FinalPracticeQuizes - Chapter 14 Statement of Cash Flows...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 14: Statement of Cash Flows What is one purpose of statement of cash flows? Identifies operating, investing, and financing activities during an accounting period. On the statement of cash flows, the purchase of a marketable security is treated as a: cash outflow under investing activities Noncash investing and financing transactions DOES NOT include depreciation, depletion, amortization recorded the period Operating activities section using indirect method would include depreciation, depletion, and amortization The sale of trading securities is considered an operating activity Cash flow yield, cash flows to sales are ratios to measure cash-generating efficiency. Free cash flow is not a ratio to measure cash generating efficiency Cash flow yield = net cash flows from operating activities / net income Free cash flow does include a deduction for dividends Under indirect method of determining cash flows from operating, a decrease in inventory is added to net income Indirect method for determining cash flows will yield the same amount than when the direct method is used Gains and losses must be removed from net income and shown in the investing activities section of the statement of cash flows Cash flows from investing activities are determined by explaining the changes in each account involving cash payments and cash receipts from investing activities The cash flow effects of the purchase of investments and sale of investments may be shown separately on the statement of cash flows to give users of the statement a complete view of investing activities. Paulen company sold an asset that cost $120,000 and had a book value of $72000 for $90000. Using the
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

FinalPracticeQuizes - Chapter 14 Statement of Cash Flows...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online