Question 1

Use the following company information to prepare a schedule of significant noncash investing and financing activities:
(a) Sold a building with a carrying amount of $125,000 for $195,000 cash and land with a carrying amount of $32,000 for $65,000 cash.
(b) Issued 10,000 $10 par value ordinary shares in exchange for equipment with a market value of $135,000.
(c) Retired a $100,000, 10% bond by issuing another $100,000, 12% bond issue.
(d) Acquired land by issuing a ten-year, 9%, $44,000 note payable.

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Question 2

Weston is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities. Management wishes to maximize cash flows from operating activities. 
A) $(168,000).
B) $200,000.
C) $168,000.
D) $(191,700).
E) $191,700.

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Question 3

The following information is available for the Eldridge Company:
   Additional information:
(1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired.
(2) Old machinery with an original cost of $45,060 was sold for $2,520 cash.
(3) New machinery was purchased for $81,060 cash.
(4) Cash dividends of $40,320 were paid. Management wishes to classify this under financing activities.
(5) Additional shares were issued for cash.
Prepare a complete statement of cash flows for year 2011 using the indirect method.

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Question 4

Define and discuss the differences between operating, investing and financing activities.

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Question 5

What are the five usual steps involved in the preparation of the statement of cash flows?

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Question 6

The following information is available for the Ehrens Corporation:
   Additional information:
(1) There was no gain or loss on the sales of the long-term investments, nor on the bonds retired.
(2) Old equipment with an original cost of $37,550 was sold for $2,100 cash.
(3) New equipment was purchased for $67,550 cash.
(4) Cash dividends of $33,600 were paid. Management wishes to classify this under financing activities.
(5) Additional shares were issued for cash.
Prepare a complete statement of cash flows for year 2011 using the indirect method.

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Question 7

Explain the value of separating cash flows into operating activities, investing activities and financing activities to financial statement users in analyzing cash flows and the company's financial performance and condition.

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Question 8

Define and explain significant noncash investing and financing activities and the method of reporting them on the statement of cash flows.

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Question 9

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the direct method.

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Question 10

Based on the following information provided about a company's operations, calculate its cost of goods purchased and its cash paid for merchandise.

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Question 11

Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows and to assess company performance.

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Question 12

Explain how the cash flows from operating activities section of the statement of cash flows is prepared using the indirect method.

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Question 13

Describe the format of the statement of cash flows, including the reporting of significant noncash investing and financing activities.

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Question 14

Match each of the following items with the appropriate definitions.

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Question 15

A company had average total assets of $2,316,000, total cash flows of $1,320,000, cash flows from operations of $455,000, and cash flows for property, plant and equipment of $850,000. The cash flow on total assets ratio equals:
A) 17.33%.
B) 20.97%.
C) 53.53%.
D) 34.47%.
E) 19.65%.

Accepted Answer

The cash flow on total assets ratio is calculated by dividing cash flows from operations by average total assets. Therefore, the ratio is $455,000 / $2,316,000 = 0.1965 or 19.65%.

Question 16

Martin, Inc.'s, income statement is shown below. Based on this income statement and the other information provided, calculate the net cash provided by operations using the indirect method.
Additional information:
   Beginning income taxes payable + Income taxes expense - Cash paid for taxes = Ending income taxes payable
Cash paid for taxes = $17,200

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Question 17

Based on the following income statement and balance sheet for Rashid Corporation, determine the cash flows from operating activities using the indirect method.

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Question 18

Explain the purpose and format of the statement of cash flows. Also describe its relevance to decision makers.

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Question 19

Use the following income statement and information about selected current assets and current liabilities to calculate the net cash provided or used by operating activities using the indirect method. The company's income is tax-exempt and its management decides to classify interest paid as operating activities.
Selected beginning and ending balances of current asset and current liability accounts, all of which relate to operating activities, are as follows:

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Question 20

Explain how cash flows from investing and financing activities are determined.

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Quiz 16: Statement of Cash Flows

Weston is preparing the company's statement of cash flows for the fiscal year just ended. Using the following information, determine the amount of cash flows from financing activities. Management wishes to maximize cash flows from operating activities.