175,000 and an original cost of $300,000 was sold at a loss of $17,000. (b) Paid $62,000 cash for a new truck. (c) Sold land costing $32,000 for $36,000 cash, realizing a $4,000 gain. (d) Purchased treasury stock for $61,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

When preparing a statement of cash flows using the indirect method, each of the following should be classified as an operating cash flow except:

A spreadsheet can help organize the information needed to prepare a statement of cash flows.

A company reported average total assets of $501,000 in Year 1 and $611,000 in Year 2. Its net operating cash flow in Year 1 was $41,500 and $55,250 in Year 2. Calculate its cash flow on total assets ratio for both years. Comment on the results.

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from financing activities generally are affected by:

Investing activities include receiving cash dividends from stock investments.