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Chapter 13_ Statement of Cash Flows

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					Chapter 13: Statement of Cash Flows Classifications of Statement of Cash Flows 1. What is the purpose of the statement of cash flows? 2. How is the statement of cash flows dated? 3. What are cash equivalents? 4. What are the three categories of the statement of cash flows? Cash Flows from Operating Activities 5. What are included in cash flow from operating activities? 6. What are the two alternatives for presenting the operating activities section? 7. What is the direct method? 8. What is the indirect method?

Cash Flow from Investing Activities 9. What are included in cash flows from investing activities? 10. Obuoba’s 2002 statement of cash flows reported the following information. Proceeds from disposals of investments were $176,000; purchases of investments were $526,000; income from equity investments net of dividends was $292,000; and payments to suppliers of inventory was $800,000. How much will be reported as net cash inflow or outflow from investing activities?

11. Usair Company sold equipment for $100,000, purchased a building for $80,000, sold long-term investments for $20,000 and repaid a note payable for $25,000 plus $1500 of interest. All transactions are with cash. What is the net cash flow from investing activities?

Cash Flows from Financing Activities 12. What are included in cash flows from financing activities? 13. Abena, Inc. issued $50,000 of bonds, paid cash dividends of $8,000, sold long-term investments for $12,000, received $5,000 of dividend revenue, purchased treasury stock for $15,000, and purchased new equipment for $19,000. Net income for the period was $50,000. What is the net cash flow from financing activities?

Reporting and Interpreting Cash Flows from Operating Activities 14. Why do many analysts believe the operating activities section is the most important section of the statement of cash flows? 15. What is required in preparing the operating activities section of the statement of cash flows? 16. Barney Company reported total sales revenue of $55,000 and total expenses amounting to $45,000 (i.e. net income $10,000) on its income statement for the year ended December 31, 2001. During 2001, accounts receivable decreased by $4,000, merchandise inventory decreased by $6,000, accounts payable increased by $2,000, and depreciation of $8,000 was recorded. The company also received $5,000 in dividends from its equity investment in an investee corporation. Based on this information what is the ner cash flow from operating activities?

17. Allen Company reported total sales revenue of $150,000 and total expenses of $152,000 (i.e. a net loss of $2,000) for the year ended December 31, 2001. During 2001, accounts receivable decreased by $1,000, trade payables increased by $5,000, wages payable increased by $3,000, and $18,000 in depreciation expense was recorded. Assuming no other adjustments are needed what is the net cash flow from operating activities?

Noncurrent Accruals 18. What are noncurrent accruals? Changes in Current Assets and Current Liabilities 19. Are increases in current assets added or subtracted to/from net income? 20. Are decreases in current assets added or subtracted to/from net income? 21. Are increases in current liabilities added or subtracted to/from net income? 22. Are decreases in current liabilities added or subtracted to/from net income?

Quality of Income Ratio 1. What is the equation for the quality of income ratio? 2. What does the quality of income ratio measure?

3. All other things equal, what does a high quality of income ratio measure?

Additional Issues in Interpreting Cash Flows from Operations 1. What is done to gains or losses on the sale of property plant and equipment in the operating activities section? 2. What is done with deferred income taxes in the operating activities section? 3. What is done to the equity income or losses of unconsolidated affiliates in the operating activities section?

Capital Acquisition Ratio 1. What is the equation for the capital acquisition ratio? 2. What does the capital acquisition ratio measure? 3. What does a high capital acquisition ratio indicate?

Free Cash Flow 1. What is the equation for free cash flow? 2. What does free cash flow measure?

Misc. Questions 1. A company acquired some land (independently appraised at $12,000) and paid for it by issuing 1,000 shares of its common stock (par $10 per share; no market price was quotes). How should this be reported on the statement of cash flows?


				
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