Q1. Operating activities include cash transactions that primarily affect (_____________ / long-term asset/ _____________/ long-term liability / stockholders’ equity) accounts. (Circle all that apply)
Q2. Identify transactions recorded in the operating section of the statement of cash flows.
(_____________/ Not) a. Receive cash from customers paying on account.
(_____________/ Not) b. Pay rent for the next accounting period.
(Operating / _____________) c. Receive the utility bill for this accounting period that will be paid next accounting period. (Not paid this accounting period)
(Operating / _____________) d. Extend $100,000 of credit to Supplier Barry for a purchase. (Non-cash)
(_____________/ Not) e. Receive interest payment of $8,000 from Supplier Barry.
(Operating / _____________) f. Supplier Barry pays off the $100,000. (Financing)
The operating activity section on the face of the statement of cash flows can be reported using the direct or the indirect method. The direct method reports sources and uses of cash during the accounting period. The indirect method reconciles accrual-based “Net Income” to cash-based “Net Cash from Operating Activities.”
Q3. Cash flows from operating activities is reported using the (direct / _____________) method.
Q4. The strongest year for LUV was (2011/ ________/ 2009). Why?
Q5. The weakest year for LUV was (2011/ 2010 / _____________). Why?
Q6. LUV operates all (_____________/ Airbus / Raytheon) aircraft. Why?