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Exam 12: Reporting Cash Flows

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Question 91

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When preparing the operating activities section of the statement of cash flows using the indirect method, depreciation is subtracted from net income.

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B) False

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Question 92

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The reporting of investing and financing activities is ________ under the direct and indirect methods of preparing the statement of cash flows.

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Question 93

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The payment of cash dividends never changes the balance of retained earnings.

When preparing the operating activities section of the statement of cash flows using the indirect method, an increase in income taxes payable is added to net income.

The indirect method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, are classified as:

Scranton, Inc. reports net income of $230,000 for the year ended December 31. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used) in operating activities using the indirect method.

Cash flows from selling trading securities are usually reported in the statement of cash flows as part of:

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

Investing activities include (a) the purchase and sale of long-term assets, (b) the purchase and sale of short-term investments, and (c) lending and collecting on loans.

Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: Cash dividends declared for the year $40,000 Cash dividends payable at the beginning of the year 17,000 Cash dividends payable at the end of the year 13,000 The amount of cash paid for dividends was:

The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { | l | r | } \hline \text { Retained earnings balance at the beginning of the year } & \$ 126,000 \\\hline \text { Cash dividends declared for the year } & 46,000 \\\hline \text { Proceeds from the sale of equipment } & 81,000 \\\hline \text { Gain on the sale of equipment } & 7,000 \\\hline \text { Cash dividends payable at the beginning of the year } & 18,000 \\\hline \text { Cash dividends payable at the end of the year } & 20,000 \\\hline \text { Net income for the year } & 92,000 \\\hline\end{array}$ What is the ending balance for retained earnings?

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the indirect method. \begin{array}{cc}\text {PULLMAN COMPANY}\\\text {Income Statement}\\\text {For Year Ended December 31, 20 \mathrm { X } 2}\\\begin{array}{|l|r|r|}\hline\text { Sales } & & \$ 180,000 \\\hline\text { Cost of goods sold } & & 104,00 \\\hline\text { Gross profit from sales } & & \$ 76,000 \\\hline \text { Operating expenses: } & & \\\hline \text { Salaries and wages expense } & \$ 25,000 & \\\hline \text { Depreciation expense } & 7,000 & \\\hline \text { Rent expense } & 7,200 & \\\hline \text { Interest expense } & 1,900 & 41,100 \\\hline \text { Income from operations } & & \$ 34,900 \\\hline \text { Loss on sale of land } & & 3,500 \\\hline \text { Net income } & & \$ 31,400 \\\hline\end{array}\end{array} Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows: $\begin{array} { | l | r r | } \hline &\quad\quad\quad\quad\quad\quad { \text { Balance } } \\\hline \text { Accounts receivable } & \text { Dec. 31,20X2 } & \text { Dec. } 31,20 \mathrm { X } 1 \\\hline \text { Merchandise inventory } & \$ 27,600 & \$ 24,000 \\\hline \text { Prepaid rent } & 22,300 & 20,000 \\\hline \text { Accounts payable } & 550 & 400 \\\hline \text { Salaries and wages payable } & 27,100 & 26,000 \\\hline \text { Interest payable } & 10,400 & 9,000 \\\hline\end{array}$

Use the information provided below to calculate the cash paid for interest for the period. $\begin{array}{|l|l|cc|} \hline \text {\quad\quad\quad } & \text {Interest payable, beginning-year. } & \text {\$4,200 }\\\hline \text { } & \text {Interest expense. } & \text {26,700 }\\\hline \text { } & \text { Interest payable, year-end } & \text { 3,000}\\ \hline\text { } & \text { Cash paid for interest } & \text { }\\\hline \end{array}$

All cash transactions eventually affect noncash ________ accounts.

All of the following statements related to reporting cash flows from operating activities under U.S. GAAP and IFRS are true except:

A purchase of land in exchange for a long-term note payable must be disclosed as a noncash investing and financing activity.

All of the following statements related to preparation of the statement of cash flows under U.S. GAAP and IFRS are true except:

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating gains are added to net income.