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Exam 21: The Statement of Cash Flows Revisited

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Question 41

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Listed below are reporting classifications for a statement of cash flows using the indirect method for reporting operating cash flows. Match the reporting classifications with the transactions described below. -Operating activity, positive adjustment to net income

A) Issuance of bonds at a discount for cash.
B) Depreciation expense.
C) Acquisition of a building for cash.
D) Payment of semi-annual interest on bonds payable.
E) Decrease in accounts payable.

F) B) and C)
G) A) and C)

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Question 42

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When using the indirect method to determine cash flows from operating activities, adjustments to net income should not include:

A) An addition for amortization expense.
B) An addition for bond discount amortization.
C) An addition for a gain.
D) An addition for a loss.

E) A) and D)
F) B) and C)

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Question 43

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Listed below are the reporting classifications for a statement of cash flows using the direct method for reporting operating cash flows. Indicate the reporting classification that would apply to each of the five transactions described below by placing the number of the reporting classification in the space provided by each transaction. $\begin{array} { | l | l | l | } \hline \text { CLASSIFICATION } & \text { TRANSACTIONS } & \text { NUMIBER } \\\hline\text { 1. Not reported for the } & & \\\text { statement of cash flows } & \text { Payment of cash dividends. } &- \\\hline \text { 2.Noncash financing and } & \\\text { investing activity } & \text { Purchase of treasury stock. } &- \\\hline & \text { Investment of excess cash in an interest-bearing } &- \\\text { 3. Financing cash outflow } & \text { security classified as a cash equivalent. } \\\hline & \text { Appropriation of retained earnings for expansion } & \\\text { 4. Financing cash inflow } &\text { of the } \mathrm{R} \& \mathrm{D} \text { program. }&-\\\hline \text { 5.Not reported for the } & \text { Acquisition of equipment under a finance lease } & -\\\text { statement of cash flows } & \text { agreement. } & -\\\hline\end{array}$

Which of the following is not true regarding the statement of cash flows?

In its 2018 Annual Report to Shareholders, Kinney Inc. reported the following Consolidated Statement of Cash Flows: For the years ended December 31, -Kinney reported cost of goods sold of $168,114,150 in its fiscal 2018 income statement Assuming that Kinney uses accounts payable strictly for inventory purchases and that all such purchases are on credit, how much cash did Kinney pay during the year for inventories: (a) To inventory suppliers? (b) To employees?

Why is the statement of cash flows required as part of the set of external financial statements?

Which of the following is reported as a deduction from net income when using the indirect method to determine net cash flows from operating activities?

Goodfellow Corporation reported insurance expense of $477 for the current year. The beginning and ending balances in the prepaid insurance account were $50 and $30, respectively. What was the amount of cash paid for insurance?

When using the indirect method to determine cash flows from operating activities, an increase in held-to-maturity securities that does not arise from the interest component of the debt should be reported as:

Which of the following never requires an outflow of cash?

What activities are included in the statement of cash flows under the section titled "Cash flows from financing activities"?

Sales revenue for Hy Marx Tutoring was $220,000. The following data are from the accounting records of Marx: The cash received from customers was:

Listed below are reporting classifications for a statement of cash flows using the indirect method for reporting operating cash flows. Match the reporting classifications with the transactions described below. -Operating activity, negative adjustment to net income

Partial balance sheets and additional information are listed below for Rickey Company. Additional information for 2018: Net income was $160,000. Depreciation expense was $20,000. Required: Prepare the operating activities section of the statement of cash flows for 2018 using the indirect method.

Freeman Company's accounting records include the following information: $\begin{array}{lr}\text { Payments to suppliers } & 50,000 \\\text { Collections on accounts receivable } & 90,000 \\\text { Cash sales } & 20,000\\\text { Income taxes paid }&5,000\\\text { Equipment purchased }&15,000\end{array}$ What is the amount of net cash provided by operating activities indicated by these transactions?

Do "cash flows from operating activities" report all the elements of the income statement on a cash basis? Explain.

Which one of the following financial statements does not report amounts primarily on an accrual basis?

What are the general guidelines for an investment to be considered a cash equivalent?

Determine the amount of cash paid to suppliers for each of the four independent situations below. $\begin{array} { | l | l | l | l | l | } \hline \text { Situation } & \begin{array} { c } \text { Cost d } \\\text { goods } \\\text { sold }\end{array} & \begin{array} { c } \text { Inventory } \\\text { incr. } \\\text { (decr.) }\end{array} & \begin{array} { c } \text { Accounts } \\\text { payable } \\\text { incr. } \\\text { (decr.) }\end{array} & \begin{array} { l } \text { Cash paid } \\\text { to suppliers }\end{array} \\\hline 1 & \$ 300,000 & \$ 6,000 & \$ 0 & \$ \\\hline 3 & 300,000 & 0 & 7,000 & \$ \\\hline & 400,000 & 6,000 & 7,000 & \$ \\\hline 4 & 400,000 & ( 6,000 ) & ( 7,000 ) & \$ \\\hline\end{array}$

Following are the income statement and some additional information for Carolina Consulting Company. All sales were on credit and accounts receivable decreased by $900 in 2018 compared to 2017. Merchandise purchases were on credit with a decrease in accounts payable of $700 during the year. Ending inventory was $500 larger than beginning inventory. Income taxes payable increased $300 during the year. All operating expenses were paid for in cash. Required: Prepare the cash flows from operating activities section of the statement of cash flows using the direct method.