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Exam 14: Statement of Cash Flows

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Question 1

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The statement of cash flows is not useful for:

A) planning future investing and financing activities
B) determining a company's ability to pay its debts
C) determining a company's ability to pay dividends
D) calculating the net worth of a company

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

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Question 2

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Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity and dividends.

A) True
B) False

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Question 3

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Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.

Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing activities section of the statement of cash flows would be $85,000.

On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

Cash flow per share is

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the amortization of bond discount for the period is deducted from the net income for the period.

Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.

The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

Indicate whether each of the following would be added to or deducted from net income in determining net cash flow from operating activities by the indirect method:

The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.

Indicate the section (operating activities, investing activities, financing activities, or none) in which each of the following would be reported on the statement of cash flows prepared by the indirect method:

The statement of cash flows reports a firm's major sources of cash receipts and major uses of cash payments for a period.

To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.

A cash flow per share amount should be reported on the statement of cash flows.

Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased $5,000, and the inventory balance increased by $11,000 over the year. Determine the amount of cash paid for merchandise.

The cost of merchandise sold during the year was $50,000. Merchandise inventories were $12,500 and $10,500 at the beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the year, respectively. Using the direct method of reporting cash flows from operating activities, cash payments for merchandise total

The statement of cash flows is an optional financial statement.

Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

If accounts payable have increased during a period