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Exam 15: The Statement of Cash Flows

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Question 61

True/False

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Because noncash investing and financing transactions do not affect cash, they should be excluded from the statement of cash flows.

A) True
B) False

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Question 62

Multiple Choice

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Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Decrease in Accounts Payable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

A) Add to net income to arrive at net cash flows from operating activities
B) Subtract from net income to arrive at net cash flows from operating activities
C) Not used to adjust net income to calculate net cash flows from operating activities

D) A) and B)
E) All of the above

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Question 63

Multiple Choice

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During 2009, Heckart Corporation had sales of $250,000, net income of $25,000, average total assets of $350,000, dividend payments of $17,500, net cash flows from operating activities of $26,000, purchases of plant assets of $37,500, and sales of plant assets of $45,000. Cash flow yield equals (Round amounts to one decimal place)

Which of the following items would not be included in a statement of cash flows prepared using the indirect method?

When a statement of cash flows is prepared using the indirect method,

Royer Corporation engaged in this transaction: Purchased land for cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

The income statement indicates a business's success or failure in earning an income from its operating activities, but it does not reflect the inflow and outflow of cash from operating activities.

If net cash flows from operating activities were $296,000, net income were $200,000, and sales were $2,000,000, cash flows to sales would equal (Round amounts to one decimal place)

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Accounts Receivable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Give two explanations for why the amount of cash outflow for equipment for the year might not equal the increase in the Equipment account balance from one balance sheet date to the next.

A negative free cash flow indicates that the company has met all its planned cash commitments and has cash available to reduce debt or to expand.

Royer Corporation engaged in this transaction: Purchased one-year insurance policy for cash. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

Geiger Company's cash balance at December 31, 2009, was $136,000. Calculate the company's cash balance at December 31, 2010 , given the following information for the year ended December 31, 2010. Show your work.

A company sells equipment with a carrying value of $10,000 for $7,000. Where, and for what amounts, would this transaction appear on a statement of cash flows using the indirect method?

Cash inflows and outflows are easier to manipulate than earnings.

Interest received is one item deducted from net income as per the income statement to arrive at net cash flows from operating activities.

The net income for the period would appear in the cash flows from financing activities section of a statement of cash flows prepared using the indirect method.

Assume the indirect method is used to compute net cash flows from operating activities. For this item extracted from the financial statements-Increase in Income Taxes Payable-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Royer Corporation engaged in this transaction: Repaid 190-day note payable. Indicate which section, if any, the above transaction would appear in, or relate to, on a statement of cash flows.

If the indirect method is used, which of the following would be added to net income to arrive at net cash flows from operating activities?