Exam 3: Income Flows Versus Cash Flows: Understanding the Statement of Cash Flows

Under the indirect method of preparing the statement of cash flows,add backs to net income include all of the following except:

In 2010,Lamar Industries reported the following: Sales $700,000;Accounts receivable beginning of 2010 $450,000;Accounts receivable end of 2010 $369,200;Depreciation expense $55,400;Rent Expense $30,000.What is the net cash provided (used)by operating activities

An example of an item that is deducted from net income when preparing the operating activities section of the statement of cash using the indirect method is:

When net income is low relative to operating cash flows,we describe the firm as having recorded:

Which of the following is a cash flow from operating activities?

Which of the following statements is false?

A company in the growth phase of its product life cycle will normally have which of the following patterns of cash flows?

One rationale for the statement of cash flows is to:

____________________ activities relate to the acquisition and sale of noncurrent assets,particularly property,plant and equipment.

The calculation of cash flow from operations under the indirect method involves two types of adjustments.Discuss each type of adjustment and provide an example of each type of adjustment.

Under the ______________________________ of preparing the statement of cash flow's operating activities section firms list the cash flows from selling goods and services and then subtract the cash outflows to providers of goods and services.

In a statement of cash flows,interest received from sources other than a company's investments would be classified as cash inflows from:

Norton Company reported total sales revenue of $55,000,total expenses of $45,000,and net income of $10,000 on its income statement for the year ended December 31,2010.During 2010,accounts receivable increased by $4,000,merchandise inventory increased by $6,000,accounts payable decreased by $2,000,and depreciation of $18,000 was recorded.Therefore,based only on this information,the net cash flow from operating activities using the indirect method for 2010 was:

Lagos Corp.recorded sales of $345,000 in 2010.In addition,its accounts receivable and accounts payable balances at the beginning and end of 2010 were as follows: How much cash did Lagos collect from customers in 2010?

Discuss the correlations that have been found between net income,net income plus or minus Type 1 adjustments (i.e. ,adjustments to net income for revenues,expenses,gains,and losses that are recognized in income and are associated with changes in noncurrent assets,noncurrent liabilities,and shareholders' equity,but do not affect cash by the same amounts for the period),and cash flow from operations.

Which of the following is an adjustment that would need to be made to net income when calculating cash flows from operations under the indirect method?

For the following types of companies,discuss whether you think their cash flows from operations,investing,and financing will be positive (the activity provides cash)or negative (the activity uses cash).Provide support for your answer.

Interest expense and interest revenue would be classified as ____________________ activities in the statement of cash flows.

One factor that may cause cash flow from operations to differ from net income is the length of the ______________________________.

Kraco Corporation reported 2010 net income of $450,000,including the effects of depreciation expense of $60,000,and amortization expense on a patent of $10,000.Also,cash of $50,000 was borrowed on a 5-year note payable.Based on this data,total cash inflow from operating activities using the indirect method for 2010 was: