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Exam 16: Statement of Cash Flows

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Question 21

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The payment of cash dividends to shareholders can be classified as an operating or a financing activity.

A) True
B) False

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Question 22

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Depreciation expense is not reported on a statement of cash flows prepared under the direct method.

A) True
B) False

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Question 23

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The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.

Beewell's net income for the year ended December 31, Year 2 was $185,000. Information from Beewell's comparative balance sheets is given below. Compute the cash received from the sale of its ordinary shares during Year 2.

The direct method for preparing and reporting the statement of cash flows reports net income and then adjusts it for items necessary to calculate net cash provided or used by operating activities.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for ordinary shares is:

If a company borrows money from a bank, the interest paid on this loan should be reported on the statement of cash flows as a(n) :

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.

To be classified as a cash equivalent, the only criterion an item must meet is that it must be readily convertible to a known amount of cash.

A company had average total assets of $2,316,000, total cash flows of $1,320,000, cash flows from operations of $455,000, and cash flows for property, plant and equipment of $850,000. The cash flow on total assets ratio equals:

Analysis reveals that a company had a net decrease in cash of $4,000 for the current year. Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash used in financing activities was $12,000. If the year-end cash balance is $21,000, the beginning cash balance was:

The cash flow on total assets ratio:

Use the following company information to prepare a schedule of significant noncash investing and financing activities: (a) Sold a building with a carrying amount of $125,000 for $195,000 cash and land with a carrying amount of $32,000 for $65,000 cash. (b) Issued 10,000 $10 par value ordinary shares in exchange for equipment with a market value of $135,000. (c) Retired a $100,000, 10% bond by issuing another $100,000, 12% bond issue. (d) Acquired land by issuing a ten-year, 9%, $44,000 note payable.

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

Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities.

Conversion of preference shares to ordinary shares is reported in the financing section of the statement of cash flows.

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

Use the following calendar-year information to prepare David Company's statement of cash flows using the direct method.