163) Favre Company reports depreciation expense of $40,000 for Year 2. Also, equipment
costing $240,000 was sold for a $10,000 loss in Year 2. The following selected information is
available for Favre Company from its comparative balance sheet. Compute the cash received
from the sale of the equipment.
At December 31
Year 2
Year 1
Equipment
$
510,000
$
750,000
Accumulated Depreciation-Equipment
328,000
500,000
A) $62,000.
B) $38,000.
C) $28,000.
D) $18,000.
E) $58,000.
164) Jordan’s net income for the year ended December 31, Year 2 was $185,000. Information
from Jordan’s comparative balance sheets is given below. Compute the cash received from the
sale of its common stock during Year 2.
At December 31
Year 2
Year 1
Common Stock, $5 par value
$
500,000
$
450,000
Paid-in capital in excess of par
948,000
853,000
Retained earnings
688,000
582,000
A) $185,000.
B) $106,000.
C) $95,000.
D) $50,000.
E) $145,000.
165) Salah’s net income for the year ended December 31, Year 2 was $175,000. Information
from Salah’s comparative balance sheets is given below. Compute the cash paid for dividends
during Year 2.
At December 31
Year 2
Year 1
Common Stock, $5 par value
$
500,000
$
450,000
Paid-in capital in excess of par
948,000
853,000
Retained earnings
688,000
582,000
A) $79,000.
B) $201,000.
C) $95,000.
D) $50,000.
E) $69,000.
166) Alfredo Inc. reports net income of $230,000 for the year ended December 31. It also reports
$87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its comparative
balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750 increase in accounts
payable, and a $12,500 decrease in wages payable. Calculate the cash provided (used) in
operating activities using the indirect method.
A) $376,450.
B) $351,450.
C) $356,450.
D) $319,950.
E) $263,750.
167) Gregor Company reports net income of $305,000 for the year ended December 31. It also
reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its
comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease
in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages
payable, and a $100,000 decrease in notes payable. Calculate the cash provided (used) in
operating activities using the indirect method.
A) $461,800.
B) $371,400.
C) $381,400.
D) $351,000.
E) $361,000.
168) Mayweather reports net income of $305,000 for the year ended December 31. It also reports
$93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative
balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid
expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a
$75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the net
increase in cash for the year.
A) $216,400.
B) $281,400.
C) $381,400.
D) $206,400.
E) $406,400.
169) Alvarez Company is preparing the company’s statement of cash flows for the fiscal year just
ended. The following information is available:
Retained earnings balance at the beginning of the year
$
233,000
Cash dividends declared for the year
50,000
Proceeds from the sale of equipment
85,000
Gain on the sale of equipment
4,500
Cash dividends payable at the beginning of the year
22,000
Cash dividends payable at the end of the year
30,000
Net income for the year
110,000
The ending balance in retained earnings is:
A) $343,000.
B) $213,000.
C) $293,000.
D) $297,500.
E) $301,000.
170) Barclays Company is preparing the company’s statement of cash flows for the fiscal year
just ended. The following information is available:
Retained earnings balance at the beginning of the year
$
233,000
Cash dividends declared for the year
50,000
Proceeds from the sale of equipment
85,000
Gain on the sale of equipment
4,500
Cash dividends payable at the beginning of the year
22,000
Cash dividends payable at the end of the year
30,000
Net income for the year
110,000
The amount of cash paid for dividends was:
A) $52,000.
B) $60,000.
C) $58,000.
D) $50,000.
E) $42,000.
Retained Earnings
$
50,000
Dividends Payable
$
8,000
Cash
$
42,000
171) Citi Company is preparing the company’s statement of cash flows for the fiscal year just
ended. The following information is available:
Cash dividends declared for the year
$
40,000
Cash dividends payable at the beginning of the year
17,000
Cash dividends payable at the end of the year
13,000
The amount of cash paid for dividends was:
A) $44,000.
B) $40,000.
C) $57,000.
D) $53,000.
E) $36,000.
Retained Earnings
$
40,000
Dividends Payable
$
Cash
$
44,000
172) If a company is using the indirect method to prepare the statement of cash flows, identify
where an increase in the accounts receivable account should be reported:
A) An increase in cash flows from operating activities
B) An increase in cash flows from investing activities
C) A decrease in cash flows from operating activities
D) A decrease in cash flows from investing activities
E) An increase in cash flows from financing activities
173) A decrease in the inventory account during the year should be reported on the indirect
method statement of cash flows as:
A) An increase in cash flows from operating activities
B) An increase in cash flows from investing activities
C) A decrease in cash flows from operating activities
D) A decrease in cash flows from investing activities
E) An increase in cash flows from financing activities
174) A cash dividend payment to shareholders during the year should be reported on the
statement of cash flows as:
A) An increase in cash flows from financing activities
B) An increase in cash flows from investing activities
C) A decrease in cash flows from operating activities
D) A decrease in cash flows from investing activities
E) A decrease in cash flows from financing activities
175) Northeast Inc. is preparing the company’s statement of cash flows for the fiscal year just
ended. Using the following information, determine the amount of cash flows from operating
activities using the indirect method:
Net income
$
182,000
Gain on the sale of equipment
12,300
Proceeds from the sale of equipment
92,300
Depreciation expense—equipment
50,000
Payment of bonds at maturity
100,000
Purchase of land
200,000
Issuance of common stock
300,000
Increase in merchandise inventory
35,400
Decrease in accounts receivable
28,800
Increase in accounts payable
23,700
Payment of cash dividends
32,000
A) $332,200.
B) $236,800.
C) $261,400.
D) $186,800.
E) $189,400.
176) Northeast Inc. is preparing the company’s statement of cash flows for the fiscal year just
ended. Using the following information, determine the amount of cash flows from investing
activities:
Net income
$
182,000
Gain on the sale of equipment
12,300
Proceeds from the sale of equipment
92,300
Depreciation expense—equipment
50,000
Payment of bonds at maturity
100,000
Purchase of land
200,000
Issuance of common stock
300,000
Increase in merchandise inventory
35,400
Decrease in accounts receivable
28,800
Increase in accounts payable
23,700
Payment of cash dividends
32,000
A) ($107,700).
B) $107,700.
C) ($200,000).
D) ($139,700).
E) ($207,700).
177) Northeast Inc. is preparing the company’s statement of cash flows for the fiscal year just
ended. Using the following information, determine the amount of cash flows from financing
activities:
Net income
$
182,000
Gain on the sale of equipment
12,300
Proceeds from the sale of equipment
92,300
Depreciation expense—equipment
50,000
Payment of bonds at maturity
100,000
Purchase of land
200,000
Issuance of common stock
300,000
Increase in merchandise inventory
35,400
Decrease in accounts receivable
28,800
Increase in accounts payable
23,700
Payment of cash dividends
32,000
A) ($168,000).
B) $200,000.
C) $168,000.
D) ($191,700).
E) $191,700.
178) A company had average total assets of $3,216,000, total cash flows of $1,320,000, cash
flows from operations of $554,000, and cash flows for plant assets of $850,000. The cash flow
on total assets ratio equals:
A) 41.04%.
B) 41.97%.
C) 26.43%.
D) 17.23%.
E) 64.39%.
95
179) Match each of the following items with the appropriate definitions.
(A) Financing activities
(B) Investing activities
(C) Statement of cash flows
(D) Indirect method
(E) Direct method
(F) Operating activities
________ (1) A method of computing and reporting that involves adjusting net income by
adding and subtracting items that that do not affect cash provided (used) by operating activities.
________ (2) A financial statement that reports the cash inflows and cash outflows for an
accounting period, and classifies those cash flows as operating, investing, or financing activities.
________ (3) A method of computing and reporting the net cash provided (used) by operating
activities that lists the major items of operating cash receipts, and then subtracts the major items
of operating cash payments.
________ (4) Transactions that include purchasing and selling plant assets and investments in
debt and equity securities.
________ (5) Transactions with a company’s owners and creditors that include obtaining cash
from issuing debt and repaying the amounts borrowed, and distributing cash to owners.
________ (6) Activities that involve the production or purchase of merchandise and the sale of
goods or services to customers, including expenditures related to administering the business.
180) For each of the following items, indicate whether it would be classified as an (O) operating
activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing
and investing activity.
________ (1) Received interest from investments in trading securities.
________ (2) Collected accounts receivable from customers.
________ (3) Issued bonds payable for cash.
________ (4) Paid wages to employees.
________ (5) Issued stock for cash.
________ (6) Sold equipment for cash.
________ (7) Purchased land in exchange for a note payable.
________ (8) Paid cash dividends.
________ (9) Received dividends from stock investments.
________ (10) Purchases of land for cash.
181) For each of the following items, indicate whether it would be classified as either an (O)
operating activity, an (I) investing activity, a (F) financial activity, or a significant (N) noncash
financing and investing activity.
________ (1) Cash sales of merchandise.
________ (2) Sale of land for cash.
________ (3) Signed a note payable in exchange for cash.
________ (4) Purchased supplies for cash.
________ (5) Paid cash to settle an account payable.
________ (6) Purchased a warehouse in exchange for shares of its stock.
________ (7) Paid interest on a note payable.
________ (8) Reissued treasury stock.
________ (9) Purchased equipment for cash.
________ (10) Purchased equipment in exchange for a 6-month note payable.
182) Explain the purpose and format of the statement of cash flows. Also describe its relevance
to decision makers.
183) Define and discuss the differences between operating, investing, and financing activities.
184) Define and explain significant noncash investing and financing activities and the method of
reporting them on the statement of cash flows.
185) Describe the format of the statement of cash flows, including the reporting of significant
noncash investing and financing activities.
186) Explain the value of separating cash flows into operating activities, investing activities, and
financing activities to financial statement users in analyzing cash flows and the company’s
financial performance and condition.
187) Define the cash flow on total assets ratio and explain how it is used to evaluate cash flows
and to assess company performance.
188) What are the steps involved in the preparation of the statement of cash flows?
189) Explain how the cash flows from operating activities section of the statement of cash flows
is prepared using the indirect method.
190) Explain how cash flows from investing and financing activities are determined.