1) A $10,000 investment on the books of the company is sold for $11,000. How does
this transaction affect operating, investing, and financing activities under the indirect
method?
2) Match each account classification with its example.
3) Place the following items in the correct order as they would appear in the statement
of cash flows:
1> Beginning cash balance
2> Ending cash balance
3> Investing activities
4> Financing activities
5> Net increase (decrease) in cash
6> Operating activities
4) A company establishes a petty cash fund for $400. By the end of the month,
employees had made the following expenditures from the fund: supplies, $150; fuel for
deliveries, $120; postage, $75; miscellaneous, $35. Record the entry to recognize
expenditures from the petty cash fund.
5) During the year, a company issues common stock for $50,000 and repays previously
borrowed amounts of $75,000. In addition, the company pays dividends of $5,000 to
stockholders. Determine the amount of financing cash flows the company will report in
the current year.
6) Fidelity Systems reports net income of $80 million. Included in that number is
depreciation expense of $8 million, and a gain on the sale of equipment of $1 million.
Records reveal increases in Accounts Receivable, Inventory, and Accounts Payable of
$4 million, $3 million, and $2 million, respectively. Calculate Fidelitys net cash flows
from operating activities using the indirect method.
7) During 2015, its first year of operations, a company provides services on account of
$250,000. By the end of 2015, cash collections on these accounts total $130,000. The
company estimates that 10% of accounts receivable will be uncollectible. Record the
adjustment for uncollectible accounts on December 31, 2015 .
8) Assume a companys sales are $1.6 million in 2014, $1.8 million in 2015, and $1.7
million in 2016 . What is the percentage change from 2014 to 2015? What is the
percentage change from 2015 to 2016? Be sure to indicate whether the percentage
change is an increase or a decrease.
9) A company reports the following amounts at the end of the year: Total sales =
$500,000; sales discounts = $10,000; sales returns = $30,000; sales allowances =
$20,000. Compute net revenues.
10) Sandy Sensations purchases twenty, $1,000, 7%, 10-year bonds issued by Pizza Pier
for $21,488 on January 1, 2015 . The market interest rate for bonds of similar risk and
maturity is 6%. Interest is received semi-annually on June 30 and December 31 .
1> Record the investment in bonds.
2> Record receipt of the first interest payment on June 30, 2015 .