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Exam 12: Accounting for Cash Flows

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Question 31

True/False

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A cash equivalent must be readily convertible to a known amount of cash and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

A) True
B) False

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Question 32

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Which of the following transactions or events should be reported as a source of cash from operating activities when using the direct method?

A) Credit sales.
B) Cash collections from customers.
C) Depreciation expense.
D) Cash received from the sale of a building.
E) Cash received from the sale of treasury stock.

F) A) and E)
G) B) and E)

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Question 33

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___________________ activities generally include those transactions and events that affect long-term assets.

A company's income statement showed the following: net income, $124,000; depreciation expense, $30,000, and gain on sale of plant assets, $14,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; prepaid expenses decreased $6,200; accounts payable increased $3,400. Calculate the net cash provided or used by operating activities.

Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

Use the following information to calculate the net cash provided or used by financing activities for the Brooks Corporation: (a) Net income, $10,000. (b) Sold common stock for $4,000 cash. (c) Paid cash dividend of $3,000. (d) Paid bond payable, $8,000. (e) Purchased equipment for $12,000 cash.

When using a spreadsheet to prepare the statement of cash flows, a decrease in accounts payable is entered in the Analysis of Changes column with a debit in the statement of cash flows section and a credit in the balance sheet section.

A purchase of land in exchange for a long-term note payable is reported in the investing section of the statement of cash flows.

The statement of cash flows reports:

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. This implies that $90,000 cash was received from the sale.

Both cash dividends received and interest received are considered to be investing inflows.

Based on the information provided below, complete the following worksheet to be used to prepare the statement of cash flows: (a) Net income for the year was $30,000. (b) Dividends of $10,000 were declared and paid. (c) Stylish's only noncash expense was depreciation, which totaled $50,000. (d) The company purchased plant assets for $70,000. (e) Notes payable in the amount of $40,000 were issued during the year for cash. (f) Merchandise inventory increased $30,000. (g) Accounts payable decreased $10,000,

The cash flow on total assets ratio:

The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.

An investment that is readily convertible to a known amount of cash and that is sufficiently close to its maturity date so that its market value is relatively insensitive to interest rate changes is a(n) :

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:

Match each of the following items with the appropriate definitions:

A statement of cash flows should reconcile the differences between the beginning and ending balances of:

The accounting records of Miller Company provided the data below ($ in 000s) . $\begin{array}{lrr}\text { Net income } & \$ 17,500 \\\text { Depreciation expense } & 8,400 \\\text { Increase in accounts receivable } & 4,400 \\\text { Decrease in inventory } & 6,400 \\\text { Decrease in prepaid insurance } & 1,500 \\\text { Decrease in salaries payable } & 2,700 \\\text { Increase in interest payable } & 900\end{array}$ What is the net cash provided (used) by operating activities?

Net income of Lucky Company was $52,000. The accounting records reveal depreciation expense of $99,000 as well as increases in prepaid rent, salaries payable, and income taxes payable of $74,000, $15,700, and $14,000, respectively. What is the net cash flow provided (used) by operating activities?