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Exam 12: Reporting Cash Flows

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Question 111

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Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array}{c}\begin{array}{|l|}\hline \text {Cost of goods sold.}\\\hline \text {Merchandise inventory, January 1}\\\hline \text {Merchandise inventory, December 31}\\\hline \text {Accounts payable, January 1}\\\hline \text {Accounts payable, December 31}\\\hline\end{array}\begin{array}{r|}\hline\$500,000 \\\hline85,000 \\\hline97,000 \\\hline68,000\\\hline60,000\\\hline \end{array}\end{array}$

A) $585,000.
B) $520,000.
C) $480,000.
D) $508,000.
E) $512,000.

F) D) and E)
G) C) and D)

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Question 112

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When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from financing activities generally affect:

A) Net income, current assets, and current liabilities.
B) Noncurrent assets.
C) Noncurrent liability and equity accounts.
D) Both noncurrent assets and noncurrent liabilities.
E) Equity accounts only.

F) All of the above
G) B) and D)

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Question 113

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Explain the use of a spreadsheet in the preparation of the statement of cash flows.

Information to prepare the statement of cash flows usually comes from three sources: (1) ________, (2) ________, and (3) ________.

Common uses of the statement of cash flows include all but which of the following?

Use the following company information to calculate net cash provided or used by investing activities: (a) Equipment with a book value of $175,000 and an original cost of $300,000 was sold at a loss of $17,000. (b) Paid $62,000 cash for a new truck. (c) Sold land costing $32,000 for $36,000 cash, realizing a $4,000 gain. (d) Purchased treasury stock for $61,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

The full disclosure principle requires that noncash investing and financing activities be disclosed in the financial statements.

The indirect method for the preparation of the operating activities section of the statement of cash flows:

Since it is recommended by the FASB, the direct method of preparing the statement of cash flows is most frequently used.

The statement of cash flows is divided into three sections called the ________, ________, and ________ sections.

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.

The following information is available for the Brookstone Company: $\begin{array}{c}{ \text { Brookstone Company } } \\ { \text { Income Statement } } \\{ \text { For Year Ended December } 31,20 \mathrm { X } 2 } & \\\begin{array} { | l | r | r | } \hline \text { Sales } & & \$ 288,000 \\\hline \text { Cost of goods sold } & \$ 97,080 & \\\hline \text { Depreciation expense } & 35,280 & \\\hline \text { Other operating expenses } & 57,600 & \\\hline \text { Interest expense } & 2,400 & ( 192,360 ) \\\hline \text { Other gains (losses): } & & \\\hline \text { Loss on sale of equipment } & & ( 10,080 ) \\\hline \text { Income before taxes } & & 85,560 \\\hline \text { Income taxes expense } & & 33,180 \\\hline \text { Net income } & & \$ 52,380 \\\hline\end{array} \end{array}$ Additional information: (1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired. (2) Old machinery with an original cost of $45,060 was sold for $2,520 cash. (3) New machinery was purchased for $81,060 cash. (4) Cash dividends of $40,320 were paid. (5) Additional shares of stock were issued for cash. Prepare a complete statement of cash flows for calendar-year 20X2 using the indirect method.

Use the following information about the calendar-year cash flows of Park Company to prepare a statement of cash flows (direct method) and a schedule of noncash investing and financing activities. $\begin{array} { | l | l | } \hline \text { Cash and cash equivalents, beginning-year balance } & \$ 18,000 \\\hline \text { Cash and cash equivalents, year-end balance } & 78,750 \\\hline \text { Cash payments for merchandise inventory } & 75,750 \\\hline \text { Cash paid for store equipment } & 15,750 \\\hline \text { Cash borrowed on three-month note payable } & 22,500 \\\hline \text { Cash dividends paid } & 12,000 \\\hline \text { Cash paid for salaries } & 39,000 \\\hline \text { Cash payments for other operating expenses } & 48,000 \\\hline \text { Building purchased and financed by long-term note payable } & 78,000 \\\hline \text { Cash received from customers } & 220,500 \\\hline \text { Cash interestreceived } & 8,250 \\\hline\end{array}$

A spreadsheet can help organize the information needed to prepare a statement of cash flows.

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array} { | l | r | } \hline \text { Retained earnings balance at the beginning of the year } & \$ 126,000 \\\hline \text { Cash dividends declared for the year } & 46,000 \\\hline \text { Proceeds from the sale of equipment } & 81,000 \\\hline \text { Gain on the sale of equipment } & 7,000 \\\hline \text { Cash dividends payable at the beginning of the year } & 18,000 \\\hline \text { Cash dividends payable at the end of the year } & 20,000 \\\hline \text { Net income for the year } & 92,000 \\\hline\end{array}$ The amount of cash dividends paid during the year would be:

________ activities generally include those transactions and events that affect long-term assets.

The cash flow on total assets ratio is computed by dividing average total assets by operating income.

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the ________ method is used.

When preparing the operating activities section of the statement of cash flows using the indirect method, decreases in current operating liabilities are added to net income.

An example of a transaction that must be disclosed as a noncash investing and financing activity includes all but which of the following?