The following questions dealing with the statement of cash flows are adapted from questions that previously appeared on Certified Management Accountant (CMA) examinations. The CMA designation sponsored by the Institute of Management Accountants (www.imanet.org) provides members with an objective measure of knowledge and competence in the field of management accounting. Determine the response that best completes the statements or questions.
1. When preparing the statement of cash flows, companies are required to report separately as operating cash flows all of the following except
a. interest received on investments in bonds.
b. interest paid on the company's bonds.
c. cash collected from customers.
d. cash dividends paid on the company's stock.
2. The following information was taken from the accounting records of Oak Corporation for the year ended December 31:
Proceeds from issuance of preferred stock .... $4,000,000
Dividends paid on preferred stock ....... 400,000
Bonds payable converted to common stock ... 2,000,000
Payment for purchase of machinery ....... 500,000
Proceeds from sale of plant building ...... 1,200,000
2% stock dividend on common stock ....... 300,000
Gain on sale of plant building .......... 200,000
The net cash flows from investing and financing activities that should be presented on Oak's statement of cash flows for the year ended December 31 are, respectively
a. $700,000 and $3,600,000.
b. $700,000 and $3,900,000.
c. $900,000 and $3,900,000.
d. $900,000 and $3,600,000.
3. The net income for Cypress Inc. was $3,000,000 for the year ended December 31. Additional information is as follows:
Depreciation on fixed assets .... $1,500,000
Gain from cash sale of land .... 200,000
Increase in accounts payable ..... 300,000
Dividends paid on preferred stock .. 400,000
The net cash provided by operating activities in the statement of cash flows for the year ended December 31 should be
a. $4,200,000.
b. $4,500,000.
c. $4,600,000.
d. $4,800,000.