ACCT 102 Reporting Cash Flows

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?

Investors assess cash flows before

buying and selling stock

There are five important steps to preparing a statement of cash flows. Rank the steps in order from first to last.

1) Compute the net increase or decrease in cash 2) Compute the net cash from or for operating activities 3) Compute net cash from or for investing activities 4) Compute net cash from or for financing activities 5) Compute the net cash from all sources: then prove it by adding it to the beginning cash to get ending cash

Which of the following items would be correct adjustments to net income to arrive at cash flows from operating activities, using the indirect method? (Correct all that apply.)

Add increase in accounts payable Subtract increase in inventory

Beginning accounts receivable were $20,000 and ending accounts receivable were $25,000. If sales were $150,000, cash receipts equal $

Blank 1: 145000

Net cash used in operating activities was $10,000. Net cash provided by investing activities was $2,000. Net cash provided by financing activities was $5,000. The cash balance at the end of the year was $12,000. The cash balance at the beginning of the year was $

Blank 1: 15000

At the beginning of the period, a company reported $100,000 of common stock, $10 par; and $50,000 paid-in capital in excess of par. At the end of the period, this company reported $110,000 of common stock, $10 par; and $90,000 paid-in capital in excess of par. Cash received from the sale of common stock during the year is $

Blank 1: 50000

A company repaid a long-term debt during the year. They will report this as a(n) (increase/decrease) _________ in the __________ activities section on the statement of cash flows.

Blank 1: decrease Blank 2: financing

cash flows from operating activities under the ___________ method adjusts accrual-based income statement items to a cash basis

Blank 1: direct

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.

Blank 1: outflow

If all sales are for cash, the amount received from customers will equal the ______________ reported on the income statement

Blank 1: sales

Cash flows from financing activities identifies cash receipts and cash payments related to which of the following types of accounts? (Check all that apply.)

Bonds Payable Common Stock

Which of the following items would not be adjusted to net income when computing cash flows from operating activities, using the indirect method?

Cash received from sale of building

Which of the following is not one of the five important steps to preparing a statement of cash flows?

Compute the net income

It is important to analyze the sources and uses of cash because (select all that apply):

Creditors use this information to assist them in deciding whether to loan funds to them. Investors use this information to decide if they will purchase their stock.

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

Gain on sale of building Loss on sale of investment Depreciation expense

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.)

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

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.

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

Interest Payable

Which of the following statements about the statement of cash flows are correct? (Check all that apply.)

It details the sources and uses of cash. The purpose is to report cash receipts and cash payments during a period.

Identify which of the following items is a noncash investing and financing activity that must be reported in a note to the statement of cash flows. (Check all that apply.)

Lease of an asset in a long-term lease transaction Retirement of debt by issuing stock

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

Net cash flow

Net cash provided by operating activities was $12,000. Net cash provided by investing activities was $2,000. Net cash used in financing activities was $7,000. The cash balance at the beginning of the year was $4,000. The cash balance at the end of the year is:

Reason: $12,000+2,000-7,000=$7,000. $7,000+4,000=$11,000.

Which of the following items are classified as noncash investing and financing activities? (Check all that apply.)

Retirement of debt by issuing stock Conversion of preferred stock to common stock Lease of assets in a long-term lease transaction

identify which of the following items is a noncash investing and financing activity that must be reported in a note to the statement of cash flows. (Check all that apply.)

Retirement of debt by issuing stock Lease of an asset in a long-term lease transaction

An increase in accounts receivable would be (added/subtracted) ____________ to (from) net income, when computing cash flows from operations using the indirect method.

Subtracted

Which of the following questions could not be answered from the statement of cash flows?

What are the earnings-per-share of common stock?

The statement of cash flows reports noncash investing and financing transactions in

a note or separate schedule

A loss from the sale of an investment would be (added/subtracted) _______ to (from) net income when computing cash flows from operations, using the indirect method

added

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

added

Depreciation expense is (added/subtracted) _________ to (from) net income, when computing cash flows from operations, using the indirect method.

added

Red Co.'s beginning Common Stock balance was $110,000 and their ending Common Stock balance was $125,000. This will be reported as _____ in the statement of cash flows.

an increase of $15,000 in the financing activities section

Starfish Shells had a beginning balance in Notes Payable of $35,000 and an ending balance of $40,000. This will be reported as _____ on the statement of cash flows.

an increase of $5,000 in the cash flows from financing activities section

The statement of cash flows explains the difference between beginning and ending balances of cash and cash equivalents. A cash equivalent must exhibit all of the following criteria, except:

be held at a local institution.

The format of a statement of cash flows includes reporting cash flows from three activities including:

financing operating investing

The three-step process to determine cash provided or used by financing activities includes all of the following steps except:

identify an increase or decrease in cash.

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

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

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

increase in unearned fees Increase in accounts payable

Carol Co. prepares a statement of cash flows starting with net income and then adjusting for items that do not affect cash. Carol Co. is using the (direct/indirect) ___________ method of reporting the statement of cash flows

indirecet

The _______ method of reporting the statement of cash flows reports net income and then adjusts it for items that do not affect cash.

indirect

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

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

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

net income

True or false: The direct method of reporting operating cash flows begins with revenue and adjusts for changes in related balance sheet accounts.

true

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

outflow

a(n) _______-- 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

The statement of cash flows does not report the following transactions

transactions between cash and cash equivalents

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

true