Question

(TCO F) What is the primary purpose of the statement of cash flows?

Show the company’s ability to meet its obligations, pay dividends, and any needs for financing.

Show the company’s cash flow prospects.

Show the cash payments and cash receipts for the period.

Show the operating, financing, and investing activities for the period.

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Question 25 pts

(TCO F) Which of the following is not true?

The net increase/decrease of cash on the statement of cash flow should reconcile the beginning and ending balances on the balance sheet.

The first step in preparing the statement of cash flow is to determine the cash flow from operations.

Cash receipts from customers are computed by adding revenue from sales and a decrease in accounts receivable account.

Noncash investing and financing activities are disclosed in a note to the financial statements or as a separate schedule.

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Question 35 pts

(TCO F) Glitter Girl, Inc. recognized net income of $136,000 including $24,000 in depreciation expense.        
Additional changes from the balance sheet are as follows.                                              
      Accounts Receivable             $3,000            decrease          
      Prepaid Expenses                  $14,500           decrease          
      Inventory                                $9,000            increase           
      Accrued Liabilities                $10,000           decrease          
      Accounts Payable                  $19,500          increase           
Compute the net cash from operating activities based on the above information.

$178,000

$164,500

$96,500

$94,500

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Question 45 pts

(TCO F) Pig Builder's, Inc. shows the following as of December 31, 2015.

Pig's net cash provided by investing activities for 2015 is

Acquired 50% of Wolf Corp's common stock for $160,000 cash, which was borrowed from Granny's Bank.

Issued 5,000 shares of its preferred stock for land having a fair value of $320,000

Issued 500 of its 11% debenture bonds, due 2017, for $392,000 cash

Paid $120,000 toward bank loan.

Purchased a patent for $220,000 cash

Sold available for sales securities for $796,000

Recognized $88,000 net increase in returnable long term customer deposits

$476,000.

$636,000.

$316,000.

$416,000.

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Question 55 pts

(TCO F) Dasher Builder's, Inc. shows the following as of December 31, 2015.

Sold available for sales securities for $650,000

Acquired 50% of Elven Corp's common stock for $310000 cash which was borrowed from Peppermint's Bank.

Issued 2,000 shares of its preferred stock for land having a fair value of $50,000

Purchased a patent for $170,000 cash

Issued 1,000 of its 12% debenture bonds, due 2020, for $225,000 cash

Paid $130,000 toward bank loan.

Recognized $79,000 net increase in returnable long term customer deposits

Dasher's net cash provided by financing activities for 2015 is

$614,000.

$535,000.

$484,000.

$405,000.

Answer 1

(i)

The primary purpose of the statement of cash flows is to show the company’s cash flow prospects.

Hence, correct option is (B)

(ii)

Statements (a), (b) and (c) are true. Only statement (d) is not true

(iii)

Calculation of net cash flow from Operating activities

Net income	136,000
Add: Depreciation	24,000
Operating profit before working capital changes	160,000
Accounts receivable	3,000
Prepaid expenses	14,500
Inventory	-9,000
Accrued liabilities	-10,000
Accounts payable	19,500
Net cash flow from operating activities	178,000

Hence, correct option is (A)

(iv)

Calculation of cash flows from Investing activities

Purchase of common stock	-160,000
Purchase of patents	-220,000
Sale of securities	796,000
Net cash provided by Investing activities	416,000

Hence,correct option is (D)

(v)

Calculation of cash flows from financing activities

Loan from bank	310,000
Issue of debentures	225,000
Repayment of bank loan	-130,000
Increase in customer deposits	79,000
Net cash provided by financing activities	484,000

Hence,correct option is (C)

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