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Cash Flow Statement

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If you have any difficulty answering the questions, learn more about this topic by reading our mini-lectures covering introductory to Cash Flow Statement or it might be useful to check out multimedia courses Preparing A Cash Budget, Managing Your Cash Flow presented by CIT Small Business Lending.


When answering the all questions assume that the indirect method is used.

 

There are four parts to the Statement of Cash Flows (or Cash Flow Statement):
  1.  Operating Activities
  2.  Investing Activities
  3.  Financing Activities
  4.  Supplemental

For each of the following items, indicate which part will be affected.

 1. Depreciation Expense
Operating     Investing     Financing     Supplemental


 2. Proceeds from the sale of equipment used in the business
Operating     Investing     Financing     Supplemental


 3. The Loss on the Sale of Equipment in Question #2.
Operating     Investing     Financing     Supplemental


 4. Declaration and payment of dividends on company's stock
Operating     Investing     Financing     Supplemental


 5. Gain on the Sale of Automobile formerly used in the business
Operating     Investing     Financing     Supplemental


 6. The proceeds from the sale of the automobile in Item #5.
Operating     Investing     Financing     Supplemental


 7. An increase in the balance in a retailer's Merchandise Inventory
Operating     Investing     Financing     Supplemental


 8. An increase in the balance in Accounts Payable
Operating     Investing     Financing     Supplemental


 9. Retirement of long-term Bonds Payable
Operating     Investing     Financing     Supplemental


10. Purchase of Treasury Stock (company's own stock)
Operating     Investing     Financing     Supplemental


11. The purchase of a new delivery truck to be used in the business
Operating     Investing     Financing     Supplemental


12. A decrease in the balance of Accounts Receivable
Operating     Investing     Financing     Supplemental


13. An increase in Bonds Payable (a long-term liability)
Operating     Investing     Financing     Supplemental


14. A decrease in the current asset account Prepaid Insurance
Operating     Investing     Financing     Supplemental


15. A decrease in the current liability Income Taxes Payable
Operating     Investing     Financing     Supplemental


16. The proceeds from issuing additional Common Stock
Operating     Investing     Financing     Supplemental


17. The amortization of the cost of an intangible asset
Operating     Investing     Financing     Supplemental


18. The exchange/conversion of long-term bonds into common stock
Operating     Investing     Financing     Supplemental


For items 19 – 30 indicate whether they will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement.

A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement.

19. An increase in the balance of Prepaid Insurance Positive Negative
20. A decrease in Supplies on hand Positive Negative
21. The proceeds from the sale of equipment formerly used in the business Positive Negative
22. The Loss on the Sale of Equipment in the previous question Positive Negative
23. An increase in the current liability Income Taxes Payable Positive Negative
24. A decrease in Accounts Payable Positive Negative
25. An increase in Accounts Receivable Positive Negative
26. An increase in the current liability Warranty Liability Positive Negative
27. Dividends declared and paid Positive Negative
28. Proceeds from the issuance of Preferred Stock Positive Negative
29. The Gain on the Sale of Equipment formerly used in the business Positive Negative
30. An increase in the long-term asset Investment in Another Company Positive Negative


31. For a recent year a corporation's financial statements reported the following:
Net Income$100,000
Depreciation Expense10,000
Increase in Accounts Receivable30,000
Decrease in Accounts Payable15,000
Based on the above information, what amount will the corporation report as Cash Provided by Operating Activities on the cash flow statement?
$65,000              $125,000              $155,000


32. A corporation reported the following information for the past year:
Net Income$200,000
Depreciation Expense30,000
Gain on Sale of Truck5,000
Proceeds from Sale of Truck8,000
Decrease in Accounts Receivable10,000
Assuming these are the only facts, what amount will the corporation report as the Cash Provided by Operating Activities on the cash flow statement?
$225,000              $235,000              $253,000


33. Using the information in Question #32, what amount will be reported under Cash From Investing Activities?
$3,000              $8,000              $13,000

If you have any difficulty answering the questions, learn more about this topic by reading our mini-lectures covering introductory to Cash Flow Statement or it might be useful to check out multimedia courses Preparing A Cash Budget, Managing Your Cash Flow presented by CIT Small Business Lending.

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