Consider three independent cases for the cash flows of Winter Merchandising Corporation.

Consider three independent cases for the cash flows of Winter Merchandising Corporation.

Requirement
1.
For each​ case, identify from the statement of cash flows how the company generated the cash to acquire new plant assets. Rank the three cases from the most healthy financially to the least healthy.

Answer

Of the three types of business activities reported on a statement of cash flows, investing activities are the most important when evaluating a business.

Payment of dividends is reported on the statement of cash flows as a(an):

A.
Operating activity

B.
Financing activity

C.
Investing activity
Answer
Financing activity

Of the three types of business activities reported on a statement of cash flows, investing activities are the most important when evaluating a business.

A.
True

B.
False
Answer
False

Purchase of land with cash is reported on the statement of cash flows as a(an):

A.
Operating activity

B.
Financing activity

C.
Investing activity
Answer
Investing activity

The statement of cash flows is designed to fulfill all the following purposes EXCEPT to:

A.
Evaluate management decisions

B.
Assess the collectability of accounts receivable

C.
Help predict future cash flows

D.
Show the relationship of net income to changes in the company's cash
Answer
Assess the collectability of accounts receivable

The statement of cash flows will NOT report:

A.
How cash was used in the current period

B.
The sources of cash in the current period

C.
Changes in the cash balance for the current period

D.
The number of checks not written at the end of the period

Answer
The number of checks not written at the end of the period

Aurum Investments specializes in​ low-risk government bonds.

Aurum Investments specializes in​ low-risk government bonds.

Requirement
1.
Identify each of​ Aurum's transactions as operating​ (O), investing​ (I), financing​ (F), noncash investing and financing​ (NIF), or a transaction that is not reported on the statement of cash flows​ (N). Indicate whether each item increases​ (+) or decreases ​(minus​) cash. The indirect method is used for operating cash flows.




Answer

Crater HVAC Systems is preparing its statement of cash flows ​(indirect​ method) for the year ended March​ 31, 2018. To​ follow, in no particular​ order, is a list of items that will be used in preparing the​ company's statement of cash flows.

Crater HVAC Systems is preparing its statement of cash flows ​(indirect​ method) for the year ended March​ 31, 2018. To​ follow, in no particular​ order, is a list of items that will be used in preparing the​ company's statement of cash flows. Identify each item as an operating activity addition to net​ income; an operating activity subtraction from net​ income; an investing​ activity; a financing​ activity; or an activity that is not used to prepare the cash flows statement.

Answer