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Exam 12: Statement of Cash Flows

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Question 31

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Blanton Ridge,Inc.'s Insurance Expense is $14,000 and the beginning and ending balances of Prepaid Insurance are $3,000 and $4,000,respectively,the cash paid for insurance is:

A) $14,000.
B) $13,000.
C) $10,000.
D) $15,000.

E) None of the above
F) All of the above

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Question 32

Multiple Choice

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Supplemental disclosures required by companies using the indirect method include all of the following except:

A) cash paid for interest.
B) cash paid for income tax.
C) cash paid for dividends.
D) noncash investing and financing activities.

E) B) and D)
F) A) and B)

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Question 33

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If a company uses the indirect method to determine cash flows from operating activities,gains:

Material noncash investing and financing transactions are:

Consider the following information: Required: Use the direct method to compute the amount of net cash flows provided by (used in)operating activities.

Under the indirect method,changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities.

Complete the last two columns in the following table by indicating whether each transaction would be reported: Part a.In the operating (O),investing (I),or financing (F)activities section of the statement of cash flows or if the transaction would be reported instead as a noncash investing and/or financing transaction (Noncash). Part b.As a cash inflow (+)or a cash outflow (−)on the statement of ash flows.(Leave this cell blank if you entered "Noncash" for part a. )

Assume that a company chooses the indirect method to determine net cash flows from operating activities. Required: Part a.Explain why net income is the starting point when the indirect method is used to determine cash flows from operating activities. Part b.Briefly explain why a company's net income is most likely different in amount than its cash flows from operating activities.

Blair Madison Co.issues $2.8 million of new stock and pays $560,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $4.2 million in a new bond issue and paid off existing bonds with a face value of $5.6 million.The company bought 1,400 of another company's $1,000 bonds at a $280,000 premium.The net cash flow provided by financing activities is:

Which of the following items is considered to be a cash equivalent?

The accounting records for the Fox Hollow Company show that its cost of goods sold for the year was $300,000.In addition,it had an increase in inventory of $5,000 and a decrease in accounts payable of $6,000.As a result under the direct method,the amount of cash paid to suppliers for the year was:

Which of the following would be classified as an investing activity on the statement of cash flows?

The company would report net cash provided by (used in) investing activities of:

Which of the following statements about cash flows from investing activities is correct?

The net cash flow provided by operating activities is an inflow of $37,042,the net cash flow used in investing activities is $16,831,and the net cash flow used in financing activities is $26,397.If the beginning cash account balance is $11,283,what is the ending cash account balance?

Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?

What is the starting point for calculating cash flows from operations when the indirect method is used?

Which of the following would be included in cash flows from financing activities?

Wilson Co.uses the indirect method to determine its cash flow from operations.During the course of the year,Wilson's Accounts Receivable increased by $28,000 and its Accounts Payable decreased by $14,000.As a result of these two items,the net addition (or subtraction) to convert net income to cash flow from operations equals:

Equipment with a cost of $80,000 and accumulated depreciation of $75,000 is sold for $12,000 cash. Required: Part a.Prepare the journal entry to record this transaction. Part b.Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.