Exam 15: The Statement of Cash Flows

To determine whether a company's operations are covering its dividend payments,it is best to focus on which of the following sections of the statement of cash flows?

Indicate on the blanks below the letter of the type of activity (O = operating activity,F = financing activity,I = investing activity,N = noncash transaction)each of the following transactions represents. _____ 1.Firm sold 8,000 shares of its own common stock for cash. _____ 2.Sold $200,000 worth of products for cash. _____ 3.Paid $120,000 dividend. _____ 4.Received $1,500 in interest income. _____ 5.Exchanged 6,000 shares of stock for 15-year bonds. _____ 6.Paid $121,000 to the U.S.Treasury for income taxes.

Assume that the balance of accounts payable does not change during a period.When preparing a statement of cash flows,an increase in ending inventory over beginning inventory will result in an adjustment to net income under the indirect approach because

Foxworth Company sold plant assets that had accumulated depreciation of $20,000.These assets cost Foxworth $70,000 when purchased 4 years ago.The sale of the assets resulted in a gain for Foxworth of $2,000.The amount of cash reported for this transaction on Foxworth's statement of cash flows is:

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Interest Expense (assume that cash payments are equal to amount reported)-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Interest paid on bonds payable would be included in the financing activities category on the statement of cash flows.

Cash payments made on accounts payable or accrued liabilities are considered repayments of loans and are classified as financing activities on the statement of cash flows.

Purchases and sales of long-term investments for the period should be netted for disclosure in the investing activities section of the statement of cash flows.

Lincoln Company engaged in this transaction: As required by the landlord,prepaid one year's rent on its leased warehouse. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

If the indirect method is used to prepare a statement of cash flows,which of the following would be added to net income to arrive at net cash flows from operating activities?

Lincoln Company engaged in this transaction: Retired long-term debt with cash. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

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

Cash flows to sales is a measure of how much operating cash flows did each dollar of sales generate.

Use the following information to obtain the ratios below.Round amounts to one decimal place

Lincoln Company engaged in this transaction: Collected accounts receivable. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

Which of the following statements is correctregarding the statement of cash flows?

Give two explanations for why the amount of cash outflow for equipment for the year might not equal the increase in the Equipment account balance from one balance sheet date to the next.

The acquisition of treasury stock with cash is shown as a financing activity on the statement of cash flows.

Lincoln Company engaged in this transaction: Transferred cash to money market account. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

During 20x5,Oates Company had sales of $250,000,net income of $25,000,average total assets of $350,000,dividend payments of $17,500,net cash flows from operating activities of $36,000,purchases of plant assets of $37,500,and sales of plant assets of $45,000.Cash flows to assets equals (Round amounts to one decimal place)