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Exam 12: Reporting and Interpreting the Statement of Cash Flows

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Question 1

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Choose the appropriate letter to match the term and the definition.Not all definitions will be used. Term 1._____ Operating Activities 2._____ Indirect Method 3._____ Working Capital 4._____ Cash Equivalents 5._____ Investing Activities 6._____ Supplemental Disclosures 7._____ Direct Method 8._____ Financing Activities Definition A.Cash inflows and outflows related to components of net income. B.Include assets that are very liquid and are purchased by the entity within three months of maturity. C.These activities include only purchases made with borrowed funds. D.Reports the components of cash flows from operating activities as gross receipts and gross payments. E.This ratio uses net income instead of operating cash flow to analyze a company's ability to finance the cost of its debt. F.Measures the ability of a company to finance its interest payments with its operating cash flow before taxes and interest. G.A measure of the amount by which current assets exceed current liabilities. H.These activities include money lent by a company as well as money borrowed by a company. I.Must include cash paid for interest and income tax in a separate schedule. J.Cash inflows and outflows related to the sale or purchase of investments and long-lived assets. K.Cash inflows and outflows related to financing sources external to the company (owners and lenders). L.Presents the operating activities section of the cash flow statement by adjusting net income to compute cash flows from operating activities.

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1.A
2.L
3....

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Question 2

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Allison Co.uses the direct method to determine its cash flow from operations.During the year,it had sales revenue of $300,000.Its beginning Accounts Receivable balance was $30,000,and its ending Accounts Receivable balance was $40,000.Its cash collected from customers for the year was:

A) $300,000.
B) $290,000.
C) $310,000.
D) $370,000.

E) A) and B)
F) A) and C)

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Question 3

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Which of the following would not be included in the cash and cash equivalents amount reported on the balance sheet?

A company issues $1 million of new stock and pays $200,000 in cash dividends during the year.In addition,the company took advantage of falling interest rates to borrow $1.5 million in a new bond issue and paid off existing bonds with a face value of $2 million.The company bought 500 of another company's $1,000 bonds at a $100,000 premium.The net cash flow provided by financing activities is:

The information below was obtained from the financial statements of Faraday Corp.Based on this information,what was the amount of the net cash provided by operating activities during the current year?

When the indirect method is used,if a prepaid expense account decreases during the accounting period,the change in the prepaid expense account is:

Penman Corporation showed Salaries and Wages Expense of $488,000 on its income statement.If the Salaries and Wages Payable account was $54,000 at the beginning of the year and $37,000 at the end of the year,how much cash was paid to employees?

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of each component of operating transactions that result in either a debit or a credit to cash?

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

The payment of interest on bonds is classified as a cash outflow from operating activities on the statement of cash flows.

The statement of cash flows may be viewed in terms of the balance sheet equation.Which of the following expressions below is correct?

Flynn Corporation had the following cash flows for the current year.The company uses the direct method in preparing the statement of cash flows. -Use the information above to answer the following question.What is the net cash provided by (used in) operating activities?

The Retained Earnings account has a beginning balance of $321,975 and an ending balance of $356,413.Net income is $40,251.Which of the following statements is correct?

The repayment of the principal of a loan which had been used to finance the purchase of equipment should be reported on the statement of cash flows as a:

Which of the following items would not be classified as a cash flow from financing activities?

A company took out $665,000 of new debt this year and repaid $1,000,000 of older debt in the same year.The company also issued stock for $442,000 cash and paid dividends of $99,000 for the year.The company's financing cash flows appearing the statement of cash flows will show:

A company has a net cash inflow from operating activities of $789,000,a net cash outflow of $50,000 from investing activities and a net cash inflow of $100,000 from financing activities.The company paid $124,000 in interest,$186,500 in income taxes,and $200,000 in cash dividends.Which of the following statements about the statement of cash flows is not correct?

Consider the following information: Required: Part a.Compute the cash provided by (used in)investing activities. Part b.Compute the cash provided by (used in)financing activities. Part c.If you did not use any of the items listed in parts a or b,explain why,and indicate,if appropriate,how each item would be reported on the statement of cash flows.

Which of the following would be classified as a financing activity on the statement of cash flows?

Selected balance sheet information and the income statement for Fountainhead Corporation for the current year are presented below. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.