Exam 12: Reporting and Analyzing Cash Flows

When preparing the operating section of the statement of cash flows using the indirect method, noncash operating expenses are added back to net income.

Explain the purpose and format of the statement of cash flows.Also, describe its use to decision makers.

A company reported net cash provided by operating activities of $131.4 million.Assets totaled $2,197.7 million at the beginning of the year and $2,040.0 million at the end of the year.Calculate this company's cash flow on total assets ratio.

A company had net cash flows from operations of $120,000, total cash flows of $500,000, and average total assets of $2,500,000.The cash flow on total assets ratio equals:

Use the following calendar-year information to prepare David Company's statement of cash flows using the direct method.You may omit the schedule reconciling net income and net cash provided or used by operating activities. Cash paid to purchase machinery \ 124,000 Cash paid for merchandise inventory 220,000 Cash paid for operating expenses 280,000 Cash paid for interest 4,000 Cash received for interest 10,000 Cash proceeds from sale of land 100,000 Cash balance at beginning of year 15,000 Cash balance at end of year 77,000 Cash borrowed on a short-term note 25,000 Cash dividends paid 24,000 Cash received from stock issuance 57,000 Cash collections from customers 522,000

The conversion of preferred stock to common stock is disclosed in the financing section of the statement of cash flows.

Cash paid out for merchandise is considered to be an operating activity.

The statement of cash flows reports:

The reporting of investing and financing activities is _________________ under the direct and indirect methods of preparing the statement of cash flows.

A company purchased equipment for $150,000 by paying $50,000 and signing a $100,000 note payable.The entire transaction is disclosed to users on the statement of cash flows and/or in its notes.

The cash flow on total assets ratio is defined as average total assets divided by operating income.

Cash flow amounts and their timing should be examined when planning and analyzing operating activities.

The statement of cash flows is divided into three sections called the _____________, _____________ and _______________ sections.

The use of a spreadsheet for analysis is especially useful when preparing the statement of cash flows using the _____________ method.

When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Noncash financing activities are disclosed in a note in the financing section of the statement of cash flows.

A company reported operating cash flows of $23,400 in 2012 and $26,220 in 2013.The average total assets for the company in 2012 was $262,000 and $285,000 in 2013.Calculate the cash flow on total assets ratio for both years.Comment on the results.

Accounting standards:

Use the following information to calculate cash received from dividends: Dividends revenue \ 29,800 Dividends receivable, January 1 2,600 Dividends receivable, December 31 3,400