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Exam 12: Reporting Cash Flows

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Question 111

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Use the information provided to calculate the cash paid for insurance for the period $\begin{array}{|l|c|}\hline \text { Prepaid insurance, beginning-year. }& \$7,000 \\\hline \text { Interest expense. } &16,800 \\\hline \text {Prepaid insurance, year-end } & 3,400 \\\hline\text { Cash paid for interest }\\\hline\end{array}$

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Question 112

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For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Collected accounts receivable from customers.

A) F
B) O
C) N
D) I

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Question 113

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

Preparation of the statement of cash flows does not involve:

A machine with a cost of $130,000,current year depreciation expense of $17,000 and accumulated depreciation of $85,000 is sold for $40,000 cash.The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is:

The direct method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities.

A company had net cash flows from operations of $341,000,net income of $286,000 and average total assets of $1,850,000.The cash flow on total assets ratio equals:

Typical cash flows from investing activities include each of the following except:

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

Northington,Inc.is preparing the company's statement of cash flows for the fiscal year just ended.Using the following information,determine the amount of cash flows from financing activities: $\begin{array}{|l|r|}\hline \text { Net income } & \$ 182,000 \\\hline \text { Gain on the sale of equipment } & 12,300 \\\hline \text { Proceeds from the sale of equipment } & 92,300 \\\hline \text { Depreciation expense }- \text { equipment } & 50,000 \\\hline \text { Payment of bonds at maturity } & 100,000 \\\hline \text { Purchase of land } & 200,000 \\\hline \text { Issuance of common stock } & 300,000 \\\hline \text { Increase in merchandise inventory } & 35,400 \\\hline \text { Decrease in accounts receivable } & 28,800 \\\hline \text { Increase in accounts payable } & 23,700 \\\hline \text { Payment of cash dividends } & 32,000\\\hline\end{array}$

A company reported net income of $132,000,operating cash flows of $87,000,total cash flows of $112,000,and average total assets of $1,053,000.Calculate its cash flow on total assets ratio.

Match each of the following items with the appropriate definitions. -Activities that involve the production or purchase of merchandise and the sale of goods or services to customers,including expenditures related to administering the business.

Use the following income statement and information about selected current assets and current liabilities for Kimberline Industries to calculate the net cash provided or used by operating activities using the indirect method. \begin{array}{c}\text {KIMBERLINE INDUSTRIES}\\\text {Income Statement}\\\text {For Year Ended December 31,20 \mathrm{X} 1 }\\\begin{array}{|l|l|l|}\hline \text { Sales } & & \$ 280,000 \\\hline \text { Cost of goods sold } & & 124,000 \\\hline \text { Gross profit from sales } & & \$ 156,000 \\\hline \text { Operating expenses: } & \\\hline \text { Salaries and wages expense } & \$ 35,000 \\\hline \text { Depreciation expense } & 11,00 \\\hline \text { Rent expense } & 27,200 \\\hline \text { Interest expense } & 3,900&77,100 \\\hline \text { Income from operations } & & \$ 78,900 \\\hline \text { Loss on sale of land } & & 4,700 \\\hline \text { Net income } & & \$ 74,200\\\hline\end{array}\end{array} Increases and decreases of current asset and current liability accounts,all of which relate to operating activities,are as follows: $\begin{array} { | l | r | } \hline & \text { Change } \\\hline \text { Accounts receivable increase } & \$ 3,600 \\\hline \text { Merchandise inventory decrease } & 1,700 \\\hline \text { Accounts payable increase } & 1,100 \\\hline \text { Salaries and wages payable decrease } & 2,600 \\\hline\end{array}$

Use the following income statement and information about changes in noncash current assets and liabilities to (1)prepare only the cash flows from operating activities section of the statement of cash flows using the indirect method and (2)compute the company's cash flow on total assets ratio for the year assuming that average total assets are $525,250. Changes in current asset and current liability accounts for the year that relate to operations follow. $\begin{array} { | l | r | } \hline \text { Increase in accounts receivable } & \$ 32,000 \\\hline \text { Increase in accounts payable (all accounts } & \\\hline \text { payable transactions are for inventory) } &13,500\\\hline \text { Decrease in prepaid expenses } & 9,200 \\\hline \text { Decrease in merchandise inventory } &14,000\\\hline \text { Decrease in long-term notes payable } & 20,000 \\\hline\end{array}$

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { | l | r | } \hline \text { Cost of goods sold } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & \$ 735,000 \\\hline \text { Merchandise inventory, January } 1 \ldots \ldots \ldots \ldots \ldots \ldots & 84,700 \\\hline \text { Merchandise inventory, December } 31 \ldots \ldots \ldots \ldots \ldots & 82,400 \\\hline \text { Accounts payable, January } 1 \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 54,500 \\\hline \text { Accounts payable, December } 31 \ldots \ldots \ldots \ldots \ldots \ldots & 60,200 \\\hline\end{array}$

When preparing the operating activities section of the statement of cash flows using the indirect method,non-operating gains are added to net income.

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

A company reported net income of $318,000,operating cash flows of $218,000,total cash flows of $184,000,and average total assets of $898,000.Calculate its cash flow on total assets ratio.

For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Received cash dividends from investments in trading securities.

A company's income statement showed the following: net income,$124,000 and depreciation expense,$30,000.An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $9,400; merchandise inventory increased $18,000; and accounts payable increased $3,400.Calculate the net cash provided or used by operating activities.