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34) Selling property, plant, and equipment for $10,000 cash is considered a cash inflow from investing
activities on the statement of cash flows.
35) When computing investing cash flows, it is helpful to evaluate the T-accounts for each long-term
liability.
36) On the statement of cash flows, the investing activities section is shown after the financing activities
section.
37) Which of the following sections of the statement of cash flows include activities that increase and
decrease long-term assets?
A) the financing activities section
B) the operating activities section
C) the investing activities section
D) the non-cash investing and financing section
38) Which of the following sections of the statement of cash flows include purchases and sales of long-
term assets?
A) the financing activities section
B) the operating activities section
C) the investing activities section
D) the non-cash investing and financing section
39) Connecticut, Inc. uses the indirect method to prepare its statement of cash flows. Refer to the
following portion of the comparative balance sheet:
Connecticut, Inc.
Comparative Balance Sheet
December 31, 2019 and 2018
2019
2018
Increase/(Decrease)
Cash
$25,000
$22,000
$3000
Accounts Receivable
31,000
38,000
(7000)
Merchandise Inventory
55,000
26,000
29,000
Plant and Equipment
124,000
93,000
31,000
Accumulated Depreciation-Plant
and Equipment
(47,000)
(43,000)
(4000)
Total Assets
$188,000
$136,000
$52,000
Additional information provided by the company includes the following:
1. Equipment was purchased for $67,000 with cash.
2. Equipment with a cost of $36,000 and accumulated depreciation of $7300 was sold for $48,000.
What was the amount of net cash provided by (used for) investing activities?
A) $167,000
B) $19,000
C) $(167,000)
D) $(19,000)
40) Arkansas Corp. is preparing its statement of cash flows using the indirect method. It provides the
following information about transactions for the year:
Plant assets, net—beginning balance: $111,000
Plant assets, net—ending balance: $145,000
Equipment was purchased for $65,000 with cash.
Equipment with a net asset value of $12,000 was sold for $19,000.
Depreciation Expense of $19,000 was recorded during the year.
What was the amount of net cash provided by (used for) investing activities?
A) $(46,000)
B) $46,000
C) $(65,000)
D) $(34,000)
41) Wisconsin Farm Equipment Company sold equipment for cash. The income statement shows a loss
on the sale of $6000. The net book value of the asset was $30,900. Which of the following statements
describes the cash effect of the transaction?
A) positive cash flow of $36,900 from financing activities
B) negative cash flow of $24,900 for operating activities
C) negative cash flow of $24,900 for financing activities
D) positive cash flow of $24,900 from investing activities
42) Atlanta Company sold equipment for cash. The income statement shows a gain on the sale of $1020.
The net book value of the asset was $3710. Which of the following statements describes the cash effect of
the transaction?
A) negative cash flow of $4730 for financing activities
B) negative cash flow of $2690 for operating activities
C) positive cash flow of $4730 from investing activities
D) positive cash flow of $2690 from investing activities
43) Illinois Woodworking Company is preparing its statement of cash flows using the indirect method.
During the year, Illinois Woodworking sold equipment for $6490 cash. The net book value of the asset
was $4770. Which of the following statements is true?
A) The gain on sale of $1720 is added back to net income in the operating activities section.
B) The book value of the asset sold is shown as a negative cash flow in the investing activities section.
C) The cash receipt of $6490 is shown as a positive cash flow in the investing activities section.
D) The gain on sale of $1720 is shown as a positive cash flow in the financing activities section.
44) Oregon Company is preparing its statement of cash flows using the indirect method. During the year,
the company purchased equipment for $15,000 cash. Which of the following statements is true?
A) $15,000 would be shown as a negative cash flow in the operating activities section.
B) $15,000 would be shown as a negative cash flow in the investing activities section.
C) $15,000 would be shown as a positive cash flow in the investing activities section.
D) $15,000 would be shown as a positive cash flow in the financing activities section.
45) Michigan Auto Parts Company uses the indirect method to prepare its statement of cash flows. Refer
to the following portion of the comparative balance sheet:
Michigan Auto Parts Company
Comparative Balance Sheet
December 31, 2018 and 2017
2018 2017 Increase (Decrease)
Cash $42,000 $36,000 $6,000
Accounts Receivable 62,000 70,000 (8,000)
Merchandise Inventory 106,000 50,000 56,000
PP&E, net 240,000 180,000 60,000
Total Assets $450,000 $336,000 $114,000
Additional information provided by the company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation expense of $24,000 was recorded during the year.
Prepare the investing activities section of the statement of cash flows.
46) New Mexico, Inc. uses the indirect method to prepare its statement of cash flows. Refer to the
following portion of the comparative balance sheet:
New Mexico, Inc.
Comparative Balance Sheet
December 31, 2019 and 2018
2019 2018 Increase (Decrease)
Cash $42,000 $36,000 $6,000
Accounts Receivable 62,000 70,000 (8,000)
Merchandise Inventory 106,000 50,000 56,000
PP&E, net 240,000 180,000 60,000
Total Assets $450,000 $336,000 $114,000
Additional information provided by the company includes the following:
Equipment costing $104,000 was purchased for cash.
Equipment with a net book value of $20,000 was sold for $28,000.
Depreciation Expense of $24,000 was recorded during the year.
Use the T-account format and evaluate the transactions affecting Property, Plant, and Equipment, net.
47) Issuing preferred stock to stockholders in exchange for cash is shown under the financing activities
section of the statement of cash flows.
48) Buying property, plant, and equipment for cash is considered a cash outflow for the financing
activities section of the statement of cash flows.
49) Financing activities on the statement of cash flows affect the long-term liability and equity accounts.
50) The financing section of the statement of cash flows involves transactions relating to the equity
accounts and the long-term liability accounts.
51) Tennessee Moving Company uses the indirect method to prepare its statement of cash flows. Refer to
the following portion of the comparative balance sheet:
Tennessee Company
Comparative Balance Sheet
December 31, 2018 and 2017
2018
2017
Increase/(Decrease)
Common Stock
$36,000
$12,000
$24,000
Retained Earnings
114,000
92,000
22,000
Treasury Stock
(12,000)
(3,000)
(9,000)
Total Stockholders' Equity
138,000
101,000
37,000
If the net income for the year was $66,000, the company must have declared $44,000 as dividends during
the year.
52) New York Production Company uses the indirect method to prepare its statement of cash flows. The
Treasury Stock account had a debit balance of $11,000 at the beginning of the year and a debit balance of
$16,000 at the end of the year. No treasury stock was sold during the year. The financing section of the
statement of cash flows will show a positive cash flow of $5,000 for the buyback of treasury stock.
53) Which of the following sections of the statement of cash flows includes activities that increase and
decrease long-term liabilities and stockholders' equity?
A) the financing activities section
B) the operating activities section
C) the investing activities section
D) change in cash section
54) Which of the following sections of the statement of cash flows includes the issuance of stock and the
payment of cash dividends?
A) the investing activities section
B) the financing activities section
C) the operating activities section
D) the non-cash investing and financing section
55) Which of the following sections from the statement of cash flows includes the cash paid for the
purchase of Treasury Stock?
A) the financing activities section
B) the operating activities section
C) the investing activities section
D) the non-cash investing and financing section
