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Exam 13: Statement of Cash Flows

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Question 1

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Using the indirect method, which of the following would be added to net income?

A) increase in accounts receivable
B) increase in prepaid expenses
C) depreciation expense
D) decrease in accounts payable

E) None of the above
F) C) and D)

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Question 2

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Free cash flow:

A) is not a solvency-based measure that helps creditors and investors understand how much discretionary cash flow a company has left from operating activities.
B) is calculated as cash provided (used) by operating activities plus net capital expenditures and dividends paid.
C) helps creditors and investors understand how much discretionary cash flow a company has left from its operating activities.
D) helps to understand how much discretionary cash flow a company has left from its operating activities that can be used to expand operations, increase debt, or pay additional dividends.

E) A) and B)
F) A) and D)

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Question 3

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Use the following information for questions Ingles Corp., a private company reporting under ASPE, engaged in the following transactions.For each transaction, indicate where, if at all, it would be classified on the statement of cash flows. -Retirement of non-current debt (incurred for lending purposes) with cash:

A loss on sale of equipment is included in the investing activities on the statement of cash flows.

Under ASPE, the payment of interest on a mortgage payable may be classified as a cash payment from financing activities.

Dock Inc.reports the following: If cost of goods sold for the year is $128,000, the amount of cash paid to suppliers is

If a company has combined cash equivalents with cash, it must disclose the components of the cash equivalents, with a reconciliation of the amounts reported on the statement of cash flows with those reported on the statement of financial position.

On the statement of cash flows of a growing company, the reader should expect to see cash provided by its financing activities, not cash used.

Use the following information for questions Boreal Corporation is a private corporation reporting under ASPE and uses the indirect method when preparing its statement of cash flows.The company has engaged in the following transactions.For each transaction, indicate where it would be reflected on the statement of cash flows. -A payment of interest on a long-term bank loan:

The statement of cash flows will not report the

Using the indirect method, which of the following adjustments to convert net income to net cash provided by operating activities is incorrect?

Under the direct method, an increase in inventory would be added to cost of goods sold to determine net purchases for the period.

Which of the following items does not appear in the operating activities section of the statement of cash flows prepared under the direct method?

When equipment is sold for cash, the amount received is reflected as a cash

The sale of land for cash would be classified as a cash receipt from an investing activity.

Cost of goods sold + an increase in inventory + an increase in accounts payable = cash paid to suppliers during a period.

If a gain of $30,000 is incurred in selling (for cash) office equipment that cost $120,000 and had accumulated depreciation of $40,000, the total amount reported in investing activities is

In preparing the statement of cash flows, determining the net increase or decrease in cash requires the use of

The statement of cash flows

During the year, Tristan Inc.reported a $6,000 increase in Inventory and a $4,000 increase in Accounts Payable.Cost of goods sold for the year was $125,000.What were the cash payments made to suppliers during the year?