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41 Cards in this Set
- Front
- Back
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It is an objective of the statement of cash flows to |
Provide information about operating, investing, and financing activities during a period. |
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The primary purpose of the statement of cash flows is to provide information |
about the cash receipts and cash payments of an entity during a period. |
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What is not answered by the statement of cash flows? |
Were all the cash expenditures of benefit to the company during the period? |
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The first step in the preparation of the statement of cash flows requires the information included in which comparative financial statements? |
Balance sheet |
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Cash equilvants are |
Treasury bills, commercial paper, money market funds purchased with cash, investments with original maturities of three months or less, and readily convertible into known amounts of cash. |
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A company borrows $10,000 and signs a 90-day nontrade note payable. In preparing a statement of cash flows, this event would be reflected as a |
Cash inflow from financing activities |
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To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by |
Eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash. |
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An increase in inventory balance would be reported in a statement of cash flows using the indirect method (reconciliation method) as a |
Deduction from net income in arriving at net cash flow from operating activities. |
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A statement of cash flows typically would not disclose the effects of |
Stock dividends declared |
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When preparing a statement of cash flows, what is not an adjustment to reconcile net income to net cash provided by operating activities? |
A change in dividends payable |
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Declaration of a cash dividend on common stock affects cash flows from operating activities under the direct and indirect methods as follows. |
Direct method - no effect Indirect method - no effect |
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In a statement of cash flows, the cash flows from investing activities section should report |
A major repair to machinery charged to accumulated depreciation |
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Xanthe corporation had the following transactions occur in the current year: 1. cash sale of merchandise inventory 2. Sale of delivery truck at book value 3. Sale of Xanthe common stock for cash 4. Issuance of a note payable to a bank for cash 5. Sale of a security held as an available-for-sale investment 6. Collection of loan receivable How many of the above items will appear as a cash inflow from investing activities on a statement of cash flows for the current year? |
Three items |
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What would be classified as a financing activity on a statement of cash flows? |
Deposit to a bond sinking fund |
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The amortization of bond premium on long-term debt should be presented in a statement of cash flows as a |
Deduction from net income |
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Crabbe Company reported $80,000 of selling and administrative expenses on its income statement for the past year. The company had depreciation expense and an increase in prepaid expenses associated with the selling and administrative expenses for the year. Assuming use of the direct method, how would these items be handled in converting the accrual based selling and administrative expenses to the cash basis? |
Depreciation - Deducted from Increase in Prepaid Expenses - Added To |
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When preparing a statement of cash flows, an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because |
Cost of goods sold on an accrual basis is lower than on a cash basis. |
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When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in determining cash flow from operating activities? |
Direct Method - Increase Indirect Method - Increase |
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In determining net cash flow from operating activities, a decrease in accounts payable during a period |
Requires an increase adjustment to cost of goods sold under the direct method. |
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When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustment in determining cash flows from operating activities? |
Indirect method - increase Direct method - decrease |
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When preparing a statement of cash flows, a decrease in prepaid insurance during a period would require which of the following adjustments in determining cash flows from operating activities? |
Indirect method - increase Direct method - decrease |
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When preparing a statement of cash flows, the following are used for which method in determining cash flows from operating activities? |
Gross accounts receivable - direct Net accounts receivable - indirect |
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Which statement is correct? |
The direct method is more consistent with the primary purpose of the statement of cash flows. |
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When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities? |
Amortization of patent. |
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When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted form net income to compute cash provided by/used by operating activities |
Gain on sale of land |
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What is false concerning the statement of cash flows? |
The FASB requires companies to classify all income taxes paid as operating cash outflows |
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Dolan company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Moss Co. during the current year, even though no dividends were declared or paid by Moss during the year. On Dolan's statement of cash flows, the $25,000 should |
Be shown as a deduction from net income in the cash flows from operating activities section. |
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In reporting extraordinary transactions on a statement of cash flows the |
Gross amount of an extraordinary gain should be deducted from net income. |
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What would not be shown on a statement of cash flows? |
Stock dividends Stock split an appropriation of retained earnings |
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How should significant noncash transaction be reported in the statement of cash flows according to FASB Statement No. 95? |
These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials. |
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A company acquired a building, paying a portion of the purchase price in cash and issuing a mortgage note payable to the seller for the balance. In a statement of cash flows, what amount is included in investing activities for the above transaction? |
Cash Payment |
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In a statement of cash flows, what amount is included in financing activities for the above transaction? |
Zero |
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Smiley Corp.'s transactions for the year ended December 31, 2013 included the following: Purchase real estate for $575,000 cash which was borrowed from a bank Sold available-for-sale securities for $500,000 Paid dividends of $600,000 Issued 500 shares of common stock for $250,000 Purchased machinery and equipment for $125,000 cash Paid $450,000 toward a bank loan Reduced accounts receivable by $100,000 Increase accounts payable $200,000 Smiley's net cash used in investing activities for 2013 was |
$200,000 $575,000 plus $500,000 minus $125,000 equals $200,000 |
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Smiley's net cash used in financing activities was |
$225,000 $575,000 minus $600,000 plus $250,000 minus $450,000 equals $225,000 |
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Peavy Corp.'s transactions for the year ended December 31, 2013 included the following: Acquired 50% of Gant Corps common stock for $160,000 cash which was borrowed from a bank Issued $5,000 shares of its preferred stock for land having fair value of $320,000 cash Issued 500 of its 11% debenture bonds, due 2018, for $392,000 cash Purchased a patent for $220,000 cash Paid $120,000 toward a bank loan Sold available-for-sale securities for $796,000 Had a net increase in returnable customer deposits of $88,000 Peavy's net cash provided by investing activities for 2013 was |
$416,000 $160,000 minus $220,000 plus $796,000 equals $416,000 |
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Peavy's net cash provided by financing activities for 2013 was |
$520,000 $160,000 plus $392,000 minus $120,000 plus $88,000 equals $520,000 |
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Jamison Corp.'s balance sheet accounts as ofDecember 31, 2013 and 2012 and information relating to 2013 activities arepresented below. December31, 2013 2012 Assets Cash $ 440,000 $ 200,000 Short-terminvestments 600,000 — Accountsreceivable (net) 1,020,000 1,020,000 Inventory 1,380,000 1,200,000 Long-terminvestments 400,000 600,000 Plantassets 3,400,000 2,000,000 Accumulateddepreciation (900,000) (900,000) Patent 180,000 200,000 Totalassets $6,520,000 $4,320,000 Liabilitiesand Stockholders' Equity Accountspayable and accrued liabilities $1,660,000 $1,440,000 Notespayable (nontrade) 580,000 — Commonstock, $10 par 1,600,000 1,400,000 Additionalpaid-in capital 800,000 500,000 Retainedearnings 1,880,000 980,000 Totalliabilities and stockholders' equity $6,520,000 $4,320,000 Information relating to 2013 activities:· Net incomefor 2013 was $1,500,000.· Cashdividends of $600,000 were declared and paid in 2013.· Equipmentcosting $1,000,000 and having a carrying amount of $320,000 was sold in 2013for $360,000.· A long-terminvestment was sold in 2013 for $320,000. There were no other transactionsaffecting long-term investments in 2013.· 20,000shares of common stock were issued in 2013 for $25 a share.· Short-terminvestments consist of treasury bills maturing on 6/30/14. Net cash provided by Jamison's 2013 operating activities was |
$2,080,000 $1,500,000 minus $180,000 plus $900,000 minus $900,000 plus $680,000 minus $360,000 minus $320,000 plus $20,000 plus $220,000 minus $320,000 minus $200,000 equals $2,080,000 |
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Net cash used in Jamison's 2013 investing activities was |
$2,320,000 $320,000 plus $360,000 minus $3,400,000 plus $1,000,000 minus $2,000,000 minus $600,000 equals $2,320,000 |
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Net cash provided by Jamison's 2013 financing activities was |
$480,000 $20,000 times $25 equals $500,000 $500,000 plus $580,000 minus $600,000 equals $480,000 |
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Foxx Corp.'s comparative balance sheet at December 31, 2013 and 2012 reported accumulated depreciation balances of $850,000 and $600,000, respectively. Property with a cost of 550,000 and a carrying amount of $38,000 was the only property sold in 2013. Depreciation charged to operations in 2013 was |
$262,000 $850,000 minus $600,000 plus $50,000 minus $38,000 equals $262,000 |
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Nagel Co.'s prepaid insurance was $90,000 at December 31, 2013 and $45,000 at December 31, 2013. Insurance was $31,000 for 2013 and $27,000 for 2012. What amount of cash disbursements for insurance would be reported in Nagel's 2013 net cash provided by operating activities presented on a direct basis? |
$76,000 $90,000 plus $31,000 minus $45,000 equals $76,000 |
