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Exam 5: Communicating and Interpreting Accounting Information

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Question 31

True/False

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Increases in current liabilities are added to profit while decreases in current liabilities are subtracted from profit to derive the net cash flows.

A) True
B) False

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Question 32

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Collection of principal on a note receivable is a cash flow from investing activities.

A) True
B) False

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Question 33

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Which of the following would not be a cash flow from investing activities?

When a cash dividend is paid,the cash outflow is classified as an operating activity.

Loans to other companies (notes receivable)are cash flows from investing activities.

How should the statement of cash flows be dated?

Which of the following statements about the statement of cash flows is correct?

The payment to shareholders for repurchase of treasury shares is a cash flow from a financing activity.

The following information is provided from the cash flow statement for Toys 4 U for the years 2008 through 2012 in millions of dollars: (A)Calculate the capital acquisitions ratio for Toys 4 U for the five year period from 2008 to 2020. (B)Comment on the capital acquisitions ratio for Toys 4 U for the five years.

Depreciation expense does not cause a cash outflow for the current period; therefore,it should never be shown on the statement of cash flows.

Jackson Company gathered the following data to prepare its 20B statement of cash flows: Based only on the above data,the net cash inflow from operating activities during 20B was which of the following?

Winn Company's 20B income statement reported total revenues,$110,000,and total expenses (including $10,000 depreciation) ,$70,000 .The 20B balance sheet reported the following: trade receivables--beginning balance,$16,000 and ending balance,$14,000; wages payable--beginning balance,$2,000 and ending balance,$1,500.Therefore,based only on this information,the 20B net cash inflow from operating activities was which of the following?

The capital acquisitions ratio (Cash Flow from Operating Activities ¸ Cash Paid for Property,Plant,and Equipment)reflects the portion of purchases of property,plant,and equipment financed from operating activities without the need for outside debt or equity financing or the sale of other investments or other long-term assets.

C Co.reported the following information from their statement of cash flows in millions of dollars: (A)Calculate the quality of income ratio for C Co for the three years: (B)In 2011,P Co.reported a quality of earnings ratio of 1.61.Compare C Co.'s quality of earnings ratio for that year to their competitor's ratio.

Morgan Company is preparing a statement of cash flows using the indirect method.The following data are available:

For each of the following items,indicate whether they would appear in the operating,investing,or financing activities section of the statement of cash flows.Place a check mark in the appropriate column for each transaction.If neither an operating,investing,or financing activity is appropriate,place a check mark in the "none" column.Assume the indirect method is used for reporting.

Cash equivalents are highly liquid investments with original maturities of less than six months.

When using the indirect method,a loss on the sale of equipment should be added to profit to derive cash flows from operating activities.

The net cash inflow or outflow for the year is the same amount as the increase or decrease in cash and cash equivalents for the year.

Billton Company purchased a machine in the current year for $18,000.Payment included cash,$5,000; a one-year note payable,$5,000; and a 2-year,$8,000 note payable.This decreases cash by $5,000 in the current year.