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Exam 11: Statement of Cash Flows

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Question 31

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Depreciation expense is not reported on the statement of cash flows under the direct method.

A) True
B) False

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Question 32

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We report the payment of cash dividends as a cash outflow from investing activities. We report the payment of cash dividends as a cash outflow from financing activities.

A) True
B) False

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Question 33

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The following information pertains to Alpha Computing at the end of 2012: $\begin{array} { | l | r | } \hline \text { Assets } & \$ 970,000 \\\hline \text { Liabilities } & \$ 560,000 \\\hline \text { Net Income } & \$ 90,000 \\\hline \text { Common Stock } & \$ 350,000 \\\hline\end{array}$ Alpha Computing's Retained Earnings account had a zero balance at the beginning of 2012. What amount of dividends did the company pay in 2012?

Which of the following is an example of a cash inflow from a financing activity?

The balance sheet of Sound Designs reports total assets of $750,000 and $800,000 at the beginning and end of the year, respectively. Sales revenues are $1.5 million ($1.2 million in the previous year) , net income is $150,000, and net cash flows from operating activities are $175,000. What is Sound Designs' cash flow to sales?

During 2012, Smithson Corp. had the following cash flows: receipt from customers, $10,000; receipt from the bank for long-term borrowing, $6,000; payment to suppliers, $5,000; payment of dividends, $1,000, payment to workers, $2,000; and payment for machinery, $8,000. What amount would be reported for financing cash flows on the Statement of Cash Flows?

The inflow of cash received from issuing common stock is reported as an investing activity. The inflow of cash received from issuing common stock is reported as a financing activity.

We add an increase in interest payable to interest expense in arriving at cash paid for interest under the direct method. We deduct an increase in interest payable from interest expense in arriving at cash paid for interest under the direct method.

Discount Computers' accounts receivable increases during the year by $3 million. What is the amount of cash received from customers during the reporting period if its sales are $47 million?

Which one of the following is correct about the statement of cash flows?

The sale of land is reported in the operating section of the statement of cash flows. The sale of land is reported in the investing section of the statement of cash flows.

When preparing a statement of cash flows using the indirect method, a decrease in accounts payable is subtracted from net income.

The Statement of Cash Flows:

We need to add back to net income any loss on sale of long-term assets in the operating section of the statement of cash flows in order to eliminate the noncash component of net income.

When accounts payable decrease, cash paid to suppliers must have been more than purchases.

The balance sheet of The Computer Doctor reports total assets of $160,000 and $220,000 at the beginning and end of the year, respectively. The cash return on assets for the year is 10%. Calculate The Computer Doctor's net cash flows from operating activities for the year.

Cash flows from financing activities include:

Distinguish between the indirect method and the direct method for reporting net cash flows from operating activities. Which method is more common in practice? Which method provides a more logical presentation of cash flows?

Financing activities include cash receipts and cash payments for transactions relating to revenue and expense activities. Operating activities include cash receipts and cash payments for transactions relating to revenue and expense activities.

Cash received from issuing common stock would be classified in which section of the Statement of Cash Flows?