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Exam 14: Statement of Cash Flows

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Question 61

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Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity.

A) True
B) False

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Question 62

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The cost of merchandise sold during the year was $45,000.Merchandise inventories were $13,500 and $10,500 at the beginning and end of the year,respectively.Accounts payable were $7,000 and $5,000 at the beginning and end of the year,respectively.Using the direct method of reporting cash flows from operating activities,cash payments for merchandise total

A) $46,000
B) $44,000
C) $50,000
D) $40,000

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

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Question 63

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Samuel Company’s accumulated depreciation—equipment increased by $6,000, while patents decreased by $2,200 between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In addition, the income statement showed a loss of $3,200 from the sale of investments. Assume no changes in noncash current assets and liabilities. Reconcile a net income of $92,000 to net cash flow from operating activities

Dorman Company reported the following data: $\begin{array}{|l|r|}\hline \text { Net income } & \$ 225,000 \\\hline \text { Depreciation expense } & 25,000 \\\hline \text { Gain on disposal of equipment } & 20,500 \\\hline \text { Decrease in accounts receivable } & 14,000 \\\hline \text { Decrease in account payable } & 3,600 \\\hline\end{array}$ Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the year.Net income reported on the income statement for the year was $105,000.Exclusive of the effect of other adjustments,the cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect method is

Cash flows from investing activities,as part of the statement of cash flows,would include any receipts from the issuance of bonds payable.

The net income reported on the income statement for the current year was $58,000.Depreciation recorded on fixed assets for the year was $24,000.In addition,equipment with an original cost of $130,000 and accumulated depreciation of $115,000 on the date of the sale,was sold for $20,000.Balances of the current asset and current liability accounts at the end and beginning of the year are listed below.Prepare the cash flows from operating activities section of a statement of cash flows using the indirect method.

The net income reported on the income statement for the current year was $250,000.Depreciation recorded on fixed assets and amortization of patents for the year were $40,000 and $9,000,respectively.Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows: $\begin{array}{l}\begin{array}{lll}\\\text { Cash}\\\text { Accounts receivable}\\\text { Inventories}\\\text { Prepaid expenses}\\\text { Accounts payable merchandise creditors}\\\end{array}\begin{array}{lll}\underline { \text { End}}\\\$ 50,000 \\112,000 \\105,000 \\4,500 \\75,000\end{array}\begin{array}{lll}\underline { \text { Beginning}}\\\$ 60,000 \\108,000 \\93,000 \\6,500 \\89,000\end{array}\end{array}$ What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share,the statement of cash flows would report net cash flow from financing activities as $165,000.

To determine cash payments for merchandise for the statement of cash flows using the direct method,a decrease in accounts payable is added to the cost of merchandise sold.

Cash flow per share is

Cash dividends paid on capital stock would be reported in the statement of cash flows in

Lamar Corporation purchased land for $150,000.Later in the year,the company sold land with a book value of $190,000 for $200,000.Show how the effects of these transactions are reported on the statement of cash flows using the indirect method.

Each of the events below may have an effect on the statement of cash flows.Designate how the event should be reported within the statement of cash flows using the codes provided below.Codes may be used more than once,or not at all. Codes I + $\quad$ investing activity; cash inflow I - $\quad$ investing activity; cash outflow F + $\quad$ financing activity; cash inflow F - $\quad$ financing activity; cash outflow O + $\quad$ operating activity; cash inflow O - $\quad$ operating activity; cash outflow NC $\quad$ noncash investing and financing activity Events _____ 1.Paid the weekly payroll _____ 2.Paid an account payable _____ 3.Issued bonds payable for cash _____ 4.Declared and paid a cash dividend _____ 5.Paid cash for a new piece of equipment _____ 6.Purchased treasury stock for cash _____ 7. Paid cash for stock in another company _____ 8. Received interest on a long-term bond investment _____ 9. Received cash for sales _____ 10. Sold a long-term stock investment for cash at book value

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

Firefly Inc.sold land for $225,000 cash.The land had been purchased five years earlier for $275,000.The loss on the sale was reported on the income statement.On the statement of cash flows,what amount should Firefly report as an investing activity from the sale of the land?

A building with a book value of $54,000 is sold for $63,000 cash.Using the indirect method,this transaction should be shown on the statement of cash flows as follows:

On the statement of cash flows,the cash flows from operating activities section would include

State the sections of the statement of cash flows prepared by the indirect method operating activities,investing activities,financing activities,or not reported and the amount that would be reported for each of the following transactions: a. Received $120,000 from the sale of land costing $70,000. b. Purchased investments for $75,000. c. Declared $35,000 cash dividends on stock.$5,000 dividends were payable at the beginning of the year,and $6,000 were payable at the end of the year. d. Acquired equipment for $64,000 cash. e. Declared and issued 100 shares of $20 par common stock as a stock dividend,when the market price of the stock was $32 a share. f. Recognized depreciation for the year,$37,000. g. Issued 85,000 shares of $10 par common stock for $25 a share,receiving cash. h. Issued $500,000 of 20-year,10% bonds payable at 99. i. Borrowed $43,000 from Regional Bank,issuing a 5-year,8% note for that amount.

Cash paid for equipment would be reported on the statement of cash flows in