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Exam 13: Statement of Cash Flows

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Question 1

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The statement of cash flows shows the effects on cash of a company's operating, investing, and financing activities.

A) True
B) False

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Question 2

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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) A) and C)
F) C) and D)

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Question 3

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In determining the cash flows from operating activities for the statement of cash flows by the indirect method, the depreciation expense for the period is added to the net income for the period.

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

Which of the following increases cash?

There is no difference in the investing and financing sections of the statement of cash flows using the indirect and direct method.

The following information is available from the current period financial statements: The net cash flow from operating activities using the indirect method is

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

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.

Baxter Company reported a net loss of $13,000 for the year ended December 31.  During the year, accounts receivable decreased by $5,000, merchandise inventory increased by $8,000, accounts payable increased by $10,000, and depreciation expense of $4,000 was recorded.  During the year, operating activities

For each of the following, identify whether it would be disclosed as an operating (O), financing (F), or investing (I) activity on the statement of cash flows under the indirect method. a. Purchased treasury stock b. Sold equipment at book value c. Net income d. Sold long-term investments e.Issued common stock f.Depreciation expense

On the statement of cash flows, the cash flows from financing activities section would include

A ten-year bond was issued at par for $250,000 cash.  This transaction should be shown on a statement of cash flows under

Cash inflows and outflows are not netted in the investing or financing sections of the statement of cash flows but are separately disclosed to give the reader full information.

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

On the statement of cash flows prepared by the indirect method, the cash flows from operating activities section would include

On the statement of cash flows, the cash flows from investing activities section would include

Financing activities include

Samuel Company's accumulated depreciation-equipment increased by $6,000, while patents decreased by $2,200 between balance sheet dates.  There were no purchases or sales of depreciable or intangible assets during the year.  In addition, the income statement showed a loss of $3,200 from the sale of investments. Assume no changes in noncash current assets and liabilities. Reconcile a net income of $92,000 to net cash flow from operating activities.

The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.