Exam 12: Statement of Cash Flows

What is the purpose of the statement of cash flows?

Powers Corporation had the following beginning and ending balances for 2013: During the year Powers sold equipment for $30,000 that had originally been purchased for $80,000. The old equipment had accumulated depreciation of $60,000 at the time of sale. To replace the equipment Powers purchased new equipment for $100,000 by making a $10,000 down payment and signing a 2-year note for the balance. a) Calculate the purchase price of the new equipment. b) If Powers uses the indirect approach to calculate cash flow from operating activities, what will be the net effect of the sale of the old equipment and the depreciation on the new equipment on cash from operating activities? c) How will the sale and purchase be reported in Powers' cash flow from investing activities? d) Will the note be reported? If so, where?

FASB requires that companies report cash flow per share in their audited financial statements.

Indicate whether each of the following statements is true or false. _____ a) It is possible for a growing business to have substantial earnings, but yet be short of cash. _____ b) It is possible for a well-established business to report large operating losses, but have positive cash flow from operating activities. _____ c) A merchandising firm adding new stores must report the additional inventory purchases as investing activities. _____ d) When equipment is bought to replace old equipment, the transaction is reported as an operating activity. _____ e) FASB requires companies to disclose significant investing and financing activities even if these transactions do not affect cash.

For the year ended December 31, 2013, Carr Company had cash collections from customers of $200,000, cash paid to employees of $32,000, cash paid to suppliers of $100,000, cash used to retire long-term bonds of $32,000, and cash payments for dividends of $20,000. Based on this information, the amount of cash provided by operating activities for 2013 is:

George Co. purchased $5,000 of supplies, paying $1,000 in cash and charging the remainder on account. $3,000 of the supplies were used during the accounting period. Show the combined effects of the events.

Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?

Identify each of the following activities as operating activities (O), investing activities (I), or financing activities (F) for the Statement of Cash Flows.

Rapid growth of a company can cause it to be short of cash.

Companies report significant noncash investing and financing activities on a schedule that accompanies the statement of cash flows.

Which of the following cash flows would be included in the operating activities section of the statement of cash flows? Assume use of the direct method.

Which method of preparing a cash flow statement is recommended by the Financial Accounting Standards Board?

The Laramie Corporation reported a beginning balance of $2,400 in its Prepaid Insurance account for 2013. During the year, Laramie paid a total of $32,000 to purchase insurance, and the Prepaid Insurance account had an ending balance of $3,200. What was the amount of insurance expense that Laramie reported for 2013?

George Co. purchased land costing $15,000 by paying $7,000 cash and issuing a note payable for the remaining balance.