Exam 15: The Statement of Cash Flows

When preparing a statement of cash flows using the indirect method,an increase in wages payable is subtracted from net income.

Use this information to answer the following question. Northbrook Corporation is preparing a statement of cash flows.The following transactions occurred during the year: 1)Sold machinery for $9,000 cash. 2)Purchased a building for $80,000 cash. 3)Issued $70,000 worth of stock to acquire an airplane. 4)Converted long-term bonds by issuing $100,000 worth of stock. 5)Declared and paid a $10,000 cash dividend. Transaction 5 would be found on the statement of cash flows in the

When preparing a statement of cash flows using the indirect method,depreciation expense is added to net income to arrive at net cash flows from operating activities.

The primary purpose of the statement of cash flows is to provide information about a company's investing and financing activities during an accounting period.

Cash inflows and outflows are easier to manipulate than earnings.

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Prepaid Expenses-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

The indirect method of preparing a statement of cash flows

A U.S.Treasury bill with an original maturity of 90 days or less is considered a cash equivalent.

Cash inflows and outflows are not netted in the investing activities section of the statement of cash flows but are separately disclosed to give the reader full information.

How are transfers between cash and cash equivalents treated on a statement of cash flows?

For 20x5,Devers Enterprises had average total assets of $1,040,000,sales of $900,000,net income of $100,000,net cash flows from operating activities of $150,000,dividend payments of $50,000,purchases of plant assets of $120,000,and sales of plant assets of $110,000.Using this information,compute (a)cash flow yield,(b)cash flows to sales,(c)cash flows to assets,and (d)free cash flow.Round amounts to one decimal place.

Lincoln Company engaged in this transaction: Abandoned fully depreciated equipment. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Lincoln Company engaged in this transaction: Sold land it was holding for speculation. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

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

The primary purpose of the statement of cash flows is to provide information about a company's cash receipts and cash payments during an accounting period.

Interest received on investments would be included in the operating activities category on the statement of cash flows.

Lincoln Company engaged in this transaction: Purchased 30-day U.S.Treasury bill. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Dividends declared but unpaid are reflected in the financing activities section of the statement of cash flows.

Kingston Company settled a long-term note payable it owed to Creative Company by issuing capital stock.Kingston would report this

Lincoln Company engaged in this transaction: Received 6-month's rent in advance from a tenant in its office building. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.