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Exam 21: The Statement of Cash Flows Revisited

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Question 61

Multiple Choice

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Creditors and investors would generally find the statement of cash flows least useful for assessing the:

A) Ability to generate future cash flows.
B) Ability to pay dividends.
C) Financial position at a point in time.
D) Quality of earnings.

E) None of the above
F) All of the above

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Question 62

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If the direct method is used to report cash flows from operating activities in the body of the statement of cash flows, a reconciliation of net income to net cash flows from operating activities also is required.

A) True
B) False

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Question 63

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When preparing a statement of cash flows using the direct method, accrual of payroll expense is:

Cost of goods sold as reported in the income statement will be less than cash paid to suppliers if:

Cash paid to suppliers under the direct method is computed as:

In a statement of cash flows using the indirect method, an increase in the available-for-sale debt securities account not due to an increase in fair value should be reported as:

Which of the following would be an example of an investing activity on a statement of cash flows?

Listed below are the reporting classifications for a statement of cash flows using the direct method for reporting operating cash flows. Match the reporting classifications with the transactions described below. -Investing cash outflow

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

In determining cash flows from operating activities (indirect method) , adjustments to net income should not include:

Using the direct method, cash received from customers is calculated as sales:

Listed below are the reporting classifications for a statement of cash flows using the direct method for reporting operating cash flows. Match the reporting classifications with the transactions described below. -Operating cash inflow

Like U.S. GAAP, International Financial Reporting Standards (IFRS) also require a statement of cash flows. Consistent with U.S. GAAP, cash flows are classified as operating, investing, or financing activities. However, with regard to interest and dividend inflows and outflows, the international standard for cash flow statements:

In its 2018 Annual Report to Shareholders, Sisters Corporation included the following information on cash flows from operations: -Explain why Sisters Corporation subtracts equity income from its net income in its measurement of cash flows.

Prepare the summary entries necessary to determine the amount of cash paid to suppliers for each of the four independent situations below. $\begin{array} { | l | l | l | l | l | } \hline \text { Situation }&{ \begin{array} { l } \text { Cost of } \\\text { goods } \\\text { sold }\end{array} } & \begin{array} { c } \text { Inventory } \\\text { incr. } \\\text { (decr.) }\end{array} & \begin{array} { c } \text { Account } \\\text { payable } \\\text { incr. } \\\text { (decr.) }\end{array} & \begin{array} { c } \text { Cash paid } \\\text { to suppliers }\end{array} \\\hline 1 & 400,000 & 6,000 & 0 \\\hline 2 & 400,000 & 0 & 7,000 \\\hline 3 & 100,000 & 6,000 & 7,000 \\\hline 4 & 100,000 & (6,000) & (7,000) \\\hline\end{array}$

Partial balance sheets and additional information are listed below for Funk Company. Funk Company Partial Balance Sheets as of December 31 $\begin{array}{|l|r|r|}\hline\text { Assets } & 2018 & 2017 \\\hline \text { Cash } & \$ 40,000 & \$ 20,000 \\\hline \text { Accounts receivable } & 94,000 & 90,000 \\\hline \text { Inventory } & 25,000 & 40,000 \\\hline \mathbf { Liabilities } & & \\\hline \text { Accounts payable } & \$ 58,000 & \$ 72,000\\\hline\end{array}$ Additional information for 2018: Net income was $170,000. Depreciation expense was $30,000. Sales totaled $800,000. Cost of goods sold totaled $325,000. Required: Prepare the summary entry for the amount of cash received from customers during 2018.

Hugh Morris Comics sold for $110,000 cash a 3D printer that cost $334,000 with accumulated depreciation of $221,000. This transaction would be reported as:

How is the amortization of patents reported in a statement of cash flows that is prepared using the indirect method?

Which of the following is always reported as an outflow of cash?

Why are "cash equivalents" included as part of cash in the statement of cash flows?