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Exam 11: The Statement of Cash Flows

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Question 31

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Which of the following financing activities results in a cash inflow?

A) repurchasing shares
B) issuing bonds
C) repaying a bank loan
D) paying cash dividends

E) B) and C)
F) A) and B)

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Question 32

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Unlike the income statement,no financial ratios are reported on the statement of cash flows.

A) True
B) False

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Question 33

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Medstar Radiology Clinic Information from the company's financial records is presented in the following table: $\begin{array}{lr}\text { Notes payable, December 31, Year 1 } & \$ 1,000,000 \\\text { Notes payable, December 31, Year 2 } & 1,200,000 \\\text { Loss on note retirement - Year 2 } & 45,000 \\\text { Interest expense on bonds - Year 2 } & 75,000\end{array}$ At the end of Year 2, the company issued notes at par value for $1,200,000 cash. The proceeds were used to retire the $1,000,000 note issue outstanding at the end of Year 1 (before the maturity date) . All interest expense was paid in cash during Year 2. -Refer to the figure Medstar Radiology Clinic.How much was paid to retire the $1,000,000 note issue during Year 2?

Midtown Diner Inc.purchased $10,000 of paper napkins for its restaurants.At the end of the period,three-quarters of the bill for the napkins is unpaid.An inventory revealed that 40% of the napkins were still on hand.Which of the following combinations of amounts would affect the income statement and statement of cash flows?

When the indirect method is used to determine operating cash flows,how is the receipt of cash from the sale of long-term investments treated on the statement of cash flows?

Match these terms with their correct definition. -includes cash received from the issuance of shares and cash used to pay dividends

Which of the following is a current reporting requirement for a statement that reports changes in cash over a period of time?

Match these terms with their correct definition. -measures the company's ability to meet its maturing debt obligations

Medstar Radiology Clinic Information from the company's financial records is presented in the following table: $\begin{array}{lr}\text { Notes payable, December 31, Year 1 } & \$ 1,000,000 \\\text { Notes payable, December 31, Year 2 } & 1,200,000 \\\text { Loss on note retirement - Year 2 } & 45,000 \\\text { Interest expense on bonds - Year 2 } & 75,000\end{array}$ At the end of Year 2, the company issued notes at par value for $1,200,000 cash. The proceeds were used to retire the $1,000,000 note issue outstanding at the end of Year 1 (before the maturity date) . All interest expense was paid in cash during Year 2. -Refer to the figure Medstar Radiology Clinic.How is the information included in the statement of cash flows?

When the indirect method is used to determine operating cash flows,how are the declaration and payment of cash dividends shown on the statement of cash flows?

Use the following codes to indicate how the cash flow effect, if any, of each transaction would be reported on a statement of cash flows if the operating activities section is prepared using the direct method. (Choices may be used more than once.) -declared share dividends

Both the indirect and direct method arrive at an identical amount of net cash provided (used)by operating activities.

Which balance sheet accounts are most affected by investing activities?

The financial statement that summarizes the operating,investing,and financing activities of a business over a period of time is the ____________________.

When the indirect method is used to determine operating cash flows,how is depreciation expense recorded on the statement of cash flows?

When the direct method is used to determine operating cash flows,how is the collection of cash from customers shown on the statement of cash flows?

Morris Plumbing Company The following items were reported by Morris Plumbing Company: $\begin{array}{llr} \text { Accounts receivable, December 31 , Year 2 } &\$250,000\\ \text { Accounts receivable, December 31, Year 1 } &225,000\\ \text {Sales for Year 2 } &1,000,000\end{array}$ -Refer to the figure Morris Plumbing Company.Under the direct method,and assuming that all sales are on credit,what amount would be reported in the operating activities section of the Morris Plumbing Company's statement of cash flows for collections from customers?

What does the information in the statement of cash flows help investors,creditors and others to do?

During the current year,the accounts payable balance decreased.What does this indicate?

If the balance of prepaid insurance was the same on January 1,Year 1,and December 31,Year 2,then the insurance expense must have been ____________________ the cash payments made for insurance during the year.