1. The net increase (decrease) in cash reported on the statement of cash flows should reconcile the beginning and ending cash balances reported in the comparative balance sheets. True
2. Cash payments for operating expenses are computed by subtracting an increase in prepaid expenses and a decrease in accrued expenses payable from operating expenses. False
3. Of the following questions, which one would not be answered by the statement of cash flows?
a. Where did the cash come from during the period?
b. What was the cash used for during the period?
c. Were all the cash expenditures of benefit to the company during the period?
d. What was the change in the cash balance during the period?
4. Which of the following would be classified as a financing activity on a statement of cash flows?
a. Declaration and distribution of a stock dividend
b. Deposit to a bond sinking fund
c. Sale of a loan receivable
d. Payment of interest to a creditor
5. In reporting extraordinary transactions on a statement of cash flows (indirect method), the
a. gross amount of an extraordinary gain should be deducted from net income.
b. net of tax amount of an extraordinary gain should be added to net income.
c. net of tax amount of an extraordinary gain should be deducted from net income.
d. gross amount of an extraordinary gain should be added to net income.
6. The following information on selected cash transactions for 2008 has been provided by Simpson Company:
Proceeds from sale of land $160,000
Proceeds from long-term borrowings 400,000
Purchases of plant assets 144,000
Purchases of inventories 680,000
Proceeds from sale of Simpson common stock 240,000
What is the cash provided (used) by investing activities for the year ended December 31, 2008, as a result of the above information?
7. Bell Corp.’s comparative balance sheet at December 31, 2008 and 2007 reported accumulated depreciation balances of $800,000 and $600,000, respectively. Property with a cost of $50,000 and a carrying amount of $38,000 was the only property sold in 2008. Depreciation charged to operations in 2008 was
8. Net cash flow from operating activities for 2008 for Fordham Corporation was $300,000. The following items are reported on the financial statements for 2008:
Cash dividends paid on common stock 20,000
Depreciation and amortization 12,000
Increase in accounts receivables 24,000
Based on the information above, Fordham’s net income for 2008 was
9. The indirect method adjusts net income for items that affected reported net income but did not affect cash.
10. Cash receipts from customers are computed by adding a decrease in accounts receivable to revenue from sales.
Explain the need for full disclosure in financial report. Identify possible consequences of failing to properly disclose certain items in financial statement