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Exam 16: Reporting the Statement of Cash Flows

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Question 61

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For each of the following items, indicate whether it would be classified as either an (O) operating activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash financing and investing activity. ________ (1) Cash sales of merchandise. ________ (2) Sale of land for cash. ________ (3) Signed a note payable in exchange for cash. ________ (4) Purchased supplies for cash. ________ (5) Paid cash to settle an account payable. ________ (6) Purchased a warehouse in exchange for shares of its stock. ________ (7) Paid interest on a note payable. ________ (8) Reissued treasury stock. ________ (9) Purchased equipment for cash. ________ (10) Purchased equipment in exchange for a 6-month note payable.

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1. O; 2. I; 3. F; 4....

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Question 62

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Explain the value of separating cash flows into operating activities, investing activities, and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

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By separating cash flows into three cate...

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Question 63

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Jamison Company reports depreciation expense of $35,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Jamison Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. $\begin{array} { | l | l | l | } \hline \text { At December 31 } & { \text { Year 2 } } & \text { Year 1 } \\\hline \text { Equipment } & \$ 610,000 & \$ 750,000 \\\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000 \\\hline\end{array}$

Use the following information to calculate cash paid for wages and salaries: $\begin{array} { | l | r } \text { Salaries expense } & \$ 168,000 \\\hline \text { Salaries payable, January 1 } & 6,400 \\\hline \text { Salaries payable, December 31 } & 10,600\end{array}$

The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { l | r } \text { Retained earnings balance at the beginning of the year } & \$ 819,000 \\\hline \text { Net income for the year } & 230,000 \\\hline \text { Cash dividends declared for the year } & 42,000 \\\hline \text { Retained earnings balanes at the end of the year } & 1,007,000 \\\hline \text { Cash dividends payable at the begining of the year } & 10,000 \\\hline \text { Cash dividends payable at the end of the year } & 11,000\end{array}$ 84 What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?

Which of the following items is reported on the statement of cash flows under financing activities?

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

A company reported net income of $132,000, operating cash flows of $87,000, total cash flows of $112,000, and average total assets of $1,053,000. Calculate its cash flow on total assets ratio.

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:

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

A cash equivalent is:

A noncash investing transaction should be disclosed in either a footnote or at the bottom of the statement of cash flows.

A main purpose of the statement of cash flows is to report all the major cash ________ and cash ________.

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. PULLMAN COMPANY Income Statement For Year Ended December 31, 20X2 $\begin{array} { l | r | r } \hline \text { Sales } & & \$ 180,000 \\\hline \text { Cost of goods sold } & & 104,000 \\\hline \text { Gross profit from sales } & & \$ 76,000 \\\hline \text { Operating expenses: } & & \\ \hline \text { Salaries and wages expense } & \$ 25,000& \\\hline \text { Depreciation expense } & 7,000 & \\\hline \text { Rent expense } & 7,200 \\\hline \text { Interest expense } &1,900 & \underline { 41,100 } \\\hline \text { Income from operations } & & \$ 34,900 \\\hline \text { Loss on sale of land } & & 3 , 5 0 0 \\\hline \text { Net income } & & \$ 31,400 \\\hline\end{array}$ Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows: $\begin{array} { l | r | r } &{ \text { Balance } } \\\hline & \text { Dec. 31, 20X2 } & \text { Dec. 31, 20X1 } \\\hline \text { Accounts receivable } & \$ 27,600 & \$ 24,000 \\\hline \text { Merchandise inventory } & 22,300 & 20,000 \\\hline \text { Prepaid rent } & 550 & 400 \\\hline \text { Accounts payable } & 27,100 & 26,000 \\\hline \text { Salaries and wages payable } & 10,400 & 9,000 \\\hline \text { Interest payable } & 300 & 250\end{array}$

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000. This implies that $40,000 cash was received from the sale.

A cash dividend payment to shareholders during the year should be reported on the statement of cash flows as:

Use the following calendar-year information to prepare Adam Company's statement of cash flows using the direct method. $\begin{array}{|l|r|}\hline\text { Cash paid to purchase machinery } & \$ 124,000 \\\hline \text { Cash paid for merchandise inventory } & 220,000 \\\hline \text { Cash paid for operating expenses } & 280,000 \\\hline \text { Cash paid for interest } & 4,000 \\\hline \text { Cash received for interest } & 10,000 \\\hline \text { Cash proceeds from sale of land } & 15,000 \\\hline \text { Cash balance at beginning of year } & 77,000 \\\hline \text { Cash balance at end of year } & 25,000 \\\hline \text { Cash borrowed on a short-term note } & 24,000 \\\hline \text { Cash dividends paid } & 57,000 \\\hline \text { Cash received from stock issuance } & 522,000\\\hline\end{array}$

The statement of cash flows reports:

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the:

Equipment costing $200,000 with accumulated depreciation of $160,000 is sold at a loss of $10,000. This implies that $30,000 cash was received from the sale.