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Exam 13: The Statement of Cash Flows

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Question 41

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Lincoln Company engaged in this transaction: Received 6-month's rent in advance from a tenant in its office building. Indicate which section,if any,the above transaction would appear in,or relate to,on a statement of cash flows.

A) Financing activities section.
B) Schedule of noncash investing and financing transactions.
C) Operating activities section.
D) Investing activities section.

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Question 42

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The income statement indicates a business's success or failure in earning an income from its operating activities,but it does not reflect the inflow and outflow of cash from operating activities.

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Question 43

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Dividends declared but unpaid are reflected in the financing activities section of the statement of cash flows.

What does it mean when a company has positive free cash flow? What does it mean when a company has negative free cash flow?

Assume the indirect method is used to compute net cash flows from operating activities. -For this item extracted from the financial statements-Depletion Expense-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

Indicate on the blanks below the letter of the type of activity (operating activity,financing activity,investing activity,noncash transaction)each of the following transactions represents.

Cash equivalents include money market accounts,commercial paper,and U.S.Treasury bills.

Determining net cash flows from operating activities using the indirect method reveals cash collected from customers.

To determine whether a company's operations are covering its dividend payments,it is best to focus on which of the following sections of the statement of cash flows?

A decrease in the balance of merchandise inventory is subtracted from net income when calculating net cash flows from operating activities using the indirect method.

The purchase of trading securities with cash is considered an investing activity.

Assume the indirect method is used to compute net cash flows from operating activities. -For this item extracted from the financial statements-Decrease in Accrued Liabilities-indicate the effect on net income in arriving at net cash flows from operating activities by choosing one of the following:

If net cash flows from operating activities were $296,000,net income were $200,000,and sales were $2,000,000,cash flows to sales would equal (Round amounts to one decimal place)

A U.S.Treasury bill with an original maturity of 90 days or less is considered a cash equivalent.

Free cash flow is measured in terms of dollars.

When preparing a statement of cash flows using the indirect method,depreciation expense is added to net income to arrive at net cash flows from operating activities.

When preparing a statement of cash flows using the indirect method,an increase in wages payable is subtracted from net income.

The activity on the balance sheet to be presented in the financing activities section of the statement of cash flows is based on an analysis of stockholders' equity only.

A cash flow yield of 2.5 times is considered better than one of 3.0 times.

Investors and creditors would find the statement of cash flows least useful in assessing