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Exam 12: Reporting Cash Flows

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Question 31

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Use the following information about the calendar-year cash flows of Park Company to prepare a statement of cash flows (direct method)and a schedule of noncash investing and financing activities. $\begin{array}{|l|r|}\hline\text { Cash and cash equivalents, beginning-year balance } & \$ 18,000 \\\hline \text { Cash and cash equivalents, year-end balance } & 78,750 \\\hline \text { Cash payments for merchandise inventory } & 75,750 \\\hline \text { Cash paid for store equipment } & 15,75 \\\hline \text { Cash borrowed on three-month note payable } & 22,500 \\\hline \text { Cash dividends paid } & 12,000 \\\hline \text { Cash paid for salaries } & 39,000 \\\hline \text { Cash payments for other operating expenses } & 48,000 \\\hline \text { Building purchased and financed by long-term note payable } & 78,000 \\\hline \text { Cash received from customers } & 220,500 \\\hline \text { Cash interest received } & 8,250 \\\hline\end{array}$

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Question 32

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Based on the following information provided about a company's operations,calculate its cost of goods purchased and its cash paid for merchandise. $\begin{array} { | l | r } \hline \text { Cost of goods sold } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & \$ 522,000 \\\hline \text { Merchandise inventory, beginning year } \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 70,000 \\\hline \text { Accounts payable, beginning year } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 53,000 \\\hline \text { Merchandise inventory, end-of-year } \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 57,000 \\\hline \text { Accounts payable, end-of-year } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 48,000 \\\hline\end{array}$

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Question 33

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When using the indirect method to calculate and report net cash provided or used by operating activities,which of the following is subtracted from net income?

The statement of cash flows is divided into three sections called the ________,________,and ________ sections.

The following information is available for the Brookstone Company: \begin{array}{c} \text {Brookstone Company}\\ \text {Income Statement}\\ \text {For Year Ended December 31,20 \mathrm{X} 2 }\\\begin{array}{|l|r|r|}\hline \text { Sales } &&\$4288,000\\\hline \text { Cost of goods sold } & \$ 97,080 & \\\hline \text { Depreciation expense } &35,280& \\\hline \text { Other operating expenses } & 57,600 \\\hline \text { Interest expense } & 2,400 & (192,360) \\\hline \text { Other gains (losses): } & & \\ \hline \text { Loss on sale of equipment } & &(10,0800) \\\hline \text { Income before taxes } & & 85,560 \\\hline \text { Income taxes expense } & & 33,180\\\hline \text { Net income } & & \$ 52,380 \\\hline\end{array}\end{array} Additional information: (1)There was no gain or loss on the sales of the long-term investments,nor on the bonds retired. (2)Old machinery with an original cost of $45,060 was sold for $2,520 cash. (3)New machinery was purchased for $81,060 cash. (4)Cash dividends of $40,320 were paid. (5)Additional shares of stock were issued for cash. Prepare a complete statement of cash flows for calendar-year 20X2 using the indirect method.

Use the following information to calculate the net cash provided or used by financing activities for the Streams Corporation: (a)Net income,$10,000 (b)Sold common stock for $40,000 cash (c)Paid cash dividend of $13,000 (d)Paid bond payable,$28,000 (e)Purchased equipment for $12,000 cash

When preparing the operating activities section of the statement of cash flows using the indirect method,a decrease in accounts receivable is subtracted from net income.

When preparing the operating activities section of the statement of cash flows using the indirect method,decreases in current operating liabilities are subtracted from net income.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { | l | r | } \hline \text { Cost of goods sold } \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & \$ 500,000 \\\hline \text { Merchandise inventory, January } 1 \ldots \ldots \ldots \ldots \ldots \ldots & 85,000 \\\hline \text { Merchandise inventory, December } 31 \ldots \ldots \ldots \ldots \ldots & 97,000 \\\hline \text { Accounts payable, January } 1 \ldots \ldots \ldots \ldots \ldots \ldots \ldots \ldots & 68,000 \\\hline \text { Accounts payable, December } 31 \ldots \ldots \ldots \ldots \ldots \ldots & 60,000 \\\hline\end{array}$

Define and discuss the differences between operating,investing,and financing activities.

The cash flow on total assets ratio is computed by dividing cash flows from operations by average total assets.

Financing activities include (a)the purchase and sale of long-term assets, (b)the purchase and sale of short-term investments,and (c)lending and collecting on loans.

Explain the purpose and format of the statement of cash flows.Also describe its relevance to decision makers.

Based on the following income statement and balance sheet for Bankowski Corporation,determine the cash flows from operating activities using the indirect method.

Match each of the following items with the appropriate definitions. -A financial statement that reports the cash inflows and cash outflows for an accounting period,and classifies those cash flows as operating,investing,or financing activities.

A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.

Match each of the following items with the appropriate definitions. -Transactions with a company's owners and creditors that include obtaining cash from issuing debt and repaying the amounts borrowed,and obtaining cash from or distributing cash to owners.

The statement of cash flows explains the difference between the beginning and ending balances of cash and cash equivalents.

Noncash investing and financing activities may be disclosed in:

For each of the following separate cases,use the information provided to calculate the missing cash inflow or cash outflow using the direct method.