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Exam 16: Statement of Cash Flows

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Question 91

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The accounting principle that requires important noncash financing and investing activities be reported on the statement of cash flows or in a footnote is the:

A) Historical cost principle.
B) Materiality principle.
C) Full disclosure principle.
D) Going concern principle.
E) Business entity principle.

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

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Question 92

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A company reported net income of $318,000, operating cash flows of $218,000, total cash flows of $184,000, and average total assets of $898,000. Calculate its cash flow on total assets ratio.

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$218,000/$...

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Question 93

Multiple Choice

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Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $140,000 was sold for its carrying amount in Year 2. The following selected information is available for Sebring Company from its comparative balance sheets. Compute the cash received from the sale of the equipment.

Trenton reports tax-exempt income of $230,000 for the year ended December 31, Year 2. It also reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the new cash provided (used) in operating activities using the indirect method.

A cash coverage ratio of less than 1 indicates cash inadequacy to meet asset growth.

A corporation reported average total assets in Year 1 of $397,350 and $440,800 in Year 2. Its net operating cash flow for Year 1 was $35,667 and $35,790 for Year 2. Calculate the cash flow on total assets ratio for both years. Comment on the results.

_____________ activities include the cash effects of transactions and events that determine net income.

Investing activities include the:

Cash paid for merchandise is an operating activity.

Since it is recommended by the IASB, the direct method of preparing the statement of cash flows is most frequently used.

The cash flow on total assets ratio is computed by dividing _____________ by __________.

Most managers stress the importance of understanding and predicting cash flows for business decisions.

For each of the following separate cases, use the information provided to calculate the missing cash inflow or cash outflow using the direct method.