Exam 5: Communicating and Interpreting Accounting Information

Loans to other companies (notes receivable) are cash flows from investing activities.

Under the indirect method, noncash expenses are added to net earnings.

In 2013, C Co. reported a quality of earnings ratio of 1.60. In 2012 and 2011 the ratio was .97 and .98 respectively. Which of the following was the most likely cause of the large increase in the ratio?

A comparative balance sheet for Austin Corporation is presented below:

Using the indirect method, calculate the amount of cash flows from operating activities from the following data:

Reba Company reported profit of $10,000 for 20A. Additional 20A information is as follows: Based on the information given above, the statement of cash flows would show "cash flows from operating activities" of $ _.

Depreciation expense does not cause a cash outflow for the current period; therefore, it should never be shown on the statement of cash flows.

A higher quality of earnings ratio indicates that it is less likely that the company is using aggressive revenue recognition policies to increase profit.

Expenses reported on the income statement for 20A (the first year of operations), totaled $60,000, which included depreciation expense of $8,000, and wages payable increased to $3,000 by the end of 20A. Therefore, the 20A cash outflow for expenses was $71,000.

A transaction that does not cause an inflow or outflow of cash should be reported on the statement of cash flows only if it is an adjustment to convert accrual profit to the cash basis.

For an investment to qualify as a cash equivalent, it must be readily convertible to a known amount of cash and which of the following is correct?

Restless Company's 20B income statement reported total sales revenue of $100,000. The 20A-20B, comparative statements of financial position showed that trade receivables decreased by $10,000. What were the 20B "cash receipts from customers"?

Cash flow from investing activities is considered the most important category on the cash flow statement because it is considered the best measure of expected earnings.

The financial statements for Ozzie Company show the following: How much cash was paid for merchandise?

In the years 2006-2009, B Co.'s capital expenditures ratio was 2.74 and from 2010-2013, it was 1.24. From 2010-2013, R Co.'s ratio was .30. Which of the following statements about B Co.'s capital expenditures ratio is correct?

Typical financing activities do NOT include the following:

Assume the 20D income statement reported total sales revenue of $160,000. The 20C-20D, comparative statements of financial position showed that trade receivables increased by $10,000. What was the "cash inflow from customers" for 20D?

Jackson Company gathered the following data to prepare its 20B statement of cash flows: Based only on the above data, the net cash inflow from operating activities during 20B was which of the following?

The comparative balance sheets for Gillen Inc. appear below: Additional information: 1. Net earnings for the year ending December 31, 2013 were $27,000. 2. Cash dividends of $13,000 were declared and paid during the year ended December 31, 2013. 3. Long-term investments that had a carrying amount of $23,000 were sold for $18,000 in 2013. Prepare a cash flow statement for the year ended December 31, 2013, using the indirect method.

The net increase (or decrease) in cash that is reported on the statement of cash flows should be the same as the change in the balance of the cash account for the two most recent years on the comparative statements of financial position.