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Exam 16: Reporting the Statement of Cash Flows

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Question 61

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Receipts of cash dividends and interest earned on loans are classified as investing activities.

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B) False

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Question 62

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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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By separating cash flows into three cate...

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Question 63

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All of the following statements related to reporting cash flows from operating activities under U.S. GAAP and IFRS are true except:

Use the following information to calculate cash received from dividends: $\begin{array} { l l } \text { Dividends revenue } & \$ 63,500 \\\text { Dividends receivable, January 1 } & 3,600 \\\text { Dividends receivable, December } 31 & 3,100\end{array}$

Which one of the following is representative of typical cash flows from operating activities?

When preparing the operating activities section of the statement of cash flows using the indirect method, non-operating losses are added to net income.

A cash equivalent must be readily convertible to a known amount of cash, and must be sufficiently close to its maturity so its market value is unaffected by interest rate changes.

Use the following information about the current year's operations of a company to calculate the cash paid for merchandise. $\begin{array} { l } \text {Cost of goods sold. } &\$226,000\\ \text {Merchandise inventory, January 1. } &54,800\\ \text {Merchandise inventory, December 31 } &57,400\\ \text {Accounts payable, January 1. } &54,400\\ \text {Accounts payable, December 31. } &59,800\\\end{array}$

When preparing the operating activities section of the statement of cash flows using the direct method, non-operating gains are added to net income.

Alvez reports net income of $305,000 for the year ended December 31. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the net increase in cash for the year.

Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. $\begin{array}{|l|l|l|}\hline \text { At December 31 } &{\text { Y ear 2 }} & \text { Y ear 1 } \\\hline \text { Equipment } & \$ 600,000 & \$ 750,000 \\\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000\\\hline\end{array}$

The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:

A machine with a cost of $130,000, accumulated depreciation of $85,000, and current year depreciation expense of $17,000 is sold for $40,000 cash. The amount that should be reported as a source of cash under cash flows from investing activities is:

Preparation of the statement of cash flows does not involve:

A purchase of land in exchange for shares of stock is disclosed at the bottom of the statement of cash flows or in a note to the statement.

Which of the following is included in the cash flows from financing activities section of the statement of cash flows?

Of the following, which one affects cash during a period?

Match each of the appropriate definitions with items.

Accounting standards require companies to include a statement of cash flows in a complete set of financial statements.

A machine with a cost of $130,000, current year depreciation expense of $17,000 and accumulated depreciation of $85,000 is sold for $40,000 cash. The total amount that should be reported in the operating section of the statement of cash flow as per indirect method is: