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Exam 12: Statement of Cash Flows

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Question 91

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

A) The proceeds from sales of investments are reported as cash inflows from investing activities.
B) Cash flows from investing activities are calculated by making adjustments to net income.
C) Cash paid to acquire long-lived assets is reported as a cash inflow from investing activities.
D) Cash received from issuing a long-term note payable is reported as a cash inflow from investing activities.

E) A) and D)
F) All of the above

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Question 92

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Match each term with the appropriate definition.Not all definitions will be used. -Working Capital

A) A measure of the amount by which current assets exceed current liabilities.
B) Cash inflows and outflows related to the sale or purchase of investments and long-lived assets.
C) Include assets that are very liquid and are purchased by the entity within three months of maturity.
D) These activities include only purchases made with borrowed funds.
E) Must include cash paid for interest and income tax in a separate schedule.
F) Measures the ability of a company to finance its interest payments with its operating cash flow before taxes and interest.
G) Cash inflows and outflows related to financing sources external to the company (owners and lenders) .
H) These activities include money lent by a company as well as money borrowed by a company.
I) Reports the components of cash flows from operating activities as gross receipts and gross payments.
J) This ratio uses net income instead of operating cash flow to analyze a company's ability to finance the cost of its debt.
K) Cash inflows and outflows related to components of net income.
L) Presents the operating activities section of the cash flow statement by adjusting net income to compute cash flows from operating activities.

M) H) and J)
N) D) and K)

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Question 93

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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.

The starting point for preparing the operating activities section using the indirect method is:

The statement of cash flows cannot be used to determine:

Which of the following would be reported on the statement of cash flows,using the direct method,as a cash flow from operating activities?

In determining cash flows related to investing activities,which accounts are analyzed?

The management team of Wickersham Brothers Inc.is preparing its annual financial statements.The statements are complete except for the statement of cash flows.The completed comparative balance sheets and income statements are summarized. Other information from the company's records includes the following: • Bought equipment for cash,$50,000. • Paid $10,000 on long-term note payable. • Issued new shares of common stock for $20,000 cash. • Cash dividends of $16,000 were declared and paid to stockholders. • Accounts Payable arose from inventory purchases on credit. • Income Tax Expense ($4,000)and Interest Expense ($3,000)were paid in full at the end of both years and are included in Other Expenses. Required: Prepare a schedule summarizing operating,investing,and financing cash flows using the T-account approach.

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.

Free cash flow may be used for all of the following except:

Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?

Which of the following are used to determine cash flows from financing activities?

Which of the following items would be reported on a statement of cash flows using the indirect method,but not on a statement prepared using the direct method?

A company's cash flows from investing activities include cash transactions relating to the purchase and disposal of which types of assets?

Skinner Butte,Inc.had the following information: $\begin{array}{lr}\text { Net income } & \$ 4,000 \\\text { Depreciation } & 6,000 \\\text { Increase in accounts receivable } & 2,000 \\\text { Decrease in prepaid rent } & (800) \\\text { Increase in accrued liabilities } & 1,800 \\\text { Cash paid to purchase office equipment } & 8,000\end{array}$ What is Skinner Butte's net cash provided by operating activities?

When the indirect method is used to determine net cash provided by (used in) operating activities,adding an increase in Interest Payable to net income eliminates the effect of recording expenses that:

Which of the following is included in the financing activities on a statement of cash flows?

Cash flows from investing activities include cash:

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 classified as a financing activity on the statement of cash flows?