Chapter 12

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

Information to prepare the statement of cash flows comes from three sources:

1. Comparative balance sheets 2. The current income statement 3. Additional information

A cash equivalent has two criteria

1. be readily convertible to a known amount of cash 2. be sufficiently close to its maturity so its market value is unaffected by interest rate changes

MRC Company reports the following information for 2018: total assets of $65,000 and total cash provided from operations of $20,000; For 2017: total assets of $75,000 and cash provided from operations of $5,000. Cash flow on total assets for 2018 is (round to the nearest tenth):

28.6%

Investing activities

Activities that increase or decrease the long-term assets available to the business; a section of the statement of cash flows.

Which of the following items would be correct adjustments to net income to arrive at cash flows from operating activities, using the indirect method?

Add increase in accounts payable Subtract increase in inventory

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts?

Bonds Payable Common Stock

Which of the following transactions would not be classified as an operating activity on the statement of cash flows?

Cash dividends paid to shareholders

Which of the following items would be reported under financing activities on the statement of cash flows?

Cash dividends paid to shareholders Cash paid to repay cash loans Cash received from issuing notes payable

Operating activities

Cash flow activities that include the cash effects of transactions that create revenues and expenses and thus enter into the determination of net income.

Which of the following transactions would not be reported under investing activities in the statement of cash flows?

Cash paid for interest on long-term notes

Which of the following transactions would be reported under investing activities in the statement of cash flows? (Check all that apply.)

Cash paid to purchase investments in securities Cash paid to purchase plant assets

Which of the following transactions would be reported under cash flows from operating activities? Select all that apply.

Cash received from sales Cash paid for salaries and wages Cash paid to lenders for interest

Which of the following would not be reported under financing activities on the statement of cash flows?

Cash received from sales of plant assets

Which of the following items would be subtracted from net income when reporting cash flows from operating activities, using the indirect method? (Check all that apply.)

Decrease in wages payable Decrease in taxes payable

Statement of cash flows

Financial statement that reports cash receipts and disbursements related to a firm's three major activities: operations, investments, and financing.

_________ activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

Financing

activities include those transactions and events that affect long-term liabilities and equity, such as obtaining cash from issuing debt and distributing cash to owners.

Financing

Accountants can use a three-step process to determine cash provided (or used) by investing activities. Which of the following steps is not part of this process?

Identify adjustments to net income.

Which of the following items would be added to net income when reporting cash flows from operating activities, using the indirect method?

Increase in unearned fees Increase in accounts payable

To compute cash flows from financing activities, accountants normally analyze changes in all of the following accounts except:

Interest Payable

_______ activities include those transactions and events that affect long-term assets, such as lending and collecting money for notes receivable and cash receipts from sale of long-term plant assets.

Investing

Both the direct and indirect methods of operating activities report which of the following items?

Net cash inflows (outflows)

Which of the following would be included in the operating section when preparing the statement of cash flows using the indirect method?

Net income

Cash flows are separated into 3 categories

Operating, investing, and financing activities

Which of the following items would not be a correct adjustment to net income to arrive at cash flows from operating activities, using the indirect method?

Subtract increase in taxes payable

True or false: A spreadsheet can help a company prepare a statement of cash flows.

True

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?

An increase in wages payable would be (added/subtracted) to (from) net income when preparing cash flows from operating activities, using the indirect method.

added

The formula to compute cash flow on total assets takes cash flow from operations divided by:

average total assets

The statement of cash flows does not report the following transactions

between cash and cash equivalents

Cash flows include

cash and cash equivalents

The __________ helps measure a company's ability to meet its obligations, pay dividends, expand operations, and obtain financing. It is computed by taking cash flow from operations divided by average total assets.

cash flow on total assets

A cash ___must satisfy two criteria: (1) be readily convertible to a known amount of cash and (2) be sufficiently close to maturity so its market value is unaffected by interest rate changes.

equivalent

Carol Co. prepares a statement of cash flows starting with net income and then adjusting for items necessary to obtain net cash provided or used by operating activities. Carol Co. must be using the (direct/indirect) method of reporting the statement of cash flows.

indirect

The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items necessary to obtain net cash provided or used by operating activities.

indirect

Collecting money for notes receivable would be reported on the statement of cash flows as a(n) ________ activity

investing

In a statement of cash flows, cash received from the sale of a building would be classified under "cash flows from ____ activities."

investing

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

net cash inflow

The indirect method of computing and reporting net cash flows from operating activities involves adjusting ___ ____ to obtain the net cash provided or used by operating activities.

net income

Net cash outflow

occurs when the payments in a category exceed the receipts

A net cash inflow

occurs when the receipts in a category exceed the payments

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

The purchase of merchandise, the sale of goods and services to customers, and expenditures to operate the business are all reported on the statement of cash flows under

operating

A net cash ______ occurs when the payments in a category exceed the receipts.

outflow

Lakeview, Inc.'s statement of cash flows reports financing activities with payments that exceed receipts. This means that Lakeview had a net cash (inflow/outflow) from financing activities.

outflow

e three-step analysis to determine cash provided or used by investing activities includes:

reporting the cash flow effects explaining the changes using T-accounts and reconstructed entries identifying changes in investing-related accounts

Which of the following statements about the statement of cash flows are correct?

s a detailed disclosure of cash flows. The purpose is to report cash receipts and cash payments during a period.

____ also called a worksheet, can help organize the information needed to prepare a statement of cash flows.

spreadsheet

A gain from the sale of equipment would be (added/subtracted) to (from) net income, when computing cash flows from operations using the indirect method.

subtracted

Financing Actitivies

transactions and events that affect long-term liabilities and equity


Ensembles d'études connexes

California Real Estate Principles Chapter 11: Real Estate Taxation

View Set

Solving Linear Equations: Variables on Both Sides

View Set

Life policy riders, provisions, options and exclusions

View Set

Meiosis and Male Reproductive System

View Set