76) Which of the following is correct?
A) Repayments of principal and interest both reduce financing activities cash flows.
B) Purchase of common stock shares for treasury is a cash outflow connected to investing
activities.
C) If a company borrows $450 million in long-term notes and repays $380 million of long-term
notes, these items must both be disclosed separately and not netted against each other in the
financing section of the cash flow statement.
D) Issuing common stock in exchange for the purchase of a building creates both a financing
activity and investing activity cash flow.
77) Which of the following would be a financing activities cash flow?
A) Common stock dividends received from an investment in another company.
B) Interest payments.
C) Purchase of treasury stock.
D) Purchase of a building by signing a note payable.
78) Lab Industries, Inc., issued $50,000 of bonds, paid cash dividends of $8,000, sold long-term
investments for $12,000, received $5,000 of dividend revenue, purchased treasury stock for
$15,000, and purchased new equipment for $19,000. What is the net cash flow from financing
activities?
A) $70,000 inflow.
B) $27,000 inflow.
C) $80,000 inflow.
D) $20,000 outflow.
79) Significant noncash financing and investing activities:
A) must be reported in the notes to the financial statements.
B) are not separately disclosed within the financial statements.
C) are disclosed in a separate schedule as a supplement to the statement of cash flows.
D) are reported as cash flows because of their significance.
80) A company acquired some land (independently appraised at $12,000) and paid for it by
issuing 1,000 shares of its common stock (par $10 per share; no market price was quoted). How
should this be reported on the statement of cash flows?
A) Report $12,000 as inflow and outflow of cash.
B) Report $12,000 as an inflow of cash.
C) The transaction should not be reported on the statement of cash flows.
D) Report in a schedule of significant noncash investing and financing activities.
81) Which of the following transactions is not reported in the statement of cash flows as a cash
flow from investing activities?
A) Selling a depreciable asset for cash at a loss.
B) Purchasing a patent using cash.
C) Purchasing land in exchange for common stock.
D) Purchasing shares of common stock of another company using cash.
82) Which of the following is not reported as a cash flow from investing activities?
A) Sale of a depreciable asset for cash.
B) Purchasing land in exchange for common stock.
C) Selling a long-term investment at a loss for cash.
D) Selling a patent in exchange for cash.
83) KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a
$215,000 note payable.
How would this transaction be reported within the cash flow from investing activities section of
the cash flow statement?
A) An outflow of $250,000.
B) An outflow of $215,000.
C) An outflow of $35,000.
D) It would not be reported in the investing activities section of the cash flow statement.
84) KAJ Incorporated purchased a machine costing $250,000 by paying $35,000 and signing a
$215,000 note payable.
How would this transaction be reported within the cash flow from financing activities section of
the cash flow statement?
A) An inflow of $215,000.
B) An outflow of $215,000.
C) An outflow of $35,000.
D) It would not be reported in the financing activities section.
85) During 2019, Tommy’s Toys reported the following: long-term debt repayments, $503
million; interest paid, $143 million; proceeds from exercise of stock options, $27 million, and
issue of common stock in exchange for land costing $10 million. What is the 2019 net cash flow
from financing activities?
A) $476 million net cash outflow.
B) $530 million net cash outflow.
C) $673 million net cash outflow.
D) $76 million net cash outflow.
86) Which of the following would not be reported as a financing activities cash flow?
A) Issuing common stock for cash.
B) Cash dividend payments.
C) Purchasing treasury stock.
D) Purchase of a building by signing a note payable.
87) A company’s 2019 income statement reported total sales revenue of $1,200,000; accounts
receivable increased by $25,000 and the unearned sales revenue account decreased $15,000
during 2019. How much cash was collected from customers during 2019?
A) $1,225,000.
B) $1,160,000.
C) $1,175,000.
D) $1,185,000.
88) Bold Company’s 2019 income statement reported total sales revenue of $250,000. During
2019, accounts receivable decreased by $20,000 and accounts payable increased $10,000. How
much cash was collected from customers during 2019?
A) $230,000.
B) $270,000.
C) $250,000.
D) $280,000.
89) The financial statements for World Company show the following:
Cost of goods sold, $725,000.
Beginning Balance
Ending Balance
Merchandise Inventory
$45,000
$56,000
Accounts Receivable
53,000
50,000
Accounts Payable
37,000
42,000
How much cash was paid to suppliers?
A) $731,000.
B) $736,000.
C) $719,000.
D) $714,000.
= Cost of goods sold
+ Inventory increase
)
Cash paid to supplier
90) Madison Company had sales of $154,000. Additional information from the balance sheet is
below:
Beginning Balance
Ending Balance
Accounts Receivable
$22,000
$28,000
Accounts Payable
21,000
25,000
How much cash was collected from customers?
A) $148,000.
B) $150,000.
C) $154,000.
D) $160,000.
Cash collected from customers = $148,000
= Sales
)
91) Amanda Company reported income tax expense of $250,000. Beginning income taxes
payable was $30,000, while ending income taxes payable was $25,000, and accounts payable
decreased $10,000. How much cash was paid for taxes?
A) $280,000.
B) $255,000.
C) $245,000.
D) $265,000.
92) Aaron Inc. reported operating expenses during 2019 of $765,000 (including $80,000 of
depreciation expense). Prepaid expenses increased $25,000 while accrued liabilities increased
$43,000. How much cash was paid for operating expenses during 2019?
A) $702,000.
B) $622,000.
C) $667,000.
D) $703,000.
93) A company reported an increase in accounts payable and a decrease in inventory during
2019. Which of the following statements is correct?
A) Cash paid to suppliers equals cost of goods sold plus both the increase in accounts payable
and the decrease in inventory.
B) Cash paid to suppliers equals cost of goods sold minus both the increase in accounts payable
and the decrease in inventory.
C) Cash paid to suppliers equals cost of goods sold minus the increase in accounts payable, plus
the decrease in inventory.
D) Cash paid to suppliers equals cost of goods sold plus the increase in accounts payable, minus
the decrease in inventory.
94) A company reported an increase in accounts receivable and an increase in unearned sales
revenues during 2019. Which of the following statements is correct?
A) Cash collected from customers equals sales revenues plus both the increase in accounts
receivable and the increase in unearned sales revenues.
B) Cash collected from customers equals sales revenues minus both the increase in accounts
receivable and the increase in unearned sales revenues.
C) Cash collected from customers equals sales revenues plus the increase in accounts receivable,
minus the increase in unearned sales revenues.
D) Cash collected from customers equals sales revenues minus the increase in accounts
receivable, plus the increase in unearned sales revenues.
95) A company reported an increase in prepaid rent and an increase in accrued liabilities during
2019. Which of the following statements is correct?
A) When determining cash paid for operating expenses, both the increase in prepaid rent and the
increase in accrued liabilities are subtracted from operating expenses.
B) When determining cash paid for operating expenses, both the increase in prepaid rent and the
increase in accrued liabilities are added to operating expenses.
C) When determining cash paid for operating expenses, the increase in prepaid rent is added to
operating expenses and the increase in accrued liabilities is subtracted from operating expenses.
D) When determining cash paid for operating expenses, the increase in prepaid rent is subtracted
from operating expenses and the increase in accrued liabilities is added to operating expenses.
96) A company reported an increase in accrued sales revenues and a decrease in unearned sales
revenues during 2019. Which of the following statements is correct?
A) When determining cash collected from customers, both the increase in accrued revenues and
the decrease in unearned revenues are subtracted from sales revenues.
B) When determining cash collected from customers, both the increase in accrued revenues and
the decrease in unearned revenues are added to sales revenues.
C) When determining cash collected from customers, the increase in accrued revenues is
subtracted from sales revenues and the decrease in unearned revenues is added to sales revenues.
D) When determining cash collected from customers, the increase in accrued revenues is added
to sales revenues and the decrease in unearned revenues is subtracted from sales revenues.
97) Slipper Company sold a productive asset, a machine, for cash. It originally cost Slipper
$20,000. The accumulated depreciation at the date of disposal was $15,000. A gain on the
disposal of $2,000 was reported. What was the asset’s selling price?
A) $7,000.
B) $3,000.
C) $4,000.
D) $5,000.
98) Halbur Company reported the following for its recent year of operation:
From the income statement:
Depreciation expense
$
1,000
Loss on sale of equipment
3,000
From the comparative balance sheet:
Beginning balance, equipment
$
12,500
Ending balance, equipment
8,000
Beginning balance, accumulated depreciation
2,000
Ending balance, accumulated depreciation
2,400
No new equipment was purchased during the year. What was the selling price of the equipment?
A) $3,900.
B) $1,000.
C) $900.
D) $600.
Accumulated depreciation ending balance = $2,400
= Beginning balance
)
99) Atkins Corporation has provided the following information for the year ended December 31,
2019:
• The equipment account balance increased by $200,000 from the beginning of the year to the
end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the
beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
Which of the following statements is correct with respect to determining cash flow from
investing activities? Assume that the equipment purchase and sale resulted in cash flows.
A) A $60,000 cash inflow is reported from the equipment sale.
B) A $200,000 cash outflow is reported for equipment purchases.
C) A $50,000 cash outflow is reported for the equipment sale.
D) A $250,000 cash outflow is reported for equipment purchases.
100) Atkins Corporation has provided the following information for the year ended December
31, 2019:
• The equipment account balance increased by $200,000 from the beginning of the year to the
end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the
beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
Which of the following statements is incorrect with respect to preparation of the statement of
cash flows? Assume that the equipment purchase and sale resulted in cash flows.
A) A $30,000 cash inflow is reported from the equipment sale.
B) Using the indirect method, net income is increased by the $65,000 depreciation expense.
C) Using the indirect method, net income is decreased by the $10,000 gain on the sale of the
equipment.
D) A $60,000 cash inflow is reported from the equipment sale.
101) Atkins Corporation has provided the following information for the year ended December
31, 2019:
• The equipment account balance increased by $200,000 from the beginning of the year to the
end of the year.
• The equipment accumulated depreciation account balance increased by $35,000 from the
beginning of the year to the end of the year.
• Equipment costing $50,000 was sold during the year resulting in a $10,000 gain.
• Depreciation expense recorded on the equipment during the year was $65,000.
What was the amount of the investing activities cash inflow from the sale of the equipment?
Assume that the equipment purchase and sale resulted in cash flows.
A) $30,000.
B) $60,000.
C) $40,000.
D) $50,000.
58
102) For each of the following items, indicate with the letter X whether the transaction would
appear in the operating, investing, or financing activities section of the statement of cash flows,
or is not reported in any one of these three categories. Assume the indirect method is used for
reporting.
Transaction
Activity
Operating
Investing
Financing
None
1.
Revenue minus expenses
from operations (i.e., net
income)
2.
Collection of cash
dividend.
3.
Payment of a cash
dividend previously
declared.
4.
Purchase of land in
exchange for a long-term
note payable.
5.
Issuance of common stock
for cash.
6.
Cash settlement of a short-
term note payable
(principal only).
7.
Sale of a productive asset
for cash (no gain or loss on
the sale).
8.
Purchase of a patent.
9.
Sale of a short-term
marketable security for
cash (no gain or loss on the
sale).
10.
Increase in accounts
receivable.
11.
Issuance of a stock
dividend.
103) State the three cash flow classifications that are reported within a statement of cash flows
and describe the primary activities included in each.