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Exam 12: Reporting and Analyzing Cash Flows

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Question 41

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

A) Declaration of a cash dividend.
B) Payment of a cash dividend.
C) Declaration of a stock dividend.
D) Payment of a stock dividend.
E) Stock split.

F) A) and C)
G) B) and D)

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Question 42

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A decrease in the inventory account during the year should be reported on the indirect method statement of cash flows as:

A) An increase in cash flows from operating activities
B) An increase in cash flows from investing activities
C) A decrease in cash flows from operating activities
D) A decrease in cash flows from investing activities
E) An increase in cash flows from financing activities

F) A) and C)
G) A) and B)

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Question 43

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

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.

Scranton,Inc.reports net income of $230,000 for the year ended December 31.It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment.Its comparative balance sheet reveals a $35,500 decrease in accounts receivable,a $15,750 increase in accounts payable,and a $12,500 decrease in wages payable.Calculate the cash provided (used) in operating activities using the indirect method.

A company reported operating cash flows in Year 1 of $33,100 and $26,220 in Year 2.Its average total assets in Year 1 were $262,000 and $313,000 in Year 2.Calculate the cash flow on total assets ratio for both years.Comment on the results.

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the direct method.

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

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

Use the information provided to calculate the cash paid for insurance for the period

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

Use the information provided to calculate the missing cash paid for merchandise for the period.

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

Bagwell's net income for the year ended December 31,Year 2 was $185,000.Information from Bagwell's comparative balance sheets is given below.Compute the cash received from the sale of its common stock during Year 2. $\begin{array}{lrr}\text { At December } 31 & \text { Year 2 } & \text { Year } 1 \\\text { Common Stock, \$5 par value } & \$ 500,000 & \$ 450,000 \\\text { Paid-in capital in excess of par } & 948,000 & 853,000 \\\text { Retained earnings } & 688,000 & 582,000\end{array}$

When using a spreadsheet to prepare the statement of cash flows,a decrease in accounts payable is entered in the Analysis of Changes columns with a debit in the statement of cash flows section and a credit in the balance sheet section.

Accounting standards:

A cash coverage of growth ratio of less than 1 indicates cash inadequacy to meet asset growth.

The appropriate section in the statement of cash flows for reporting the receipt of cash dividends from investments in securities is:

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

The purchase of long-term assets by issuing a note payable for the entire amount is reported on the statement of cash flows in the: