Exam 13: Statement of Cash Flows

The accountant for Foster Institute,Inc. ,determined the cash flow for several transactions to be as follows: On the basis of the above transactions alone,determine the net cash flow from financing activities.

Under the indirect method,when machinery is sold at a gain,the gain is added in the operating section of the statement of cash flows and the cost is added in the investing section.

The FASB classifies interest received on investments and interest paid on debt financing as part of operating cash flows,while the IASB:

Net cash flows from operating activities will have the same total no matter which method is used,direct or indirect.

[The following information applies to the questions displayed below.] An analysis of Korman Corporation's Investment in Marketable Securities account during 2018 disclosed the following: Korman's 2018 income statement included a $40,000 gain on sale of marketable securities and $30,000 dividend income from marketable securities.All payments and proceeds relating to marketable securities transactions were in cash. -The amount of cash paid by Korman Corporation in 2018 for the purchase of marketable securities was:

Which of the following is not classified among the financing activities in a statement of cash flows?

Which of the following is not classified among the investing activities in a statement of cash flows?

[The following information applies to the questions displayed below.] The financial statements of York,Inc. ,provide the following information for the current year: -Compute the amount of cash received from customers during the current year.

Rent expense in Burr Company's income statement is $480,000.If Prepaid Rent was $120,000 on January 1 and is $95,000 on December 31,the cash paid for rent during the year is:

In a statement of cash flows,cash transactions are classified into three major categories.Which of the following is not one of these three categories?

Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year.Use the following code: O = operating activities,I = investing activities,and F = financing activities. Assume use of the direct method.If the event does not involve a cash flow that should be included in the statement of cash flows,use an X. ________ (a)Paid an account payable for inventory purchased in a prior accounting period. ________ (b)On December 28,made a large credit sale;terms,2/10,n/30. ________ (c)Received a dividend from an investment in IBM common stock. ________ (d)Paid a dividend to stockholders. ________ (e)Paid the interest on a note payable to First Bank. ________ (f)Paid the principal amount due on the note payable to First Bank. ________ (g)Transferred cash from a checking account into a money market fund. ________ (h)Made an adjusting entry to record accrued wages payable at the end of the period. ________ (i)Recorded depreciation expense for the current year. ________ (j)Purchased plant assets for cash. Answer: O (a)Paid an account payable for inventory purchased in a prior accounting period. X (b)On December 28,made a large credit sale;terms,2/10,n/30. O (c)Received a dividend from an investment in IBM common stock. F (d)Paid a dividend to stockholders. O (e)Paid the interest on a note payable to First Bank. F (f)Paid the principal amount due on the note payable to First Bank. X (g)Transferred cash from a checking account into a money market fund. X (h)Made an adjusting entry to record accrued wages payable at the end of the period. X (i)Recorded depreciation expense for the current year. I (j)Purchased plant assets for cash. Difficulty: 1 Easy Topic: Classification of Cash Flows Learning Objecti: 13-02 Describe how cash transactions are classified in a statement of cash flows. Bloom's: Remember AACSB: Analytical Thinking -Format of a cash flow statement-direct method Arrange the following information to complete the statement of cash flows for Olympia,Inc.Place parentheses around those dollar amounts representing cash outlays.

Which of the following is a financing activity?

Companies that show profits on the income statement will always show positive cash flows from operating activities.

If cash increased during the year and there was also a net loss for the year,there must be positive cash flows from financing and investing activities.

Which of the following statements regarding the direct and indirect methods of reporting cash flow from operating activities is false?

[The following information applies to the questions displayed below.] The financial statements of Seldin,Inc. ,provide the following information for the current year: -Compute the amount of Seldin's cash payments for purchases of merchandise during the current year.

Indicate how each of the following events should be classified in a statement of cash flows for the current calendar year.Use the following code: O = operating activities,I = investing activities,and F = financing activities Assume this company uses the direct method.If the event does not involve a cash flow that should be included in the statement of cash flows,use an X. ________ (a)Declared a dividend to be paid early next year. ________ (b)Recorded depreciation expense for the current year. ________ (c)At year-end,paid rent in advance for the next six months. ________ (d)Issued capital stock for cash;management plans to use this cash to invest in marketable securities. ________ (e)Sold a parcel of unused land at a loss. ________ (f)Collected principal amount due on a note receivable. ________ (g)Used the cash received in d,above,to purchase marketable securities. ________ (h)Collected interest due on note receivable described in f,above. ________ (i)Made an adjusting entry to accrue interest payable at year-end. ________ (j)Collected account receivable from a customer who made a large credit purchase in a prior period. Answer: X (a)Declared a dividend to be paid early next year. X (b)Recorded depreciation expense for the current year. O (c)At year-end,paid rent in advance for the next six months. F (d)Issued capital stock for cash;management plans to use this cash to invest in marketable securities. I (e)Sold a parcel of unused land at a loss. I (f)Collected principal amount due on a note receivable. I (g)Used the cash received in d,above,to purchase marketable securities. O (h)Collected interest due on note receivable described in f,above. X (i)Made an adjusting entry to accrue interest payable at year-end. O (j)Collected account receivable from a customer who made a large credit purchase in a prior period. Difficulty: 1 Easy Topic: Cash Flows from Operating Activities;Cash Flows from Investing Activities Learning Objecti: 13-03 Compute the major cash flows relating to operating activities. ;13-04 Compute the cash flows relating to investing and financing activities. Bloom's: Remember AACSB: Analytical Thinking -Computation of cash flows An analysis of changes in selected balance sheet accounts of Taurus Corporation shows the following for the current year: The income statement for the current year included the following items relating to the transactions summarized above: All payments and proceeds relating to these transactions were in cash.Using this information,compute the following cash flows for the current year:

When equipment is sold at a loss:

Accounting terminology Listed below are eight technical accounting terms introduced in this chapter: Each of the following statements may (or may not)describe one of these technical terms.In the space provided beside each statement,indicate the accounting term described,or answer "None" if the statement does not correctly describe any of the terms. ________ (a)Cash sales and collections of accounts receivable. ________ (b)The classification of cash flows which includes issuing capital stock and paying dividends. ________ (c)The financial statement that best illustrates the profitability of a business. ________ (d)The section of a statement of cash flows summarizing the cash effects of most transactions entering into the determination of net income. ________ (e)An expense that reduces net cash flow but does not reduce net income. ________ (f)The classification of cash flows that includes purchases and sales of plant assets. ________ (g)Transactions shown in a supplementary schedule accompanying a statement of cash flows.

Cash flows from operating activities-indirect method The data below are taken from the financial statements of the Spectrum Corporation: Complete the partial statement of cash flows for the year ended December 31,2018,showing the computation of net cash flows from operating activities by the indirect method: