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Exam 13: Statement of Cash Flows

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Question 51

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Which of the following would be considered an investing activity and a source of cash?

A) Purchase of equipment
B) Sale of Dillard's stock held as an investment
C) Issuance of corporate stock
D) Receipt of interest on savings account

E) B) and D)
F) B) and C)

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Question 52

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Assume your friend has taken an accounting course in high school and is familiar with the balance sheet and income statement.However,she is not so familiar with the statement of cash flows. Required: Explain to your friend why the statement of cash flows is an important financial statement just like the balance sheet and income statement.In addition,explain to her how the information is presented in the statement of cash flows.

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Although the income statement may show a...

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Question 53

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The following balances were gathered from Newport Industries general ledger. Required: Using the indirect method,prepare the cash flows provided by operating activities section of Newport's statement of cash flows.

Parnell Corporation provided the following financial information: Required: Using the direct method,prepare the operating activities section of Parnell's statement of cash flows. Appendix,

For the past two years,Monroe Corporation's statement of cash flows has shown net cash provided by investing activities.Which of the following choices could explain this result?

Alma Ortiz prepared Carlee Instruments' balance sheet and income statement for 2016.Before she could complete the statement of cash flows,she had to leave town to attend to a family emergency.Because the full set of statements must be provided to the auditors today,Carlee's president,Mike Lymon,has asked you to prepare the statement of cash flows.Lymon has provided you with the balance sheet and income statement that Ortiz prepared,as well as some notes she made: $\bullet$ Equipment with an original cost of $35,000 was sold for $20,300.The book value of the equipment was $19,400. $\bullet$ On June 1,2016,the company purchased new equipment for cash at a cost of $18,500. $\bullet$ At the end of the year the company issued notes payable for $10,500 cash.The note will mature on December 31,2019. $\bullet$ The company paid $20,200 in cash dividends for the year. Required: Using the direct method,prepare Carlee Instruments' statement of cash flows for 2016.

Which of the following transactions is not classified as a source or use of cash in the operating,investing or financing sections of the statement of cash flows?

-In interpreting a statement of cash flows,excessive sales of property,plant and equipment combined with a lack of cash from financing activities may indicate that the company is selling productive assets to raise cash to cover operating expenses which,in the long run,will limit future growth.

Berry Corporation reported the following cash transactions for last year. Required: a.Prepare the investing section of Berry's statement of cash flows. b.Prepare the financing section of Berry's statement of cash flows. Unit 13-3,

Which of the following items would be subtracted from net income when using the indirect method of calculating cash flows provided by operating activities?

On the cash flow statement,buying inventory on account is not a use of cash.

The following balances were gathered from Brannon Corporation's general ledger. Required: Using the indirect method,prepare the cash flows provided by operating activities section of Brannon's statement of cash flows.

Which of the following is a use of cash?

One would expect a company's primary source of cash is from borrowing and investor contributions.

Burton Company purchased a new crane costing $47,000 from Heavy Equipment Corporation.To pay for the crane,Burton traded in an old piece of machinery worth $10,000 and took a note for the balance of $37,000.How will this transaction be reported on the statement of cash flows?

Which of the following items would be added to net income when using the indirect method of calculating cash flows provided by operating activities?

Myers Real Estate Company exchanged an acre of land in exchange for five hundred shares of stock in the Midland Corporation.The land is worth $22,000 and the stock is worth $40 per share.How will this transaction be reported on the statement of cash flows?

You are on a team responsible for addressing cash flow problems with other managers in your corporate division.Your accounting department has provided your team with the statement of cash flows prepared using the indirect method.At your first meeting,some of the managers have expressed concerns about the statement's understandability and do not view the statement as anything other than a "rearranged income statement".The managers have requested that your team explain to them how the statement is constructed. Required: a.Explain to your managers why the indirect method is a useful approach to reporting cash flows from operating activities. b.Explain to your managers why increases in current assets are subtracted from net income and increases in current liabilities are added to net income to calculate the cash flow provided by operating activities. c.Explain to your managers any differences between the indirect method and the direct method of preparing the investing and financing sections of the statement of cash flows. Unit 13-2,

A decrease in accounts receivable would be added to income when using the indirect method of calculating cash flows provided by operating activities.

Morris Industries reported the following cash transactions for last year. Required: a.Prepare the investing section of Morris's statement of cash flows. b.Prepare the financing section of Morris's statement of cash flows. Unit 13-3,