112) The indirect method for the preparation of the operating activities section of the statement
of cash flows:
A) Separately lists each major item of operating cash receipts.
B) Separately lists each major item of operating cash payments.
C) Reports net income and then adjusts it for items necessary to determine net cash provided or
used by operating activities.
D) Is required if the company is a merchandiser.
E) Must not be used in all circumstances.
113) The direct method of reporting operating cash flows:
A) Separately lists cash receipts and payments.
B) Must be used by all companies.
C) Is used by most companies.
D) Is considered supplementary disclosure.
E) Is not recommended by the FASB, but is commonly used.
114) Of the following, which one affects cash during a period?
A) The declaration of a stock dividend.
B) Writing off an uncollectible account receivable.
C) The declaration of a cash dividend.
D) An adjusting entry recognizing the expiration of prepaid insurance.
E) The payment of interest expense accrued in a previous accounting period.
115) When using the indirect method to calculate and report the net cash provided or used by
operating activities, net income is adjusted for all but which of the following?
A) Gains and losses from nonoperating items.
B) Revenues and expenses that did not provide or use cash.
C) Changes in noncurrent assets and noncurrent liabilities.
D) Changes in current liabilities related to operating activities.
E) Depreciation and amortization expense.
116) When using the indirect method to calculate and report net cash provided or used by
operating activities, which of the following is subtracted from net income?
A) Decrease in income taxes payable.
B) Depreciation expense.
C) Amortization of intangible assets.
D) Bad debts expense.
E) Decrease in merchandise inventory.
117) The first line item in the operating activities section of a spreadsheet for a statement of cash
flows prepared using the indirect method is:
A) Cash.
B) Cash received from customers.
C) Increase (decrease) in accounts receivable.
D) Net income (loss).
E) Adjustments to net income.
118) When preparing a statement of cash flows using the indirect method, each of the following
should be classified as an operating cash flow except:
A) An increase in accounts receivable.
B) A decrease in accounts payable.
C) Proceeds from the disposal of a long-term asset with no gain or loss.
D) An increase in prepaid expenses.
E) A decrease in accrued expenses payable.
119) A company’s Inventory balance at the end of the year was $188,000 and $200,000 at the
beginning of the year. Its Accounts Payable balance at the end of the year was $84,000 and
$80,000 at the beginning of the year, and its cost of goods sold for the year was $720,000. The
company’s total amount of cash payments for merchandise during the year equals:
A) $704,000.
B) $712,000.
C) $720,000.
D) $728,000.
E) $736,000.
120) Use the following information to calculate cash paid for wages and salaries:
Salaries expense
$
168,000
Salaries payable, January 1
6,400
Salaries payable, December 31
10,600
A) $157,400.
B) $163,800.
C) $168,000.
D) $172,200.
E) $174,400.
Salaries Expense
$
168,000
Salaries Payable
$
Cash
$
163,800
121) Use the following information to calculate cash paid for salaries:
Salaries expense
$
175,000
Salaries payable, January 1
20,000
Salaries payable, December 31
12,000
A) $175,000.
B) $183,000.
C) $167,000.
D) $143,000.
E) $155,000.
Salaries Expense
$
175,000
Salaries Payable
$
Cash
$
183,000
122) Use the following information to calculate cash paid for income taxes:
Income tax expense
$
43,000
Income tax payable, January 1
9,100
Income tax payable, December 31
10,200
A) $23,700.
B) $52,100.
C) $53,200.
D) $41,900.
E) $43,000.
Income tax Expense
$
43,000
Income tax Payable
$
Cash
$
41,900
123) Use the following information to calculate cash paid for income taxes:
Income tax expense
$
50,000
Income tax payable, January 1
9,000
Income tax payable, December 31
7,000
A) $50,000.
B) $59,000.
C) $57,000.
D) $48,000.
E) $52,000.
Income tax Expense
$
50,000
Income tax Payable
$
2,000
Cash
$
52,000
124) Use the following information about the current year’s operations of a company to calculate
the cash paid for merchandise.
Cost of goods sold
$
226,000
Merchandise inventory, January 1
54,800
Merchandise inventory, December 31
57,400
Accounts payable, January 1
54,400
Accounts payable, December 31
59,800
A) $218,000.
B) $223,200.
C) $220,000.
D) $228,800.
E) $234,000.
Cost of Goods Sold
$
226,000
Merchandise Inventory
$
Accounts Payable
$
Cash
$
125) Use the following information about the current year’s operations of a company to calculate
the cash paid for merchandise.
Cost of goods sold
$
735,000
Merchandise inventory, January 1
84,700
Merchandise inventory, December 31
82,400
Accounts payable, January 1
54,500
Accounts payable, December 31
60,200
A) $727,000.
B) $726,300.
C) $732,700.
D) $737,300.
E) $737,700.
Cost of Goods Sold
$
735,000
Merchandise Inventory
$
Accounts Payable
$
Cash
$
126) Use the following information about the current year’s operations of a company to calculate
the cash paid for merchandise.
Cost of goods sold
$
500,000
Merchandise inventory, January 1
85,000
Merchandise inventory, December 31
97,000
Accounts payable, January 1
68,000
Accounts payable, December 31
60,000
A) $585,000.
B) $520,000.
C) $480,000.
D) $508,000.
E) $512,000.
Cost of Goods Sold
$
500,000
Merchandise Inventory
$
Accounts Payable
$
Cash
$
127) When preparing a statement of cash flows using the indirect method, which of the following
is correct?
A) Proceeds from the sale of equipment should be added to net income in the operating activities
section.
B) A loss on the sale of land should be added to net income in the operating activities section.
C) The declaration of a cash dividend should be a use of cash in the financing activities section.
D) The issuance of a stock dividend should be a use of cash in the financing activities section.
E) The purchase of land and a building by issuing a long-term note payable should be a source of
cash in the financing activities section.
128) A company’s income statement showed the following: net income, $134,000; depreciation
expense, $30,000; and gain on sale of plant assets, $4,000. An examination of the company’s
current assets and current liabilities showed the following changes: accounts receivable
decreased $9,400; merchandise inventory increased $18,000; prepaid expenses increased $6,200;
accounts payable increased $3,400. Calculate the net cash provided or used by operating
activities.
A) $156,600.
B) $141,000.
C) $96,600.
D) $148,600.
E) $88,600.
129) A company’s income statement showed the following: net income, $124,000 and
depreciation expense, $30,000. An examination of the company’s current assets and current
liabilities showed the following changes: accounts receivable decreased $9,400; merchandise
inventory increased $18,000; and accounts payable increased $3,400. Calculate the net cash
provided or used by operating activities.
A) $118,000.
B) $159,200.
C) $123,200.
D) $148,800.
E) $178,000.
130) Use the following information and the indirect method to calculate the net cash provided or
used by operating activities:
Net income
$
85,300
Depreciation expense
12,000
Gain on sale of land
7,500
Increase in merchandise inventory
2,050
Increase in accounts payable
6,150
A) $69,900.
B) $108,900.
C) $93,900.
D) $85,700.
E) $81,600.
Net income
$
85,300
Depreciation expense
12,000
Gain on sale of land
(7,500
)
Increase in merchandise inventory
(2,050
)
Increase in accounts payable
6,150
Net cash used by operations
$
93,900
131) In preparing a company’s statement of cash flows using the indirect method, the following
information is available:
Net income
$
52,000
Accounts payable decreased by
18,000
Accounts receivable increased by
25,000
Inventories increased by
5,000
Cash dividends paid
14,000
Depreciation expense
20,000
Net cash provided by operating activities was:
A) $120,000.
B) $71,000.
C) $70,000.
D) $24,000.
E) $110,000.
Net income
$
Depreciation exp.
Increase in A/R
(25,000
)
Increase in Inventories
)
Decrease in A/P
(18,000
)
$
132) In preparing a company’s statement of cash flows using the indirect method, the following
information is available:
Net income
$
52,000
Accounts payable increased by
18,000
Accounts receivable decreased by
25,000
Inventories decreased by
5,000
Cash dividends paid
14,000
Depreciation expense
20,000
Net cash provided by operating activities was:
A) $120,000.
B) $71,000.
C) $70,000.
D) $24,000.
E) $110,000.
Net income
$
Depreciation exp.
Decrease in A/R
Decrease in Inventories
Increase in A/P
$
120,000
133) In preparing a company’s statement of cash flows using the indirect method, the following
information is available:
Net income
$
52,000
Accounts payable increased by
18,000
Accounts receivable decreased by
25,000
Inventories increased by
5,000
Depreciation expense
30,000
Net cash provided by operating activities was:
A) $120,000.
B) $60,000.
C) $70,000.
D) $80,000.
E) $130,000.
Net income
$
Depreciation exp.
Decrease in A/R
Increase in Inventories
)
Increase in A/P
$
120,000
134) In preparing a company’s statement of cash flows using the indirect method, the following
information is available:
Net income
$
52,000
Accounts payable decreased by
18,000
Accounts receivable increased by
25,000
Inventories increased by
5,000
Depreciation expense
30,000
Net cash provided by operating activities was:
A) $34,000.
B) $60,000.
C) $70,000.
D) $80,000.
E) $52,000.
Net income
Depreciation exp.
Increase in A/R
)
Increase in Inventories
)
Decrease in A/P
)
135) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for
$50,000 cash. The amount that should be reported as a source of cash under cash flows from
investing activities is:
A) $50,000.
B) $5,000.
C) $45,000.
D) Zero. This is an operating activity.
E) Zero. This is a financing activity.
136) A machine with a cost of $130,000 and accumulated depreciation of $85,000 is sold for
$50,000 cash. The amount that should be reported in the operating activities section reported
under the direct method is:
A) $50,000.
B) $5,000.
C) $45,000.
D) $0.
E) $35,000.