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Exam 24: The Statement of Cash Flows

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Question 31

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A decrease in merchandise inventory is:

A) a source of cash under operating activities.
B) a use of cash under operating activities.
C) not reported on the statement of cash flows.
D) a source of cash under investing activities.

E) C) and D)
F) None of the above

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Question 32

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Investing activities include

A) purchases of merchandise for cash.
B) purchases of plant and equipment for cash.
C) purchases of prepaid expense items such as supplies and insurance for cash.
D) increase in accounts receivable.

E) A) and D)
F) A) and B)

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Question 33

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When the net cash provided by operating activities is determined,an increase in income taxes payable should

An example of an investing activity is

Chattel Company sold for $7,000 equipment that originally cost $40,000 and had depreciation in the amount of $34,000 taken.What amount is reported in the Cash Flows from Financing Activities section of the Statement of Cash Flows?

The cash flows from investing activities and cash flows from financing activities are the same in both the direct and indirect methods.

Noncash investing and financing activities,such as the issuance of bonds to acquire business property,do not require disclosure as the cash account is not affected.

The Financial Accounting Standards Board prefers the indirect method of preparing the statement of cash flows.

Operating activities are routine business transactions that include providing services,paying wages,borrowing funds,selling stock,and paying dividends.

If the indirect method of preparing the statement of cash flows is used,a note disclosing the amount of interest and income taxes paid during the period must accompany the statement.

Additional information: Plant assets that originally cost $67,200 were sold for $56,400,resulting in a gain of $8,200. Dividends of $35,815 were declared and paid.There were no dividends declared in 2015. Using the information provided,prepare the cash flows from financing activities for The Kerfuffle Company.

The following transactions occurred at the Lionel Corporation in 2015.Use this information to prepare Lionel's schedule of cash flows from financing activities. A)The company issued 300 shares of its $50 par value common stock at par. B)Cash dividends of $25,000 were paid on common stock during the year.

Cash flows from ____________________ activities are the result of routine business transactions such as buying and selling merchandise.

Additional information: Plant assets that originally cost $67,200 were sold for $56,400,resulting in a gain of $8,200. Dividends of $35,815 were declared and paid.There were no dividends declared in 2015. Using the information provided,prepare the cash flows from investing activities for The Kerfuffle Company.

For each of the following operating activities,indicate whether it is a source of cash,a use of cash,or neither under the indirect method.

Generally,if a short-term investment is to be classified as a cash equivalent,it must fall due within

Echt Manufacturing sold equipment that originally cost $78,400 for $54,300 cash on April 1,2015.This equipment was purchased on January 2,2013,had a salvage value of $8,400,a useful life of ten years,and was depreciated under the straight-line method of depreciation.How will this transaction be reported on Echt's 2015 Income Statement? How will this transaction be reported on the Statement of Cash Flows for 2015? (Assume that the indirect method was used. )

Usually,there is a difference between the net income reported on the income statement and the net cash from operating activities shown on the statement of cash flows.

Doff Manufacturing Co.sold equipment that cost $12,000 for $3,000.Depreciation of $10,000 had been taken on the equipment.How is the Cash Flows from Operating Activities affected?

The following information is taken from the accounting records of the Gilford Corporation.Use this information to prepare Gilford's statement of cash flows for the year ended December 31,2016. Additional information: (a)Plant construction costing $40,000 in cash was completed. (b)Equipment was purchased for $20,000 in cash. (c)Common stock was sold for $50,000 in cash. (d)Bonds were issued for $15,000 in cash. (e)Common stock dividends of $20,000 were paid in cash. (f)Net income after income taxes was $35,000.