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Exam 11: Statement of Cash Flows

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Question 31

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A gain on the sale of long-term assets is added to net income to arrive at net cash flows from operating activities under the indirect method.

A) True
B) False

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Question 32

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Which of the following is an example of a cash outflow from an investing activity?

A) Payment of cash for treasury stock.
B) Payment of cash for the purchase of land.
C) Payment of cash for inventory.
D) Payment on a long-term note payable.

E) A) and C)
F) A) and B)

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Question 33

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We record dividends received as a financing activity.

Using the indirect method,we begin with net income and then list adjustments to net income in order to arrive at operating cash flows.

For each of the following ten transactions,indicate by letter whether the cash effect of each transaction is reported in a statement of cash flows as an operating (O),investing (I),financing (F),or noncash (NC)activity.Also,indicate whether the transaction is a cash inflow (CI),cash outflow (CO),or no effect on cash (NE).The first answer is provided as an example.

We report the actual amount of cash proceeds received from the sale of land as a cash inflow from investing activities.

We add a decrease in income tax payable to income tax expense to calculate cash paid for income taxes.

Given the items below,which of the following is a subtraction from net income to arrive at Operating Cash Flows using the indirect method? I. Loss on sale of assets II. Increase in Supplies III. Increase in Accounts Payable IV. Depreciation expense

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

Operating activities are both inflows and outflows of cash resulting from the external financing of a business.

We can identify operating activities from income statement information and changes in

Under what section of the Statement of Cash Flows would you classify dividends paid on common stock?

Wilson Electric reports income tax expense of $150,000.Income tax payable at the beginning and end of the year are $20,000 and $25,000,respectively.What is the cash paid for income taxes during the year?

The balance sheet of Integrated Systems reports total assets of $890,000 and $950,000 at the beginning and end of the year,respectively.Sales revenues are $1.6 million,net income is $185,000,and net cash flows from operating activities are $155,000.Calculate the cash return on assets,cash flow to sales,and asset turnover for Integrated Systems.

Identify and briefly describe the three categories of cash flows reported in the statement of cash flows.

The purchase of treasury stock is classified in the statement of cash flows as a(n) :

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

In preparing a statement of cash flows under the indirect method,an increase in accounts payable would be reported as a(n) :

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 return on assets?

A statement of cash flows provides a summary of cash inflows and cash outflows during the reporting period.