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Exam 12: Statement of Cash Flows

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Question 81

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How is depreciation expense reported on the statement of cash flows?

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Depreciation expense is not included on ...

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Question 82

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The following income statement was drawn from the annual report of Newtown Company: What is the net cash flow from operating activities?

A) $18,000
B) $18,600
C) $13,000
D) $14,400

E) All of the above
F) None of the above

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Question 83

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A company experiencing rapid growth can be short of cash despite earning substantial net income.

Goodloe Corporation's credit sales for Year 1 were $500,000, and the balance in its accounts receivable increased by $26,000 during the year. In Year 1, Goodloe collected $526,000 in cash from its customers.

The financial statements of Gregg Company reported wages expense of $160,000 during Year 2, wages payable of $16,000 at the beginning of Year 2, and wages payable of $22,000 at the end of Year 2. What amount of cash was paid for wages during Year 2?

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected. On January 1 of the current year, Howard Company paid $10,000 to the Citizens Bank for accrued interest expense that had been accrued at the end of the previous year.

Howard Company uses the direct method to prepare its operating activities section of the statement of cash flows. Indicate how each event affects net income and the three types of activities on the statement of cash flows. In the net income column, use the letter "I" to indicate increase, the letter "D" to indicate decrease, and the letters "NA" to indicate that the income statement is not affected. In the three cash flow columns, use the letter "I" to indicate cash inflow, the letter "D" to indicate cash outflow, and the letters "NA" to indicate that the cash flow statement is not affected. Howard Company made a $25,000 cash payment on a term loan. The payment included a $23,000 reduction of principal as well as $2,000 of interest. (Show the combined effects of the events.)

In preparing the operating activities section of the statement of cash flows by the indirect method, decreases in noncash current liabilities are added to net income.

When using the indirect method, which of the following items should be added to the amount of net income when determining the amount of net cash flow from operating activities?

Erie Company reports the following comparative balance sheets and income statement information for the current year. All revenues are from credit sales. What was the cash received from customers during the year?

Indicate whether each of the following statements is true or false. a)________ It is possible for a growing business to have substantial earnings, but yet be short of cash.b)________ It is possible for a well-established business to report large operating losses, but have positive cash flow from operating activities.c)________ A merchandising firm adding new stores must report the additional inventory purchases as investing activities.d)________ When equipment is purchased to replace old equipment, the transaction is reported as an operating activity.e)________ FASB requires companies to disclose significant investing and financing activities even if these transactions do not affect cash.

The indirect method for preparing the operating activities section of the statement of cash flows begins with the amount of sales revenue reported on the income statement.

Which method of preparing the operating activities section of a cash flow statement is recommended by the Financial Accounting Standards Board?

Statler Corporation has beginning and ending accounts payable balances of $400 and $800, respectively. Inventory had beginning and ending balances of $700 and $600, respectively. If cost of goods sold was $2,800, how much cash was spent to purchase inventory?

Which of the following is a correct statement of one of the rules for converting net income to the cash flow from operating activities using the indirect method?

Texas Corporation uses the indirect method to prepare the operating activities section of its statement of cash flows. The company's comparative balance sheet information was as follows: The company reported net income for Year 2 of $40,000. No property, plant & equipment was disposed of during the year. No additional bonds were issued during the year. Texas paid $16,000 in cash dividends during Year 2. Required:Prepare a statement of cash flows for Year 2.

The following data is supplied from the comparative balance sheets and income statement information from Moreno, Incorporated Net income for Year 2 was $40,000. No long-term assets were sold and no new notes were issued during Year 2. During Year 2, Moreno paid dividends of $24,000. Consider the information provided. Required:Prepare the financing activities section of Moreno's statement of cash flows.

How can the net cash flow from operating activities be greater than net income from operating activities?

When using the indirect method to complete the cash flows from operating activities section of the statement of cash flows, what is the proper disposition of a loss on disposal of equipment?