Chapter 16

Which of the following would not be classified as an operating activity? 1) income taxes 2) interest expense 3) selling expenses 4) payment of dividends

4

Which of the following would not be on the statement of cash flows? 1) ​cash flows from financing activities 2) ​cash flows from investing activities 3) ​cash flows from operating activities 4) cash flows from contingent activities

4

Which of the following should be deducted from net income in calculating net cash flow from operating activities using the indirect method?

Decrease in accounts payable

A building with a cost of $153,000 and accumulated depreciation of $42,000 was sold for an $11,000 gain. When using the indirect method, the cash generated from this investing activity was $121,000.

False

A cash flow per share amount should be reported on the statement of cash flows.

False

Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the issuance of bonds payable.

False

Cash inflows and outflows are not netted in the investing or financing sections of the statement of cash flows but are separately disclosed to give the reader full information.

False

If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per share, the statement of cash flows would report net cash flow from financing activities as $165,000.

False

In preparing the cash flows from operating activities section of the statement of cash flows by the indirect method, the amortization of bond discount for the period is deducted from the net income for the period.

False

Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.

False

The declaration and issuance of a stock dividend would be reported on the statement of cash flows

False

Free cash flow is the measure of operating cash flow available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity

True

Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400. There were no other changes in noncash current assets and liabilities. Under the indirect method, the cash flow from operations is $32,400.

True

The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.

True

The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data are often costly to accumulate.

Trye

Free cash flow is

cash flow from operations less cash used to purchase fixed assets to maintain productive capacity

A ten-year bond was issued at par for $250,000 cash. This transaction should be shown on a statement of cash flows under

financing activities

Under GAAP, cash receipts from interest and dividends are classified as

operating activities

The order of presentation of activities on the statement of cash flows is

operating, investing, financing

Cash paid for equipment would be reported on the statement of cash flows in

the cash flows from investing activities section

Cash paid to purchase long-term investments would be reported in the statement of cash flows in

the cash flows from investing activities section

Which of the following should be shown on a statement of cash flows under the financing activities section?

the payment of cash to retire a long-term note