Exam 15: The Statement of Cash Flows

Determining cash flows from investing activities is the ________ step in preparing the statement of cash flows.

During the year,Ollie's Outdoor Outfitters issued 20,000 shares of common stock in exchange for a prime piece of land.Two employees of the accounting department,Audrey and Neil,disagree as to the appearance of this particular transaction on the statement of cash flows.Audrey believes it to be a significant noncash transaction,and it therefore should be presented as such at the bottom of the statement.Neil contends that because this transaction did not cause any cash to flow in or out of the company,it has no place on the statement of cash flows.Who is correct and why?

The activity on the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only.

Why does the acquisition of land in exchange for common stock qualify as a noncash investing and financing transaction?

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 2 would be found on the statement of cash flows in the

The statement of cash flows discloses the effect on cash of the purchase and sale of both short- and long-term investments.

Since investing activities center on the long-term assets shown on the balance sheet,they do not include any short-term investments shown under current assets on the balance sheet

Investors and creditors would find the statement of cash flows least useful in assessing

Lincoln Company engaged in this transaction: Issued common stock for cash. 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: Issued stock for land. 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,which of the following is a proper adjustment to net income to arrive at net cash flows from operating activities?

Payment of dividends would be reflected as a cash outflow in the investing activities section of the statement of cash flows.

A decrease in the balance of merchandise inventory is subtracted from net income when calculating net cash flows from operating activities using the indirect method.

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

Using the indirect method,calculate the amount of net cash flows from operating activities from the following data.Show your work.

Which of the following is reported as a noncash investing and financing transaction on the statement of cash flows?

Houston Shoe Co.is preparing a statement of cash flows using the indirect method.Indicate on the blanks below whether each item is an operating activity (O),an investing activity (I),a financing activity (F),a noncash transaction (N),or an item that would not appear on or with Houston's statement (NA). _____ 1.The change in Accounts Payable during the period _____ 2.Depreciation expense _____ 3.Exchange of stock for a building _____ 4.Purchase of equipment _____ 5.Purchases of treasury stock _____ 6.Borrowing by issuing bonds _____ 7.A gain on the sale of equipment _____ 8.Collections from customers _____ 9.Dividends paid _____ 10.Income taxes paid _____ 11.Proceeds from sale of long-term investments at a loss _____ 12.The change in Inventory for the period

Cash flows to assets is measured in "times."

Assume the indirect method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Dividend Income (assume that cash received is 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:

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