Chapter 13 – Statement of Cash Flows
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activity on the statement of cash flows under the indirect method.
a.
Purchased treasury stock
b.
Sold equipment at book value
c.
Net income
d.
Sold long-term investments
e.
Issued common stock
f.
Depreciation expense
ANSWER:
a.
F – financing
b.
I – investing
c.
O – operating
d.
I – investing
e.
F – financing
f.
O – operating
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Easy
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–01 – LO: 13–01
FNMN.WAJO.19.13–02 – LO: 13–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:33 PM
DATE MODIFIED:
10/16/2017 6:30 PM
152. The net income reported on the income statement for the current year was $210,000. Depreciation recorded on
equipment and a building amount to $62,500 for the year. Balances of the current asset and current liabilities accounts at
the beginning and end of the year are as follows:
End of Year
Beginning of Year
$ 56,000
$ 59,500
71,000
73,400
140,000
126,500
7,800
8,400
62,600
66,400
9,000
8,250
(a)
Prepare the cash flows from operating activities section of the statement of
cash flows, using the indirect method.
(b)
If the direct method had been used, would the net cash flow from operating
activities have been the same? Explain.
ANSWER:
(a)
Cash flows from operating activities:
Net income
$210,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
62,500
liabilities:
Decrease in accounts receivable
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2.
Paid an account payable
3.
Issued bonds payable for cash
4.
Declared and paid a cash dividend
5.
Paid cash for a new piece of equipment
6.
Purchased treasury stock for cash
7.
Paid cash for stock in another company
8.
Received interest on a long-term bond investment
9.
Received cash for sales
10.
Sold a long-term stock investment for cash at book value
ANSWER:
1.
O –
2.
O –
3.
F +
4.
F –
5.
I –
6.
F –
7.
I –
8.
O +
9.
O +
10.
I +
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–01 – LO: 13–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:33 PM
DATE MODIFIED:
10/16/2017 6:30 PM
157. Indicate the section (operating activities, investing activities, financing activities, or none) in which each of the
following would be reported on the statement of cash flows prepared by the indirect method:
(a)
Gain on sale of fixed assets
(b)
Net income
(c)
Retirement of long-term debt
(d)
Sale of common stock
(e)
Distribution of stock dividends
(f)
Payment of cash dividends
(g)
Purchase of fixed assets
(h)
Sale of fixed assets
(i)
Receipt of interest revenue
(j)
Payment of interest expense
ANSWER:
(a)
operating activities
(b)
operating activities
(c)
financing activities
(d)
financing activities
(e)
none
(f)
financing activities
Chapter 13 – Statement of Cash Flows
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Page 67
activities using the indirect method.
ANSWER:
Net income
$65,000
Adjustments to reconcile net income to net cash flow
from operating activities:
Changes in current operating assets and liabilities:
Increase in accounts receivable
(2,300)
Decrease in inventory
4,500
Decrease in accounts payable
(900)
Net cash flow from operating activities
$66,300
POINTS:
1
DIFFICULTY:
Moderate
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–02 – LO: 13–02
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.24 – Statement of Cash Flows
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:33 PM
DATE MODIFIED:
10/16/2017 6:30 PM
160. Kennedy, Inc. reported the following data:
Net income
$118,000
Depreciation expense
15,000
Loss on disposal of equipment
(10,000)
Gain on sale of building
20,000
Increase in accounts receivable
7,000
Decrease in accounts payable
(2,000)
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
ANSWER:
Cash flows from operating activities:
Net income
$118,000
Adjustments to reconcile net income to net
cash flow from operating activities:
Depreciation
15,000
Loss from disposal of equipment
10,000
Gain on sale of building
(20,000)
Changes in current operating assets and
liabilities:
Increase in accounts receivable
(7,000)
Decrease in accounts payable
(2,000)
Net cash flow from operating activities
$114,000
POINTS:
1
DIFFICULTY:
Easy
Bloom’s: Applying
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.13–02 – LO: 13–02