*Chapter 12
Questions
1. (a) What is a statement of cash flows?
The statement of cash flows reports the cash receipts, cash payments, and net change in cash resulting from the operating, investing, and financing activities of a company during a period in a format that reconciles the beginning and ending cash balances
(b) Mark Paxson maintains that the statement of cash flows is an optional financial statement. Do you agree? Explain.
Disagree. The statement of cash flows is required. It is the fourth basic financial statement.
2. What questions about cash are answered by the statement of cash flows?
The statement of cash flows answers the following questions about cash: (a) Where did the cash come from during the period? (b) What …show more content…

Certain transactions provide additional detailed information needed to determine how cash was provided or used during the period.

8. (a) What are the phases of the corporate life cycle?
The phases of the corporate life cycle are the introductory phase, growth phase, maturity phase, and decline phase.
(b) What effect does each phase have on the numbers reported in a statement of cash flows?
-During the introductory phase, cash from operations and investing would be expected to be negative, and cash from financing would be positive
-During the growth phase, a company would be expected to show some small amounts of cash from operations while continuing to show negative cash from investing and positive cash from financing. -During the maturity phase, cash from operations, investing, and financing would all be expected to be positive while in the decline phase, cash from operations and investing would continue to be positive while cash from financing would be negative.
9. Based on its statement of cash flows, in what stage of the product life cycle is Tootsie Roll Industries? Tootsie Roll has positive cash from operations that exceeds its net income. Cash from operations exceeded its investing needs and it retired shares of stock and paid dividends. Tootsie Roll appears to be in the middle to late maturity phase.

10. Contrast the advantages and disadvantages of the direct and indirect methods of preparing the