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Exam 12: Reporting Cash Flows

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Question 21

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Of the following,which one affects cash during a period?

A) The declaration of a stock dividend.
B) Writing off an uncollectible account receivable.
C) The declaration of a cash dividend.
D) An adjusting entry recognizing the expiration of prepaid insurance.
E) The payment of interest expense accrued in a previous accounting period.

F) A) and E)
G) A) and B)

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Question 22

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Use the following information to calculate cash paid for salaries: $\begin{array} { | l | r | } \hline \text { Salaries expense } & \$ 175,000 \\\hline \text { Salaries payable, January 1 } & 20,000 \\\hline \text { Salaries payable, December 31 } & 12,000 \\\hline\end{array}$

A) $175,000.
B) $183,000.
C) $167,000.
D) $143,000.
E) $155,000.

F) A) and C)
G) C) and E)

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Question 23

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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.

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

The FASB requires a reconciliation of net income to net cash provided or used by operating activities when the ________ method is used.

Alvez 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,a $75,000 increase in equipment,and a $100,000 decrease in notes payable.Calculate the net increase in cash for the year.

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

The accountant for Mandarin Company is preparing the company's statement of cash flows for the fiscal year just ended.The following information is available: $\begin{array} { | l | r | } \hline \text { Retained earnings balance at the beginning of the year } & \$ 819,000 \\\hline \text { Net income for the year } & 230,000 \\\hline \text { Cash dividends declared for the year } & 42,000 \\\hline \text { Retained earnings balance at the end of the year } & 1,007,000 \\\hline \text { Cash dividends payable at the beginning of the year } &10,000 \\\hline \text { Cash dividends payable at the end of the year } & 11,000\\\hline\end{array}$ What is the amount of cash dividends paid that should be reported in the financing section of the statement of cash flows?

Use the following financial statements and additional information to (1)prepare a complete statement of cash flows for the year ended December 31,20X2.The cash provided or used by operating activities should be reported using the direct method,and (2)compute the company's cash flow on total assets ratio for 20X2. 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.

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. -Paid cash dividends.

The cash flow on total assets ratio reflects actual cash flows and is therefore affected by income recognition and measurement.

When preparing the operating activities section of the statement of cash flows using the indirect method,expenses with no cash outflows are added back to net income.

Use the following information to calculate cash received from dividends: $\begin{array} { l r } \text { Dividends revenue } & \$ 29,800 \\\text { Dividends receivable, January } 1 & 2,600 \\\text { Dividends receivable, December } 31 & 3,400\end{array}$

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. -Purchases of land for cash.

Use the following financial statements and additional information to (1)prepare a statement of cash flows for the year ended December 31,20X2 using the indirect method,and (2)compute the company's cash flow on total assets ratio for 20X2. 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.

Business activities that generate or use cash are classified as operating,investing,or financing activities on the statement of cash flows.

When preparing a statement of cash flows using the indirect method,which of the following is correct?

The statement of cash flows reports and proves the net change in cash for a reporting period.

The accountant for Crusoe Company is preparing the company's statement of cash flows for the fiscal year just ended.The following information is available: $\begin{array} { | l | r | } \hline \text { Retained earnings balance at the beginning of the year } & \$ 126,000 \\\hline \text { Cash dividends declared for the year } & 46,000 \\\hline \text { Proceeds from the sale of equipment } & 81,000 \\\hline \text { Gain on the sale of equipment } &7,000 \\\hline \text { Cash dividends payable at the beginning of the year } &18,000 \\\hline \text { Cash dividends payable at the end of the year } & 20,000\\\hline \text { Net income for the year } & 92,000\\\hline \end{array}$ What is the ending balance for retained earnings?

The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the: