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Exam 16: Reporting the Statement of Cash Flows

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Question 41

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Use the following financial statements and additional information to (1) prepare a statement of cash flows for the year ended December 31, 2011 using the indirect method, and (2) compute the company's cash flow on total assets ratio for 2011. Additional Information a. A $20,000 note payable is retired at its carrying value in exchange for cash. b. The only changes affecting retained earnings are net income and cash dividends paid. c. New equipment is acquired for $120,000 cash. d. Received cash for the sale of equipment that had cost $85,000, yielding a gain of $4,700. e. Prepaid expenses relate to Other Expenses on the income statement. f. All purchases and sales of merchandise inventory are on credit.

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Question 42

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When analyzing the changes on a spreadsheet used to prepare a statement of cash flows, the cash flows from investing activities generally affect:

A) Net income, current assets, and current liabilities.
B) Noncurrent assets.
C) Noncurrent liability and the equity accounts.
D) Both noncurrent assets and noncurrent liabilities.
E) Equity accounts only.

F) All of the above
G) A) and C)

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Question 43

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Aster Company's 2011 income statement and changes in selected balance sheet accounts are given below. Calculate the company's net cash provided or used by operating activities using the direct method. The company also experienced the following during 2011:

The statement of cash flows reports:

The statement of cash flows helps analysts evaluate the:

Use the following income statement and information about changes in noncash current assets and liabilities to (1) prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method and (2) compute the company's cash flow on total assets ratio for the year assuming that average total assets are $525,250. Changes in current asset and current liability accounts for the year that relate to operations follow.

Hancock reported assets of $13,362 million at January 1 and $13,369 million as of December 31 of the current year. Hancock's net cash flows from operations were $2,204 million. Calculate the cash flow on total assets ratio for Hancock.

Which of the following items is reported on the statement of cash flows under financing activities?

_____________ activities include the cash effects of transactions and events that determine net income.

The following selected account balances are taken from a merchandising company's records: (a) Calculate the cash payments made during 2011 for merchandise. Assume all of the company's accounts payable balances result from merchandise purchases. (b) Calculate the cash receipts from customer sales during 2011. (c) Calculate the cash payments for salaries during 2011.

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

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

A main purpose of the statement of cash flows is to report all the major cash ________ and cash _____________.

A cash-based measure to help business decision makers estimate the amount and timing of cash flows is the cash flow on total assets ratio.

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

Use the following company information to calculate its net cash provided or used by investing activities: (a) Equipment with a book value of $125,000 and an original cost of $220,000 was sold at a gain of $22,000. (b) Paid $49,000 cash for a new truck. (c) Sold land costing $30,000 for $26,000 cash, realizing a $4,000 loss. (d) Purchased treasury stock for $53,000 cash. (e) Long-term investments in stock are sold for $41,000 cash, realizing a gain of $3,500.

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.

Financing activities include receiving cash dividends from investments in other companies' stocks.

Beewell's net income for the year ended December 31, Year 2 was $185,000. Information from Beewell's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2.

The use of a spreadsheet for analysis is especially useful when preparing the statement of cash flows using the _____________ method.