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Exam 13: Statement of Cash Flows

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Question 91

Multiple Choice

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In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is

A) added to net income
B) deducted from net income
C) ignored because it does not affect cash
D) reported supplementally as a noncash investing and financing activity

E) A) and B)
F) B) and C)

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Question 92

True/False

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If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in the operating activities section of the statement of cash flows prepared by the indirect method.

A) True
B) False

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Question 93

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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.

The statement of cash flows is an optional financial statement.

Cash payments for merchandise were

Preferred stock issued in exchange for land would be reported in the statement of cash flows in

To determine cash payments for merchandise for the statement of cash flows using the direct method, a decrease in accounts payable is added to the cost of merchandise sold.

Cost of merchandise sold reported on the income statement was $155,000.The accounts payable balance increased $8,000, and the inventory balance increased by $21,000 over the year.Determine the amount of cash paid for merchandise.

The statement of cash flows is not useful for

To determine cash payments for operating expenses for the statement of cash flows using the direct method, a decrease in prepaid expenses is added to operating expenses other than depreciation.

Cash collections from customers were

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

Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the sale of land.

Each of the events below may have an effect on the statement of cash flows.Designate how the event should be reported within the statement of cash flows using the codes provided below.Codes may be used more than once, or not at all. Codes I + investing activity; cash inflow I - investing activity; cash outflow F + financing activity; cash inflow F - financing activity; cash outflow O + operating activity; cash inflow O - operating activity; cash outflow NC noncash investing and financing activity Events _____ 1.Paid the weekly payroll _____ 2.Paid an account payable _____ 3.Issued bonds payable for cash _____ 4.Declared and paid a cash dividend _____ 5.Paid cash for a new piece of equipment _____ 6.Purchased treasury stock for cash

Dorman Company reported the following data: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

When using the spreadsheet work sheet method to analyzing noncash accounts, no order of analysis is required, but it is more efficient to start with Retained Earnings and proceed upward in the account listing.

State the sections of the statement of cash flows prepared by the indirect method operating activities, investing activities, financing activities, or not reported and the amount that would be reported for each of the following transactions: a Received $120,000 from the sale of land costing $70,000. b Purchased investments for $75,000. c Declared $35,000 cash dividends on stock.$5,000 dividends were payable at the beginning of the year, and $6,000 were payable at the end of the year. d Acquired equipment for $64,000 cash. e Declared and issued 100 shares of $20 par common stock as a stock dividend, when the market price of the stock was $32 a share. f Recognized depreciation for the year, $37,000. g Issued 85,000 shares of $10 par common stock for $25 a share, receiving cash. h Issued $500,000 of 20-year, 10% bonds payable at 99. i Borrowed $43,000 from Regional Bank, issuing a 5-year, 8% note for that amount.

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

Which of the following is a noncash investing and financing activity?

Which of the following increases cash?