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Exam 12: Reporting and Analyzing Cash Flows

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Question 81

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For each of the following items,indicate whether it would be classified as either an operating activity,an investing activity,a financing activity or a significant,noncash financing and investing activity.

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Question 82

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The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the direct method is used.

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Question 83

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Holly Company's accounts receivable increased during the year by $8.5 million.It had a bad debt expense of $3.0 million,and its allowance for uncollectible accounts increased by $1.5 million.What is the amount of cash received from customers if Holly's sales were $50.2 million?

Use the following information about the calendar-year cash flows of MacArthur Company to prepare a statement of cash flows (direct method)and a schedule of noncash investing and financing activities. $\begin{array}{|l|r|}\hline \text { Cash and cash equivalents, beginning-year balance } & \$ 18,000 \\\hline \text { Cash and cash equivalents, year-end balance } & 78,750 \\\hline \text { Cash payments for merchandise inventory } & 75,750 \\\hline \text { Cash paid for store equipment } & 15,750 \\\hline \text { Cash borrowed on three-month note payable } & 22,500 \\\hline \text { Cash dividends paid } & 12,000 \\\hline \text { Cash paid for salaries } & 39,000 \\\hline \text { Cash payments for other operating expenses } & 48,000 \\\hline \text { Building purchased and financed by long-term note payable } & 78,000 \\\hline \text { Cash received from customers } & 220,500 \\\hline \text { Cash interest received } & 8,250\\\hline \end{array}$

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $40,000 cash was received from the sale.

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

A company reported operating cash flows of $57,000 and average total assets of $962,000.Calculate the company's cash flow on total assets ratio.

Wilma Corporation prepares its statement of cash flows using the indirect method to report operating activities.Net income for the 2011 fiscal year was $634,000.Depreciation and amortization expense of $60,000 and 30,000 respectively were included with operating expenses in the income statement.The following information describes the changes in current assets and liabilities other than cash: $\begin{array}{lr} \text { Decrease in accounts receivable } & \$ 22,000 \\ \text { Increase in inventories } & 9,400 \\\text { Increase prepaid expenses } & 8,900 \\ \text { Increase in salaries payable } & 10,400 \\ \text { Decrease in income taxes payable } & 14,400\end{array}$ Determine the net cash flow provided (used) by operating activities.

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

For each of the following items, indicate whether it would be classified as either an operating activity, an investing activity, a financing activity or a significant, noncash financing and investing activity.

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

The cash flow on total assets ratio reflects the company's actual cash flows and therefore,is affected by the accounting constraints of recognition and measurement for net income.

The accounting principle that requires significant noncash financing and investing activities be reported on the statement of cash flows is the:

___________________ activities include those transactions that affect long-term liabilities and equity.

A company had wage expense of $750,000 during a given period.Compute cash paid for wages during this period given the following data. $\begin{array} { | l | c | c | } \hline & \begin{array} { c } \text { Beginning } \\\text { Balance }\end{array} & \begin{array} { c } \text { Ending } \\\text { Balance }\end{array} \\\hline \text { Wages Payable } & \$ 100,000 & \$ 25,500 \\\hline\end{array}$

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

Match each of the following items with the appropriate definitions.

Based on the following income statement and balance sheet for Montego Bay Corporation,determine the cash flows from operating activities using the direct method.

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.

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