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Exam 12: Accounting for Cash Flows

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Question 81

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The primary purpose of the statement of cash flows is to report all major cash receipts (inflows) and cash payments (outflows) during a period.

A) True
B) False

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Question 82

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The direct method of preparing the statement of cash flows is usually viewed as user friendly since it requires less accounting knowledge to understand it.

A) True
B) False

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Question 83

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The indirect method reports individual operating cash outflows and cash inflows by activity.

A main purpose of the statement of cash flows is to report all the major cash ________ and cash _______________.

All cash transactions eventually affect noncash ___________ accounts.

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement, and (c) additional information.

The reporting of net cash provided or used by operating activities that lists the major items of operating cash receipts, such as receipts from customers, and subtracts the major items of operating cash disbursements, such as cash paid for merchandise, is referred to as the:

The payment of cash dividends never changes the balance of retained earnings.

A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

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:

A noncash investing transaction should be disclosed as either a footnote or small schedule attached to the statement of cash flows.

The following selected account balances are taken from a merchandising company's records: $\begin{array} { | l | r | r | r | } \hline & \text { Dec. 31 } & \text { Dec. 31 } & \text { For the } \\& { 2012 } & { 2013 } & \text { Year } 2013 \\\hline \text { Merchardise inventory } & \$ 15,600 & { \$ 1 , 2 0 0 } & \\\hline \text { Accounts payable } & 32,400 & 27,400 & \\\hline \text { Salaries payable } & 4,400 & 3,000 & \\\hline \text { Accounts receivable } & 42,000 & 36,000 & \\\hline \text { Total assets } & 234,000 & 286,000 & \\\hline \text { Sales } & & & \$ 332,000 \\\hline \text { Cost of goods sold } & & & 165,600 \\\hline \text { Salaries expense } & & & 48,000 \\\hline\end{array}$ (a) Calculate the cash payments made during 2013 for merchandise. Assume all of the company's accounts payable balances are a result from merchandise purchases. (b) Calculate the cash receipts from customer sales during 2013. (c) Calculate the cash payments for salaries during 2013.

The first line item in the operating activities section of a spreadsheet for a statement of cash flows prepared using the indirect method is:

Probably the most important section of the statement of cash flows in analyzing the financial performance of a company's ongoing business is the ____________ section.

The reporting of financing activities is identical under either the direct and indirect methods for preparing the statement of cash flows.

Match the following definitions to their terms

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

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

A company's transactions with its creditors to borrow money and/or to repay the principal amounts of loans are reported as cash flows from:

For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow: (a) $\begin{array}{l}\begin{array} { | l | r | } \hline\text { Accourts receivable balances: }\\\hline \text { Beginning of year } & \$ 60,000 \\\hline \text { End of year } & 57,000 \\\hline \text { Sales revenue (all on credit) } & 375,000 \\\hline \text { Cash received from customers } & \$------ \\\hline\end{array}\end{array}$ (b) $\begin{array}{l}\begin{array} { | l | r | } \hline \text { Accounts payable balances: }\\\hline \text { Begnning of year } & \$ 42,000 \\\hline \text { End of year } & 45,000 \\\hline \text { Merchandise inventory balances: } & \\\hline \text { Begnning of year } & 50,000 \\\hline \text { End of year } & 47,500 \\\hline \text { Cost of goods sold } & 250,000 \\\hline \text { Cash paid for merchardise inventory } & \$---- \\\hline\end{array}\end{array}$ (c) $\begin{array}{l}\begin{array} { | l | r | } \hline \text { Interest payable balances: }\\\hline \text { Begnnirig of year } & { \$7 , 5 0 0 } \\\hline \text { End of year } & 9,200 \\\hline \text { Interest expense } & 35,000 \\\hline \text { Cash paid for interest } & \$--- \\\hline\end{array}\end{array}$