Chapter 12: Reporting Cash Flows

The statement of cash flows explains the difference between beginning and ending balances of cash and cash equivalents. A cash equivalent must satisfy which of the following criteria? (Check all that apply.)

Be readily convertible to a known amount of cash. Be close to maturity.

Information about cash flows can influence decision makers in important ways. Which of the following questions could be answered by the statement of cash flows? (Check all that apply.)

Can the company pay its debts? How does a company spend its cash? Does the company have the resources to pursue opportunities?

Identify which of the following items is not a noncash investing and financing activity that must be reported in a note to the statement of cash flows. (Check all that apply.)

Purchase of a plant asset with cash Repayment of a note with cash

Information on the statement of cash flows helps users answer all of the following questions except:

Why did the company invest in long-term assets?

A net cash (inflow/outflow) ___________occurs when the receipts in a category exceed the payments.

inflow

A(n) _____________ activity includes those transactions and events that determine net income, including the purchase of merchandise, the sale of goods and services to customers, and expenditures to operate the business.

operating

A(n) _______ occurs when the receipts in a category exceed the payments.

outflow