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Exam 12: Reporting Cash Flows

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Question 131

Multiple Choice

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The direct method of reporting operating cash flows:

A) Is recommended but not required by the FASB.
B) Must be used by all companies.
C) Is used by most companies.
D) Is considered supplementary disclosure.
E) Is not recommended by the FASB, but is commonly used.

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

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Question 132

Multiple Choice

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The statement of cash flows is:

A) Another name for the statement of financial position.
B) A financial statement that presents information about changes in equity during a period.
C) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.
D) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.
E) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

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

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Question 133

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The following transactions and events occurred during the year.Assuming that this company uses the indirect method to report cash provided by operating activities,indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.

The cash flows from operating activities section of an indirect method of cash flows begins with net income or loss.

Managers only use the cash flow statement to evaluate the net cash increase or decrease,and do not pay much attention to the details of cash flows from operating activities,cash flows from investing activities,and cash flows from financing activities.

The statement of cash flows reports:

Activities that involve the production or purchase of merchandise and the sale of goods and services to customers,including expenditures related to administering the business,are classified as:

All of the following statements related to reporting cash flows from operating activities under U.S.GAAP and IFRS are true except:

Analysis reveals that a company had a net increase in cash of $20,000 for the current year.Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash provided by financing activities was $12,000.If the year-end cash balance is $24,000,the beginning cash balance was:

Which one of the following is representative of typical cash flows from operating activities?

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Sold equipment for cash.

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Received interest from investments in trading securities.

When preparing the operating activities section of the statement of cash flows using the indirect method,depreciation is subtracted from net income.

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

Jeffreys Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $240,000 was sold for a $10,000 loss in Year 2.The following selected information is available for Jeffreys Company from its comparative balance sheet.Compute the cash received from the sale of the equipment. $\begin{array} { | l | r | r | } \hline \text { At December 31 } & \text { Year 2 } & \text { Year 1 } \\\hline \text { Equipment } & \$ 510,000 & \$ 750,000 \\\hline \text { Accumulated Depreciation-Equipment } & 328,000 & 500,000 \\\hline\end{array}$

In preparing Marjorie Company's statement of cash flows for the most recent year,the following information is available: $\begin{array}{llr} \text {Purchase of equipment } &\$260,000\\ \text {Proceeds from the sale of equipment } &87,000\\ \text { Purchase of land } &91,000\end{array}$ Net cash flows from investing activities for the year were:

The statement of cash flows helps analysts evaluate all but which of the following?

Alvez Company reports net income of $305,000 for the year ended December 31.It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment.Its comparative balance sheet reveals a $40,200 increase in accounts receivable,a $10,200 decrease in prepaid expenses,a $15,200 increase in accounts payable,a $12,500 decrease in wages payable,and a $100,000 decrease in notes payable.Calculate the cash provided (used) in operating activities using the indirect method.

Common uses of the statement of cash flows include all but which of the following?

When preparing the operating activities section of the statement of cash flows using the indirect method,decreases in current operating assets are added to net income.