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Exam 11: The Statement of Cash Flows

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Question 21

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Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method. (Choices may be used more than once.) a.Operating activity--add to net income b.Operating activity--deduct from net income c.Inflow from investing activity d.Outflow from investing activity e.Inflow from financing activity f.Outflow from financing activity g.Noncash investing and financing activity h.Not reported on statement of cash flows -Declared cash dividends.

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Question 22

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Which of the following statements is false?

A) The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the indirect method.
B) The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the direct method.
C) The FASB prefers the direct method of preparing the operating activities section of the statement of cash flows.
D) Most companies use the direct method of preparing the operating activities section of the statement of cash flows.

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

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Question 23

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If an analysis of the balance sheet shows that Accounts Payable increased during the period, then the increase would have to be _______________ to net income to convert net income to cash.

Cash flows from acquiring and disposing of long-term assets are classified as

Selected data and additional information from the company's records are presented below: Additional information: -Refer to Mary Kay Cosmetics. What amount of cash was collected from customers during 2014?

When using the indirect method to determine operating cash flows, how is the receipt of cash from the sale of long-term investments treated on the statement of cash flows?

Selected data from the financial statements for the years ended December 31, 2014 and 2013, are presented below: The following additional information was obtained from the company's records: -Refer to Maritime Marine Services. What was the amount of cash dividends paid during 2014?

When using the direct method to determine operating cash flows, how is the purchase of equipment for cash shown on the Statement of Cash Flows?

Match these terms with their correct definition. a.Cash flow adequacy ratio b.Cash flows from financing activities c.Cash flows from investing activities d.Cash flow from operating activities e.Direct method f.Free cash flow g.Income statement h.Indirect method i.Noncash investing & financing activities j.Statement of cash flows -Include cash sales to customers and cash dividends received.

Mercury Corporation reported the following information on its financial statements: If the company uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2014?

In terms of the statement of cash flows, cash includes actual cash items minus certain cash equivalents such as commercial paper, money market funds, and treasury bills.

Use the following codes to indicate how the cash flow effect, if any, of each transaction or event would be reported on a statement of cash flows if the operating activities section is prepared using the indirect method. (Choices may be used more than once.) a.Operating activity--add to net income b.Operating activity--deduct from net income c.Inflow from investing activity d.Outflow from investing activity e.Inflow from financing activity f.Outflow from financing activity g.Noncash investing and financing activity h.Not reported on statement of cash flows -Issued stock to buy a building.

Each of the following transactions would be classified as an investing activity except:

A company reported net income of $150,000 for 2014, but its cash balance decreased by $40,000. Which financial statement should management refer to for an explanation of this situation?

The statement of cash flows

The indirect method of reporting cash flows from operating activities involves reconciling net income and cash flows from operations.

Upon reviewing Myert Company's Statement of Cash Flows, the following was noted: From this information, the most likely explanation is that this company is

During 2014, the accounts payable balance decreased.

Which balance sheet accounts are most affected by investing activities?

Cash flows from issuing and repurchasing stock or issuing and repaying debt are classified as