Ch. 21 Statement of Cash Flows

The primary objective of the statement of cash flows is to provide information about a company’s

a. non cash financing and investing activities

b. profitability

c. cash inflows and cash outflows

d. financial position

c. cash inflows and cash outflows

Which of the following is not required by generally accepted accounting principles?

a. Statement of cash flows

b. Disclosure notes

c. Earnings per share

d. Cash flow per share

d. Cash flow per share

A company reported net cash inflows (outflows) as follows: operating $75,000 investing $200,000 and financing $350,000. The beginning cash balance was $250,000 . What was the ending cash balance?

a. $125,000

b. $475,000

c. $875,000

d. $25,000

b. $475,000

Net Cash Flow

225,000 = 75,000-200,000+350,000

Beg. 250,000

End. 475,000

Which of the following represents a financing cash outflow?

a. Payment of a cash dividend

b. Payment of interest on long-term debt

c. Write-off of an uncollectible amount

d. Purchase of inventory for cash

a. Payment of a cash dividend

In a statement of cash flows:

a. Inflows and outflows for cash equivalents are reported as operating activities

b. the two primary reporting classifications of cash flows are inflows and outflows

c. no non-cash transactions are reported in the statement itself or the related footnote

d. Operating activities include the cash flows related to the same activities as reported in the income statement

d. Operating activities include the cash flows related to the same activities as reported in the income statement

When a transfer is made between cash and cash equivalents with no gain or loss, how is the transaction treated in the statement of cash flows?

a. It is not reported

b. It is included as an investing activity

c. It is included as an operating activity

d. It is included as a non cash financing activity

a. It is not reported

Cash equivalents have each of the following characteristics except:

a. highly liquid

b. maturity of at least three months

c. short-term

d. little risk of loss

b. maturity of at least three months

Which of the following would increase reported cash flows from operating activities?

a. cash received from he sale of land

b. Interest received on notes receivable

c. gain on early extinguishment of bonds

d. Gain on sale of equipment

b. Interest received on notes receivable

When reporting operating activities by the indirect method in a statement of cash flows:

a. realized losses are added back to net income

b. realized gains are added back to net income

c. increases in operating assets are added back to net income

d. increases in operating liabilities are subtracted from net income

a. realized losses are added back to net income

A company had the following information for the year:

• Net Income was $1,700,000

• Depreciation Expense was $400,000

• Interest paid was $200,000

• Income taxes paid were $100,000

• Common stock was sold for $450,000

• Common stock dividends of $70,000 were paid

• Equipment with a book value of $100,000 was sold for $200,000

Using the indirect method, what was the company’s net cash flows from operating activities for the year?

a. $2,000,000

b. $2,030,000

c. $2,080,000

d. $2,100,000

a. $2,000,000

Which of the following is reported as an investing activity in the sttement of cash flows?

a. Purchase of highly liquid, short-term investments, using excess cash

b. Sale of treasury stock

c. Issuance of a long-term note payable

d. Sale of an intangible asset

d. Sale of an intangible asset

A company had the following account balances for the year:

Accounts receivable	Ending: $44,000	Beginning: $35,000
Accounts Payable	55,000	60,000

The company reported net income of $120,000 for the year. Assuming no other changes in current account balances, what is the amount of net cash flows from operating activities for the year reported in the statement of cash flows?

a. $206,000

b. $196,000

c. $214,000

d. $224,000

b. $196,000

210,000

-9000 A/R

-5000 A/P

=196,000 b/c cash is on credit

Cash flows from investing activities do not include cash payments to:

a. purchase securities of another company

b. acquire equipment

c. repay debt

d. buy land

c. repay debt

Selected information from a company’s accounting records and financial statements for the year is as follows ($ in millions):

Cash Paid to acquire machinery	$36
Reaquired its own common stock	50
Cash received from sale of land	90
Gain from the sale of land	52
Investment revenue received	66
Cash paid to acquire office equipment	80

In it’s statement of cash flows, the company should report net cash outflows from investing activities of:

a. $26 million

b. $72 million

c. $78 million

d. $46 million

a. $26 million

machinery: 36

Office Equip: 80

outflows. =(116)

Sale of land. 90

Invest: (26) outflows

activities

In preparing its statement of cash flows for the year, Red Cimpany gathered the following date:

Gain on sale of land	$12,000
Cash received from sale of land	20,000
Purchase of Blue, Incorporated bonds (face value $200,000)	360,000
Decrease in discount on bonds payable	4,000
Cash dividends declared	90,000
Cash dividends paid	76,000
Cash received from sales of Red Company Common Stock	150,000

What amount should Red report as net cash outflows from investing activities?

a. $376,000

b. $352,000

c. $388,000

d. $340,000

d. $340,000

360,000

-20,000

= 340,000 Invest. C.F. Activity

Converting bonds payable to common stock is reported in connection with a statement of cash flows as:

a. a non cash investing and financing activity

b. an investing activity

c. a financing activity

d. not reported in the statement of cash flows

a. a non cash investing and financing activity