33:010:272 Chapter Notes - Chapter 12: Trial Balance, Income Statement, Financial Statement

44 views3 pages

turquoisebat863

2 Mar 2019

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

Document Summary

The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from operating, investing, and financing activities during a period. The information in a statement of cash flows helps investors, creditors, and others assess the following. 1. the entity"s ability to generate future cash flows. By examining relationships between items in the statement of cash flows, investors can better predict the amounts, timing, and uncertainty of future cash flows than they can from accrual-basis data. 2. the entity"s ability to pay dividends and meet obligations. If a company does not have adequate cash, it cannot pay employees, settle debts, or pay dividends. Employees, creditors, and stockholders should be particularly interested in this statement because it alone shows the flows of cash in a business. 3. the reasons for the difference between net income and net cash provided (used) by operating activities. Net income provides information on the success or failure of a business.

Related Questions

1. A creditor is reviewing Hoffman Electronicsâ statements ofretained earnings for the last 3 years. The creditor is trying todetermine whether a substantial loan should be given to HoffmanElectronics. Which question will most likely be answered byreviewing the statement of retained earnings?

a. Does Hoffman Electronics make risky investments that impedethe cash flow of the firm?

b. What was the ending permanent account balance for HoffmanElectronics last quarter?

c. What assets owned by Hoffman Electronics are valuable enoughto cover debt repayment?

d. Does Hoffman Electronics have enough earnings to pay bothdividends and debts?

2. True or false. By reviewing a companyâs statement of retainedearnings over multiple reporting periods, an investor can evaluatethe companyâs future growth potential based on net incomechanges.

3. A creditor would most likely be interested in reviewing afirmâs statement of retained earnings to determine if the firm

a. exhibits liquidity.

b.can repay its debt obligations.

c.makes risky investments.

d.has sufficient receivables.

4. On statement of cash flow, the repayment of loans iscategorized as a cash flow from ____activities.

a. operating

b. financing

5."Fill in the blank" question: select the correct answer.

In a statement of cash flows, cash inflows that result fromproviding goods to customers are included in the section calledâcash flows from_______ activities.

a. investing

b. operating

c. sales

d. investing

6. Creditors want to know whether Photon, Inc. uses itsavailable cash to purchase new equipment. Which section of thestatement of cash flows would provide this information?

a.Cash flows from operating activities

b.Cash flows from sales activities

c.Cash flows from financing activities

d.Cash flows from investing activities

7. Creditors are examining the statement of cash flows forPhoton, Inc. Which of the following questions can be answered byreviewing the statement of cash flows?

a. What is the average net income of Photon?

b.What type of assets does Photon possess?

c.Does Photon reset its temporary accounts?

d.Does Photon pay its bills when they are due?

ochreyak725

Statement of Financial Accounting Concepts No. 1 states that oneof the objectives of financial reporting is to help âcurrent andpotential investors and creditors (and other users) in assessingthe amounts, timing, and uncertainty of future cash flows such asdividends or interest payments.â Generally Accepted AccountingPrinciples (GAAP) require the use of the accrual basis ofaccounting. Explain the difference between the accrual basis andthe cash basis of accounting and why GAAP requires the accrualbasis.

Please include a scholarly reference.

Choose the correction answer

15. The statement of cash flowsprovides information to help investors and creditors assess thecash and noncash investing and financing transactions during theperiod.

T F

16. The net increase(decrease) in cash reported on the statement of cash flows shouldreconcile the beginning and ending cash balances reported in thecomparative balance sheets.

T F

17. Anobjective of the statement of cash flows is to

a. disclose changes during the period in all assetand all equity accounts.

b. disclose the change in working capital during theperiod.

c. provide information about the operating,investing, and financing activities of an entity during aperiod.

d. None of these answers are correct.

18. Theprimary purpose of the statement of cash flows is to provideinformation

a. about the operating, investing, and financingactivities of an entity during a period.

b. that is useful in assessing future cash flowprospects.

c. about the cash receipts and cash payments of anentity during a period.

d. about the entity's ability to meet itsobligations and to pay dividends.

19. Cash equivalents are

a. treasury bills, commercial paper, and moneymarket funds purchased with excess cash.

b. investments with original maturities of threemonths or less.

c. readily convertible into known amounts ofcash.

d. All of these answers are correct.

20. Xanthe Corporation had the following transactions occur in thecurrent year:

1. Cash sale of merchandise inventory.

2. Sale of delivery truck at book value.

3. Sale of Xanthe common stock for cash.

4. Issuance of a note payable to a bank forcash.

5. Sale of a security held as anavailable-for-sale investment.

6. Collection of loan receivable.

How many of the above items willappear as a cash inflow from investing activities on a statement ofcash flows for the current year?

a. Five items

b. Four items

c. Three items

d. Two items

erinchimpanzee626

33:010:272 Chapter Notes - Chapter 12: Trial Balance, Income Statement, Financial Statement

Document Summary

Get access

Related Documents

33:010:272 Chapter Notes - Chapter 13: Accrual, Income Statement, Accounts Receivable

33:010:272 Lecture Notes - Lecture 11: Current Liability, Accrual, Negative Number

33:010:272 Study Guide - Final Guide: Double-Entry Bookkeeping System, Inventory Turnover, Deferral

Related Questions