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Exam 14: Statement of Cash Flows

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Question 1

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Dorman Company reported the following data: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.

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Cash flows from operating activities: Net income $225,000 Adjustments to reconcile net income to net cash flow from operating activities: Depreciation 25,000 Gain on disposal of equipment 20,500)Changes in current operating assets and liabilities: Decrease in accounts receivable 14,000 Decrease in accounts payable 3,600)Net cash flow from operating activities $239,900

Question 2

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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.

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Adjustments to reconcile net income to net cash flow from operating activities: 11eb113a_f04e_4a03_a29b_f94c8eaf8bb5_TB2084_00 Cash flows from investing activities: Cash received for sale of land $ 200,000 Cash paid for purchase of land (150,000)

Question 3

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A company had net income of $252,000. Depreciation expense is $26,000. During the year, accounts receivable and inventory increased by $15,000 and $40,000, respectively. Prepaid expenses and accounts payable decreased by $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much was the net cash flow from operating activities on the statement of cash flows using the indirect method?

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

For each of the following activities that may take place during the accounting period, indicate the effect a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -payment of dividends

Free cash flow is

The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data are often costly to accumulate.

Cash paid to acquire treasury stock should be shown on the statement of cash flows under investing activities.

Free cash flow is cash flow from operations less cash used to purchase fixed assets to maintain productive capacity.

Identify the section of the statement of cash flows a-d) where each of the following items would be reported. -Increase in accounts receivable

The statement of cash flows is not one of the basic financial statements.

If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

Purchasing equipment by issuing a six-month note should be shown on the statement of cash flows under the investing activities section.

Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the sale of land.

If a business issued bonds payable in exchange for land, the transaction would be reported in a separate schedule on the statement of cash flows.

For each of the following activities that may take place during the accounting period, indicate the effect a-g) on the statement of cash flows prepared using the indirect method. Choices may be selected as the answer for more than one question. -purchase of equipment

Identify which section the statement of cash flows using the indirect method) would present information regarding the following activities. Use O for operating, I for investing, or F for financing). a. Issued common stock b. Redeemed bonds c. Issued preferred stock d. Purchased patents e. Net income f. Paid cash dividends g. Purchased treasury stock h. Sold long-term investment i. Sold equipment j. Purchased buildings k. Issued bonds

If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the cash flows from financing activities section of the statement of cash flows.

Which of the following would not be found in a schedule of noncash investing and financing activities, reported at the end of a statement of cash flows?

Kennedy, Inc. reported the following data: Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.