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Exam 16: Reporting the Statement of Cash Flows

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Question 31

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The cash flow on total assets ratio compared to the total assets ratio can be used as an indicator of earnings quality.

A) True
B) False

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Question 32

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All cash transactions eventually affect noncash ________ accounts.

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Question 33

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Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { l l | l } \text { Cost d goods sold } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & \$ 226,000 \\\hline \text { Merchandise inventory. January } 1 \ldots \ldots \ldots \ldots \ldots \ldots & 54,800 \\\hline \text { Mer chandise inventory. December } 31 \ldots \ldots \ldots \ldots \ldots & 57,400 \\\hline \text { Accounts payable, January } 1 \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 54,400 \\\hline \text { Accounts payable, December } 31 \ldots \ldots \ldots \ldots \ldots \ldots & 59,800\end{array}$

For each of the following independent cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.

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

The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the indirect method.

For each of the following items, indicate whether it would be classified as an:

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

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

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.

Marshland Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available: $\begin{array}{ll}\text { Cash dividends declared for the year }&\$40,000\\\text { Cash dividends payable at the beginning of the year } & 17,000 \\\text { Cash dividends payable at the end of the year } & 13,000\end{array}$ $\text { The amount of cash paid for dividends was: }$ A) $\$ 57,000$ . B) $\$ 53,000$ . C) $\$ 36,000$ . D) $\$ 40,000$ . E) $\$ 44,000$

When using a spreadsheet to prepare the statement of cash flows, an increase 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.

The indirect method separately lists each major item of operating cash receipts and cash payments.

A company reported net income of $318,000, operating cash flows of $218,000, total cash flows of $184,000, and average total assets of $898,000. Calculate its cash flow on total assets ratio.

Investing activities do not include the:

A company had net cash flows from operations of $120,000, cash flows from financing of $330,000, total cash flows of $500,000, and average total assets of $2,500,000. The cash flow on total assets ratio equals:

The cash flow on total assets ratio is calculated by:

The gain or loss from retirement of debt is reported under cash flows from operating activities on the statement of cash flows using the direct method.