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Exam 13: Statement of Cash Flows

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Question 21

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For each of the following activities that may take place during the accounting period, indicate the effect (a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -Purchase of equipment

A) Increase cash from operating activities
B) Decrease cash from operating activities
C) Increase cash from investing activities
D) Decrease cash from investing activities
E) Increase cash from financing activities
F) Decrease cash from financing activities
G) Noncash investing and financing activity

H) B) and C)
I) All of the above

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Question 22

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On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

A) deducted from net income in converting the net income reported on the income statement to cash flows from operating activities
B) added to net income in converting the net income reported on the income statement to cash flows from operating activities
C) added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends
D) deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

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

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Question 23

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Cash flows from operating activities, as part of the statement of cash flows, include cash flow from transactions that enter into the determination of net income.

Durrand Corporation's accumulated depreciation increased by $12,000, while patents decreased by $2,200 between consecutive balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a gain of $4,300 from sale of land. Reconcile a net income of $65,000 to net cash flow from operating activities.

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current operations.

Zenith Corporation sells some of its used store fixtures. The acquisition cost of the fixtures is $12,500, and the accumulated depreciation on these fixtures is $9,750 at the time of sale. The fixtures are sold for $5,300. The value of this transaction in the investing section of the statement of cash flows is

The order of presentation of activities on the statement of cash flows is

The statement of cash flows is not one of the basic financial statements.

Changes in current assets and current liabilities are reported on the statement of cash flows, indirect method, in the

Under the indirect method, expenses that do not affect cash are added to net income in the operating activities section of the statement of cash flows.

For each of the following, identify whether it would be disclosed as an activity on the statement of cash flows under the indirect method.

Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other adjustments, the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is

Cash receipts received from the issuance of a mortgage notes payable would be classified as a(n)

On the basis of the following data for Larson Co. for the year ending December 31 Year 2, and the preceding year ended December 31 Year 1, prepare a statement of cash flows. Use the indirect method of reporting cash flows from operating activities. In addition to the balance sheet data, assume that: Equipment costing $125,000 was purchased for cash. Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000. The stock was issued for cash. ​ The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of $13,000. ​

Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of the year, respectively. Net income reported on the income statement for the year was $120,000. Exclusive of the effect of other adjustments, the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: $\begin{array}{lrr} & \text { End } & \text { Beginning } \\\text { Cash } & \$ 50,000 & \$ 60,000 \\\text { Accounts receivable } & 112,000 & 108,000 \\\text { Inventories } & 105,000 & 93,000 \\\text { Prepaid expenses } & 4,500 & 6,500 \\\text { Accounts payable (merchandise creditors) } & 75,000 & 89,000\end{array}$ What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

The Dickinson Company reported net income of $155,000 for the current year. Depreciation recorded on buildings and equipment amounted to $65,000 for the year. In addition, a building with an original cost of $250,000 and accumulated depreciation of $190,000 on the date of the sale, was sold for $75,000. Balances of the current asset and current liability accounts at the beginning and end of the year are as follows: ​ $\begin{array}{lrr}&\text { End of Year }&\text { Beginning of Year }\\\text { Cash } & \$ 20,000 & \$ 15,000 \\\text { Accounts receivable } & 19,000 & 32,000 \\\text { Inventories } & 50,000 & 65,000 \\\text { Accounts payable } & 12,000 & 18,000\end{array}$ Prepare the cash flows from the operating activities section of the statement of cash flows using the indirect method.

Identify the section of the statement of cash flows (a-d) where each of the following items would be reported. -Decrease in inventory

The following selected account balances appeared on the financial statements of the Washington Company. Use these balances to answer the questions that follow. $\begin{array}{lr}\text { Accounts receivable, Jan. } 1 & \$ 13,000 \\\text { Accounts receivable, Dec. } 31 & 9,000 \\\text { Accounts payable, Jan. 1 } & 4,000 \\\text { Accounts payable, Dec. } 31 & 7,000 \\\text { Inventory, Jan. 1 } & 10,000 \\\text { Inventory, Dec. } 31 & 15,000 \\\text { Sales } & 56,000 \\\text { Cost of goods sold } & 31,000\end{array}$ The Washington Company uses the direct method to calculate net cash flow from operating activities. Assume that all accounts payable are owed to merchandise suppliers. ​ -Cash payments for merchandise were

Which of the following would not be found in a schedule of noncash investing and financing activities, reported at the end of a statement of cash flows?