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Exam 12: Reporting and Analyzing Cash Flows

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Question 61

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The statement of cash flows reports:

A) Assets, liabilities, and equity.
B) Revenues, gains, expenses, and losses.
C) Cash inflows and outflows for an accounting period.
D) Equity, net income, and dividends.
E) Changes in equity.

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

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Question 62

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The conversion of preferred stock to common stock is disclosed in the financing section of the statement of cash flows.

A) True
B) False

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Question 63

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When preparing the operating section of the statement of cash flows using the indirect method, noncash operating expenses are added back to net income.

Accounting standards:

Use the following information to calculate cash received from dividends: $\begin{array}{|l|r|}\hline \text { Dividends revenue } & \$ 29,800 \\\hline \text { Dividends receivable, January 1 } & 2,600 \\\hline \text { Dividends receivable, December } 31 & 3,400 \\\hline\end{array}$

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

Explain the purpose and format of the statement of cash flows.Also, describe its use to decision makers.

A company had net cash flows from operations of $120,000, total cash flows of $500,000, and average total assets of $2,500,000.The cash flow on total assets ratio equals:

Noncash financing activities are disclosed in a note in the financing section of the statement of cash flows.

The cash flow on total assets ratio is defined as average total assets divided by operating income.

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

Use the following calendar-year information to prepare David Company's statement of cash flows using the direct method.You may omit the schedule reconciling net income and net cash provided or used by operating activities. $\begin{array}{|l|r|}\hline \text { Cash paid to purchase machinery } & \$ 124,000 \\\hline \text { Cash paid for merchandise inventory } & 220,000 \\\hline \text { Cash paid for operating expenses } & 280,000 \\\hline \text { Cash paid for interest } & 4,000 \\\hline \text { Cash received for interest } & 10,000 \\\hline \text { Cash proceeds from sale of land } & 100,000 \\\hline \text { Cash balance at beginning of year } & 15,000 \\\hline \text { Cash balance at end of year } & 77,000 \\\hline \text { Cash borrowed on a short-term note } & 25,000 \\\hline \text { Cash dividends paid } & 24,000 \\\hline \text { Cash received from stock issuance } & 57,000 \\\hline \text { Cash collections from customers } & 522,000 \\\hline\end{array}$

Cash paid out for merchandise is considered to be an operating activity.

Cash flow amounts and their timing should be examined when planning and analyzing operating activities.

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable.The entire transaction is disclosed to users on the statement of cash flows and/or in its notes.

A company reported operating cash flows of $23,400 in 2012 and $26,220 in 2013.The average total assets for the company in 2012 was $262,000 and $285,000 in 2013.Calculate the cash flow on total assets ratio for both years.Comment on the results.

A company reported net cash provided by operating activities of $131.4 million.Assets totaled $2,197.7 million at the beginning of the year and $2,040.0 million at the end of the year.Calculate this company's cash flow on total assets ratio.

The use of a spreadsheet for analysis is especially useful when preparing the statement of cash flows using the _____________ method.

The reporting of investing and financing activities is _________________ under the direct and indirect methods of preparing the statement of cash flows.

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