11.6-19 Under the direct method of preparing the statement of cash flows, which statement is CORRECT
regarding the method of computing interest revenue?
A) Interest revenue plus a decrease in interest receivable
B) Sales plus a decrease in interest receivable
C) Interest revenue less a decrease in interest receivable
D) Interest revenue plus an increase in interest receivable
11.6-20 Under the direct and indirect methods of preparing the statement of cash flows, cash receipts from
financing activities include:
A) sale of PPE.
B) selling treasury shares.
C) issuing ordinary shares for cash.
D) both B and C.
11.6-21 The indirect method of preparing the operating section of the statement of cash flows:
A) is the least popular method used.
B) reports all cash receipts and cash payments from operating activities.
C) reconciles net income to net cash provided by operating activities.
D) reports different amounts for investing and financing activities than the direct method.
11.6-22 The direct method of preparing the statement of cash flows is preferred primarily because of the
way it reports:
A) investing activities.
B) financing activities.
C) operating activities.
D) noncash activities.
11.6-23 Which of the following would NOT appear on a statement of cash flows prepared using the direct
method?
A) Cash received from sale of assets
B) Cash payments for inventory
C) Loss on sale of assets
D) All of these items would appear
11.6-24 Which of the following would NOT appear on a statement of cash flows using the direct method?
A) Payments to a supplier
B) Proceeds from issuance of ordinary shares
C) Cost of goods sold
D) Collections from customers
11.6-25 All of the following would appear on a direct method statement of cash flows EXCEPT:
A) cash purchase of equipment.
B) net income.
C) cash payments for interest and taxes.
D) cash receipts from customers.
11.6-26 All of the following would be reported in the financing activities section under the direct method
statement of cash flows EXCEPT:
A) issuing ordinary shares.
B) paying a cash dividend.
C) purchasing treasury shares.
D) issuing a share dividend.
11.6-27 The amount of cash available from operations after paying for planned investments in PPE is:
A) operating cash flows.
B) investing cash flows.
C) cash flow per share.
D) free cash flow.
11.6-28 Free cash flow is:
A) net cash provided by financing activities less cash payments earmarked for investments in
PPE.
B) net cash provided by investing activities less cash payments earmarked for investments in
PPE.
C) net cash provided by operating activities less cash payments earmarked for investments in
PPE.
D) net cash provided by operating activities plus cash payments earmarked for investments in
PPE.
11.6-29 ReNew Corporation had accounts receivable of $90,000 at the beginning the year and $100,000 at
the end of the year. Sales on account for the year amounted to $465,000. The amount to be
reported on the statement of cash flows under the operating activities is:
A) $475,000.
B) $ 10,000.
C) ($10,000).
D) $455,000.
11.6-30 Kyoto Industries began the year with $81,500 in Accounts Receivable and ended the year with
$79,200 in Accounts Receivable. Sales for the year were $2,100,000. The cash collected from
customers during the year amounted to:
A) $2,097,700.
B) $2,181,500.
C) $2,102,300.
D) $2,179,200.
11.6-31 Cash sales and sales on account were $190,000 and $650,000, respectively. During the year
Accounts Receivable increased by $10,000. Cash received from customers was:
A) $200,000.
B) $830,000.
C) $850,000.
D) $840,000.
11.6-32 Cash sales and sales on account were $370,000 and $455,000, respectively. During the year
Accounts Receivable decreased by $35,000. Cash received from customers was:
A) $455,000.
B) $790,000.
C) $860,000.
D) $370,000.
11.6-33 ZCMI, Inc. reported an increase in Accounts Receivable of $7,000 and credit sales of $435,000.
Cash received from customers for the period were:
A) $435,000.
B) $ 7,000.
C) $428,000.
D) $421,000.
11.6-34 If the cash collections from customers amounted to $529,700 and the Accounts Receivable
account decreased $19,400 during the same period, sales for the period:
A) were $529,700.
B) were $510,300.
C) were $547,200.
D) cannot be determined from the information given.
11.6-35 Crawler’s Appliance Shop reported interest revenue of $9,000 for the year. Interest Receivable at
the beginning of the year was $4,100 and $3,500 at the end of the year. Interest received for the
period amounted to:
A) $9,600.
B) $9,000.
C) $ 600.
D) $8,400.
11.6-36 Newbury Books Company reported Insurance Expense for the current year of $38,900. During
the same period, the Prepaid Insurance account decreased $5,100. Cash paid for insurance was:
A) $38,900.
B) $ 5,100.
C) $33,800.
D) $44,000.
11.6-37 At the beginning of the year, Prepaid Insurance had a balance of $6,500. At the end of the year
the balance in Prepaid Insurance was $7,900. Insurance Expense as reported on the income
statement was $49,500. Payments for insurance during the year amounted to:
A) $49,500.
B) $50,900.
C) $48,100.
D) $57,400.
11.6-38 Pueblo-West LLC paid a total of $61,000 in cash for insurance. Pueblo-West’s Prepaid Insurance
account had a beginning balance $9,000 and an ending balance of $7,500. The amount of
Insurance Expense to be reported on Pueblo-West’s income statement for the year is:
A) $59,500.
B) $62,500.
C) $53,500.
D) $61,000.
11.6-39 Stockton-Meadows Incorporated reports an increase in Accounts Payable of $8,700 and an
increase in inventory of $51,000 for the current year. Accounts Payable relates solely to the
purchase of merchandise. Sales on account were $529,000 and cost of goods sold was $374,000.
The total purchases of merchandise for the period were:
A) $323,000.
B) $425,000.
C) $374,000.
D) $416,300.
11.6-40 Stockton-Meadows Incorporated reports an increase in Accounts Payable of $9,200 and an
increase in inventory of $45,000 for the current year. Accounts Payable relates solely to the
purchase of merchandise. Sales on account were $532,100 and cost of goods sold was $358,000.
The payments to suppliers for inventory during the period were:
A) $393,800.
B) $303,800.
C) $412,200.
D) $322,200.
11.6-41 Dimas Company reported sales of $555,000 and cost of goods sold of $398,000. Dimas’
Inventory account increased $21,000 and its Accounts Payable account (which relates solely to
the purchase of merchandise) decreased $17,000. The cash paid to purchase inventory was:
A) $394,000.
B) $360,000.
C) $436,000.
D) $402,000.
11.6-42 Berlin & Snider Enterprise’s Inventory account decreased $29,700 and its Accounts Payable
account (which relates solely to the purchase of merchandise) decreased $11,550 during the year.
Berlin & Snider also reported sales of $757,000 and cost of goods sold of $503,400 during the
same period. Berlin & Snider’s payments to suppliers for inventory during the year were:
A) $521,550.
B) $544,650.
C) $485,250.
D) $715,750.
11.6-43 Salary Expense on the income statement was $183,200 for the year ended December 31, 20X6.
The Salary Payable account decreased $19,230 during the same period. The amount of cash
payments to employees for the year ended December 31, 20X6:
A) was $163,970.
B) was $183,200.
C) was $202,430.
D) cannot be determined from the information given.
11.6-44 The amounts found in the Salaries Payable account for NovaLights Company were $13,200 and
$15,800 on December 31, 20X6and December 31, 20X7, respectively. Cash paid to employees
for the years ended December 31, 20X6 and December 31, 20X7 was $237,000 and $274,000,
respectively. NovaLights Company’s Salary Expense for the year ended December 31, 20X7,
was:
A) $239,600.
B) $234,400.
C) $271,400.
D) $276,600.
11.6-45 Big Springs Corporation sold some of its used equipment for $37,000. The indirect method
statement of cash flows shows an addition to net income of $5,000. The accumulated depreciation
on the equipment to date of sale was $36,000. The original cost of the equipment was:
A) $41,000.
B) $78,000.
C) $42,000.
D) $68,000.
11.6-46 Tri-Square Company reported PPE, net of accumulated depreciation, on January 1, 20X7 of
$625,300 and $713,200 on December 31, 20X7. The income statement showed a depreciation
expense of $47,900 and a $5,100 loss on sale of PPE. Tri-Square Company acquired $209,000 of
PPE during the year. The proceeds from the sale of PPE were:
A) $839,400.
B) $ 73,200.
C) $ 68,100.
D) $121,100.
11.6-47 Albers Enterprises uses the direct method when preparing its statement of cash flows. Albers sold
equipment with a book value of $51,000 at a gain of $7,000. The amount to be reported on the
statement of cash flows under “proceeds from the sale of PPE” is:
A) $44,000.
B) $ 7,000.
C) $58,000.
D) $51,000.
11.6-48 Southern Industries Corporation uses the direct method when preparing its statement of cash
flows. Southern Industries sold equipment with a book value of $15,000 at a loss of $2,000. The
amount to be reported on the statement of cash flows under “proceeds from the sale of PPE” is:
A) $15,000.
B) $17,000.
C) $ 2,000.
D) $13,000.
11.6-49 Productivity Enterprises uses the direct method when preparing its statement of cash flows.
Productivity sold equipment with a book value of $9,000 at a loss of $1,500. The amount to be
reported on the statement of cash flows in the operating activities section is:
A) ($1,500).
B) $ 0.
C) $ 7,500.
D) $10,500.
11.6-50 King Edward Company reported PPE, net of accumulated depreciation, on January 1, 20X7 at
$437,500 and $589,300 on December 31, 20X7. The income statement showed depreciation of
$39,200. King Edward Company acquired $287,000 of PPE during the year and reported
proceeds from the sale of PPE of $89,200 for the year. The gain or loss resulting from the sale of
PPE was a:
A) $5,050 gain.
B) $3,400 loss.
C) $6,800 loss.
D) $3,920 loss.
11.6-51 On January 1, 20X7, Santa Fe Accents, Inc., had a balance of $338,000 in the Investments
account. During 20X7, Santa Fe Accents sold investments for $125,000 cash, resulting in a
$12,000 gain. On December 31, 20X7, the Investments account showed a balance of $388,000.
The investments purchased during 20X7 totaled:
A) $175,000.
B) $300,000.
C) $163,000.
D) $ 75,000.
11.6-52 The balance in Treasury shares on January 1, 20X7 and December 31, 20X7 is, respectively,
$55,500 and $81,700. During the year, $58,500 of treasury shares was purchased. During the
year, treasury shares was sold for $1,300 over its cost. The proceeds from the sale of treasury
shares amounted to:
A) $33,600.
B) $32,300.
C) $31,000.
D) $31,000.
11.6-53 Retained Earnings had a balance on January 1, 20X7 and December 31, 20X7, respectively, of
$255,300 and $413,000. Net income for the year was $188,700 and the only other event affecting
Retained Earnings was the declaration of dividends. If there was no change in the Dividends
Payable account during the year, the payments for dividends:
A) were $376,000.
B) were $31,000.
C) were $38,000.
D) cannot be determined from the information given.