Corporate Accounting 2 - Chapter 23 Statement of Cash Flows

The first step in the preparation of the statement of cash flow require the use of information included in which comparative financial statement?

Balance Sheet

In a statement of cash flows, the cash flows from investing activities section should report:

the assignment of accounts receivable.

Which of the following is not one of the benefits investors and creditors can expect as a result of the presentation of the statement of cash flows?

Assess the enterprise's ability to expand its operating facilities through the issuance of long-term debt.

The basis recommended by the FASB for the statement of cash flows is "cash and cash equivalents." As described by GAAP, cash equivalents are:

Short-term, highly liquid investments that are both readily convertible to known amounts of cash, and so near their maturity that they present insignificant risk of changes in interest rates.

How should significant non-cash transaction (purchase of equipment in exchange for common stock) be reported in the statement of cash flows according to GAAP?

These non-cash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials.

Of the following questions, which one would not be answered by the statement of cash flows?

Were all the cash expenditures of benefit to the company during the period?

The cash received from the sale of property, plant, and equipment at no gain or loss is classified as what type of activity on the statement of cash flows? Investing? Financing? Operating?

Yes; No; No

To arrive at net cash provided by operating activities, it is necessary to report revenues and expenses on a cash basis. This is done by:

eliminating the effects f income statement transactions that did not result in a corresponding increase or decrease in cash.

In general, financing activities as used in the statement of cash flows refer to:

liability and owners' equity items and include (a) obtaining cash from creditors and repaying the amounts borrowed and (b) obtaining capital from owners and providing then with a return on, and a return of, their investment.

Schroeder Company uses the indirect method in computing net cash provided by operating activities. How would reported net income be adjusted for the following items? Loss on Sale of Machinery? Increase in Inventories?

Added to; Deducted from

Which of the following activities is classified as an investing activity on the statement of cash flows?

Cash received from the sale of property, plant, and equipment

When preparing a statement of cash flows, an increase in accounts receivable during the period would cause which on of the following adjustments in determining cash flows from operating activities? Direct Method? Indirect Method?

Decrease; Decrease

Crabbe Company reported $80,000 of selling and administrative expenses on its income statement for the past year. The Company had depreciation expense and an increase in prepaid expenses associated with the selling and administrative expense for the year. Assuming use of the direct method, how would these items be handled in converting the accrual based selling and administrative expense to the cash basis? Depreciation? Increase in Prepaid Expenses?

Deducted from; Added to

The amortization of bond premium on long term debt should be presented in a statement of cash flows (using the indirect method for operating activities as a(n):

Deduction from net income.

The method used to compute net cash provided by operating activities that adjusts net income fro items that affected reported net income but did not affect cash is known as the;

Indirect Method