Exam 12: Reporting and Analyzing Cash Flows

Information to prepare the statement of cash flows usually comes from (a) comparative balance sheets, (b) current income statement,and (c) additional information.

Wessen Company reports net income of $200,000 for the year ended December 31,2013.It also reports $40,000 depreciation expense,$22,500 amortization expense,and a $15,000 loss on the sale of machinery.Its comparative balance sheets reveal a $225,700 increase in accounts receivable,$31,600 decrease in accounts payable,$15,000 decrease in prepaid expenses,and $48,100 decrease in wages payable.What net cash flows are provided (used) by operating activities using the indirect method?

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

Financing activities include receiving cash from issuing debt and receiving cash dividends from investments in other companies' stocks.

A purchase of land in exchange for shares of stock is disclosed on the statement of cash flows or in a note to the statement.

When using a spreadsheet to prepare the statement of cash flows,a decrease in accounts payable is entered in the Analysis of Changes column with a debit in the statement of cash flows section and a credit in the balance sheet section.

Spirit Company,a merchandiser,recently completed the 2013 calendar year.For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory,and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses.The company's balance sheet and income statement follow: Additional information on year 2013 transactions: Additional information on year 2013 transactions: a.The loss on the cash sale of equipment was $5,875 (details in b). b.Sold equipment costing $46,500, for a loss of $5,875. c.Purchased equipment costing $99,000 by paying $35,000 cash and signing a long-term note payable for the balance. d.Borrowed $2,000 cash by signing a non-sales related short-term note payable. e.Paid $47,500 cash to reduce the long-term notes payable. f.Issued 2,400 shares of common stock for $20 cash per share. g.Net income and dividends were the only items that affected retained earnings. -Required: Compute the net cash flows provided (used) by operating activities using the indirect method.

Under IFRS,cash outflows for interest expense are classified as

Use the following company information to calculate its net cash provided or used by investing activities: (a) Equipment with a book value of $125,000 and an original cost of $220,000 was sold at a gain of $22,000. (b) Paid $49,000 cash for a new truck. (c) Sold land costing $30,000 for $26,000 cash,realizing a $4,000 loss. (d) Purchased treasury stock for $53,000 cash. (e) Long-term investments in stock are sold for $41,000 cash,realizing a gain of $3,500.

All cash transactions eventually affect noncash ___________ accounts.

Under IFRS,interest revenue may be classified as an operating or investing activity,assuming that this classification is applied consistently across all periods.

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.

Based on the following income statement and balance sheet for Rashid Corporation,determine the cash flows from operating activities using the indirect method.

Financing activities include receiving cash dividends from investments in other companies' stocks.

When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,the cash flows from financing activities generally affect:

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise.

Probably the most important section of the statement of cash flows in analyzing the financial performance of a company's ongoing business is the ____________ section.

Cash flow information can assist internal users in planning day-to-day operating activities.

The cash flow on total assets ratio is defined as the total cash flows from operations divided by the average total assets.

When preparing the operating section of the statement of cash flows using the indirect method,a decrease in accounts receivable is subtracted from net income.