Exam 5: Communicating and Interpreting Accounting Information

Investing activities reported on the statement of cash flows include cash payments to acquire property, plant, and equipment, and short-term and long-term investments.

For external reporting, a company must prepare either a statement of earnings or a cash flow statement, but not both.

Dividends collected from a long-term investment are cash flows from investing activities.

While preparing a statement of cash flow, you encountered the following transaction: February 1, 20A: Zorro Corporation acquired a small office building in exchange for 5,000 shares of its own common shares; par value $10 per share; market value $15 per share. (a) Should this transaction be included in the calculations on the statement of cash flows or shown in the notes? (b) Explain your answer.

Mason Corporation reported a net loss of $12,000 for the year ended December 31, 2013. During the year, accounts receivable decreased $5,000, merchandise inventory increased $4,000, accounts payable increased by $13,000, and depreciation expense of $7,000 was recorded. During 2013, operating activities using the indirect method

Travis Company reported a profit for 20B of $20,000, building depreciation expense of $6,000, and amortization expense (patent) of $5,000. Also, trade payables increased by $7,000 and inventory decreased by $2,000. What was the amount of "cash flows from operating activities" for 20B?

Selected transactions of Horner Inc. are listed below. 1. Common shares are sold for cash. 2. Bonds payable are issued for cash at a discount. 3. Interest on a short-term note receivable is collected. 4. Merchandise is sold to customers for cash. 5. Cash is paid to purchase inventory. 6. Equipment is purchased by signing a 3-year, 5% note payable. 7. Cash dividends on common shares are declared and paid. 8. One hundred XYZ common shares are purchased for cash. 9. Land is sold for cash at book value. 10. Recorded an increase in the market value of available-for-sale securities. Classify each transaction as either (a) an operating activity, (b) an investing activit (c) a financing activity, or (d) a noncash investing and financing activity.

Green Corporation reported net earnings of $50,000 for the year. During the year, trade receivables increased by $8,000, trade payables decreased by $4,000 and depreciation expense of $6,000 was recorded. Net cash provided by operating activities for the year, using the indirect method, is

Connor Limited reported net earnings of $265,000 for the current year. Depreciation expense recorde on buildings and equipment amounted to $82,000 for the year. Balances of the current assets and current liabilities accounts at the beginning and end of the year are as follows: Prepare the operating activities section of the cash flow statement using the indirect method.

Allen Company reported total sales revenue of $150,000 and total expenses of $152,000 for the year ended December 31, 20D. During 20D, trade receivables decreased by $1,000, trade payables increased by $5,000, wages payable increased by $3,000, and $18,000 in depreciation expense was recorded. Assuming no other adjustments are needed, what was the "net cash flow from operating activities" for 20D (parentheses indicate net cash outflow)?

When a cash dividend is paid, the cash outflow is classified as an operating activity.

In 2013, The W D Company reported net earnings of $1.3 billion and cash flow from operations of $5.6 billion. In 2012, it's net earnings was $1.9 billion and cash flow from operations was $5.1 billion. What were their quality of earnings ratios for 2013 and 2012 respectively?

Which of the following transactions is not a direct use of cash?

Randy, Inc., issued $50,000 of bonds, paid cash dividends of $8,000, sold long-term investments for $12,000, received $5,000 of dividend revenue, purchased treasury shares for $15,000, and purchased new equipment for $19,000. What is the net cash flow from financing activities?

The payment of interest on a note payable is a cash flow from an operating activity.

The acquisition of a building by issuing a mortgage note payable would be considered an investing and financing activity that did not affect cash and would be reported in the notes to the financial statements.

The quality of earnings ratio (Cash Flow from Operating Activities ÷ Net earnings) measures the portion of profit that was generated in cash.

A low capital expenditures ratio indicates a higher need to obtain outside financing to expand property, plant, and equipment assets.

Which one of the following items is not generally used in preparing a statement of cash flows?

Complete the following statement of cash flows using the indirect method: