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Exam 12: Reporting Cash Flows

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Question 31

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Both cash dividends received and interest received are considered to be investing inflows.

A) True
B) False

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Question 32

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

A) True
B) False

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Question 33

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Under IFRS,interest revenue may be classified as an operating or investing activity,assuming that this classification is applied consistently across all periods.

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the direct method. $\begin{array}{c}\text {PETERS COMPANY}\\\text {Income Statement}\\\text {For Year Ended December 31, 2013}\\\begin{array}{|l|r|r|}\hline\text { Sales } & & \$ 180,000 \\\hline \text { Cost of goods sold } & & 104,000 \\\hline \text { Gross profit from sales } & & \$ 76,000 \\\hline \text { Operating expenses: } & \\\hline \text { Salaries and wages expense } & \$ 25,000 \\\hline \text { Depreciation expense } & 5,000 \\\hline \text { Rent expense } & 7,200 \\\hline \text { Interest expense } & 1,900&39,100\\\hline \text { Income from operations } & & \$ 36,900 \\\hline \text { Gain on sale of land } & & \underline{2,000} \\\hline \text { Net income } & & \underline{38,900} \\\hline\end{array}\end{array}$ Selected beginning and ending balances of current asset and current liability accounts,all of which relate to operating activities,are as follows: $\begin{array}{c} \quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\quad\text { Balance } \\ \begin{array}{|l|r|r|}\hline &\text {Dec. 31, 2013} &\text { Dec, 31, 2012} \\\hline \text { Accounts receivable } & \$ 27,600 & \$ 24,000 \\\hline \text { Merchandise inventory } & 18,200 & 20,000 \\\hline \text { Prepaid rent } & 550 & 400 \\\hline \text { Accounts payable } & 27,100 & 31,000 \\\hline \text { Salaries and wages payable } & 10,400 & 9,000 \\\hline \text { Interest payable } & 300 & 250\\\hline\end{array}\end{array}$

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

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.

The usual first step in preparing the statement of cash flows is computing the net increase or net decrease in cash.

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

Based on the following information provided about a company's operations,calculate its cost of goods purchased and its cash paid for merchandise. $\begin{array}{|l|r|}\hline \text { Cost of goods sold } & \$ 413,000 \\\hline \text { Merchandise inventory, beginning year } & 70,000 \\\hline \text { Accounts payable, beginning year } & 52,000 \\\hline \text { Merchandise inventory, end-of-year } & 67,000 \\\hline \text { Accounts payable, end-of-year } & 48,000 \\\hline\end{array}$

Given the following information,determine the amount of cash flows from investing and financing activities. $\begin{array} { | l | r | } \hline \text { Net income } & \$ 50,000 \\\hline \text { Loss on sale of plant assets } & 15,000 \\\hline \text { Cash received from sale of plant assets } & 26,000 \\\hline \text { Cash received from issuing stock } & 70,000 \\\hline \text { Increase in income taxes payable } & 120,000\\\hline\end{array}$

Investments that are readily convertible to a known amount of cash and are sufficiently close to their maturity so that the market value is unaffected by interest rate changes are ______________________________.

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

A company reported operating cash flows of $23,400 in 2012 and $26,220 in 2013.The average total assets for the company in 2012 was $262,000 and $285,000 in 2013.Calculate the cash flow on total assets ratio for both years.Comment on the results.

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:

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

Noncash financing activities are disclosed in a note in the financing section of the statement of cash flows.

A company's inventory balance was $200,000 at 12/31/11 and $188,000 at 12/31/12.Its accounts payable balance was $80,000 at 12/31/11 and $84,000 at 12/31/12,and its cost of goods sold for 2012 was $720,000.The company's total amount of cash payments for merchandise in 2012 equals:

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.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { | l | r | } \hline \text { Cost of good sold } & \$ 536,000 \\\hline \text { Merchandise inventory, January 1 } & 64,800 \\\hline \text { Merchandise inventory, December 31 } & 57,000 \\\hline \text { Accounts payable, January 1 } & 64,400 \\\hline \text { Accounts payable, December 31 } & 59,000 \\\hline\end{array}$

Use the following information and the indirect method to calculate the net cash provided or used by operating activities: $\begin{array} { | l | r | } \hline \text { Net income } & \$ 12,300 \\\hline \text { Depreciation expense } & 12,000 \\\hline \text { Payment on mortgage payable } & 15,000 \\\hline \text { Gain on sale of land } & 7,500 \\\hline \text { Increase in merchardise inventory } & 2,050 \\\hline \text { Increase in accounts payable } &6 , 1 5 0 \\\hline \text { Proceeds from sale of land } & 8 , 0 0 0 \\\hline\end{array}$