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Exam 21: The Statement of Cash Flows

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Question 31

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Which of the following is reported as an investing activity in the statement of cash flows?

A) Sale of a subsidiary.
B) Issuance of a long-term promissory note.
C) Sale of treasury stock.
D) Purchase of highly liquid, short-term investments with excess cash.

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Question 32

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Which of the following is not required by generally accepted accounting principles?

A) Cash flow per share.
B) Earnings per share.
C) Statement of cash flows.
D) Disclosure notes.

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Question 33

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

Kinney reported cost of goods sold of $168,114,150 in its fiscal 2008 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?

The statement of cash flows has been a required financial statement since 1988, but is the reporting of cash flows a relatively new concept? Explain.

Partial balance sheets for Yarborough Company and additional information are found below. Additional information for 2009: July 1: Issued 10,000 shares of common stock for cash. July 1: Purchased new equipment for cash. Dec. 31 Paid cash dividends of $30,000. Required: Prepare the investing activities section of the statement of cash flows for 2009.

The accounting records of Unlucky Company provided the data below Required: Prepare a reconciliation of net income to net cash flows from operating activities. $\begin{array} { l r } \text { Net loss } & \$ 40,000 \\\text { Depreciation expense } & 12,000 \\\text { Increase in salaries payable } & 11,000 \\\text { Increase in accounts receivable } & 4,000 \\\text { Decrease in inventory } & 4,800 \\\text { Amortization of patent } & 700 \\\text { Decrease in premium on bonds } & 500\end{array}$

An analyst compiled the following information for U, Inc. for the year ended December 31, 2009:  Net income was $1,700,000.  Depreciation expense was $400,000.  Interest paid was $200,000.  Income taxes paid were $100,000.  Common stock was sold for $200,000.  Preferred stock (eight percent annual dividend) was sold at par value of $250,000.  Common stock dividends of $50,000 were paid.  Preferred stock dividends of $20,000 were paid.  Equipment with a book value of $100,000 was sold for $200,000. Using the indirect method, what was U Inc.'s net cash flow from operating activities for the year ended December 31, 2009?

Interest payments to creditors are reported in a statement of cash flows as:

Which type of activity (operating, investing, financing) was most responsible for the net change in cash and cash equivalents experienced by Henchman & Co. during 2008?

What was most responsible for the negative cash flow from financing activities during 2007? What amount was paid?

What was the net change in cash and cash equivalents experienced by Henchman & Co. during 2008? Was it positive or negative?

On December 31, 2009, Wellstone Company reported net income of $70,000 and sales of $210,000. The company also reported beginning and ending accounts receivable at $20,000 and $25,000, respectively. Wellstone will report cash collected from customers in its 2009 statement of cash flows (direct method) in the amount of:

Which of the following would not be a component of cash flows from investing activities?

Freeman Company's accounting records include the following information: What is the amount of net cash provided by operating activities indicated by these transactions?

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?

Cash paid for taxes and interest must be disclosed on the face of the statement or in the disclosure notes under both the direct and indirect methods of reporting cash flows from operating activities.

Charlene Company sold a printer with a cost of $68,000 and accumulated depreciation of $23,000 for $20,000 cash. This transaction would be reported as:

Rampart Inc. recorded the following transaction: In the statement of cash flows, this would be reported as a:

Which of the following financial statements is prepared as of a particular point in time rather than for a period of time?