Chapter 13 Statement of Cash Flows 13-21
105. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much cash was used to acquire new equipment during 2018?
A. $3,600
B. $27,600
C. $41,000
D. $24,000
13–22 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
106. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much is the net increase or decrease in cash and cash equivalents during 2018?
A. $63,700 increase
B. $9,900 decrease
C. $35,400 decrease
D. $16,200 increase
Chapter 13 Statement of Cash Flows 13-23
107. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much cash was received from the issuance of stock during 2018?
A. $88,200
B. $22,900
C. $11,450
D. $25,200
13–24 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
108. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much cash was paid for income taxes during 2018?
A. $20,300
B. $11,700
C. $30,300
D. $16,000
Chapter 13 Statement of Cash Flows 13-25
109. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much cash was provided/(used) by financing activities in 2018?
A. $6,800
B. $14,100
C. $16,400
D. $300
13–26 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
110. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much cash was paid for dividends during 2018?
A. $20,700
B. $2,800
C. $2,300
D. $16,100
Chapter 13 Statement of Cash Flows 13-27
111. Marquette Décor is a merchandiser that operates a small retail store. Comparative balance
sheets for the years ending December 31, 2018 and 2017 and its income statement for
2018 follow:
December 31
Assets
2018
2017
Cash
$ 35,400
$ 45,300
Accounts receivable
11,400
14,500
Merchandise inventories
36,500
34,100
Equipment
90,000
66,000
Accumulated depreciation
(28,600)
(31,400)
Total assets
$144,700
$128,500
Liabilities and Stockholders’ Equity
Accounts payable
$ 14,300
$ 12,500
Income taxes payable
4,500
8,800
Long-term notes payable
16,500
23,000
Common stock, $2 par
88,200
65,300
Retained earnings
21,200
18,900
Total liabilities and stockholders’ equity
$144,700
$128,500
Sales
$224,000
Cost of goods sold
123,000
Depreciation expense
14,000
Other expenses
56,000
Gain on sale of equipment
3,400
Income taxes
16,000
Net income
$ 18,400
During the year, equipment with an original cost of $17,000, and accumulated depreciation
totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year.
How much is the net cash provided/(used) by investing activities during 2018?
A. ($37,400)
B. $3,600
C. ($20,400)
D. None of the answer choices are correct.
112. Which of the following is subtracted from net income under the indirect method to determine
net cash provided/(used) by operating activities?
A. Loss on sale of equipment
B. Decrease in prepaid insurance
C. Increase in merchandise inventory
D. Increase in accounts payable
113. Which of the following is not an addition to net income when determining the cash flows
from operating activity under the indirect method?
A. Depreciation
B. Gain on sale of equipment
C. Decrease in accounts receivable
D. Increase in wages payable
13–28 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
114. Tropical Splendor’s statement of cash flows showed the following totals:
Cash provided/(used) by operating activities$ 54,000
Cash provided/(used) by financing activities 21,100
Cash provided/(used) by investing activities (49,000)
Which statement most likely explains what occurred during the year?
A. Tropical Splendor is using cash from operations and selling long-term assets to pay
back loans.
B. Tropical Splendor is using cash from operations and borrowing money from the bank
to buy long-term assets.
C. Tropical Splendor is using its profits and selling plant assets in order to repay debt.
D. Tropical Splendor is using money from the sale of long-term assets to fund its
operations and to repay debt.
Chapter 13 Statement of Cash Flows 13-29
MATCHING
115. Classify each of the following items based on the section of the statement of cash flows in
which it will be reported if the direct method is used, using the respective letter for each
activity below:
Operating activities O
Investing activities I
Financing activities F
If an item is not reported in any of these activity sections, place an X in the space provided.
______ 1. Paid cash dividends to stockholders
______ 2. Purchased of a building by issuing a mortgage payable
______ 3. Paid interest that had been accrued in a previous period
______ 4. Purchased another business for cash
______ 5. Issued bonds at a discount
______ 6. Paid suppliers for inventory
______ 7. Received interest revenue
______ 8. Collected cash from customers
______ 9. Collected a principal payment on a long-term note
______ 10. Paid cash to retire long-term debt
______ 11. Paid income taxes
______ 12. Received cash from the sale of a machine no longer in use
13–30 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
116. Indicate how each item listed below should be reported in the operating activities section of
the statement of cash flows under the indirect method using the coding that follows:
A. Added to net income
D. Deducted from net income
X. Item does not appear in the operating activities section under the indirect
method
______ 1. Gain on sale of equipment
______ 2. Loss on sale of building
______ 3. Decrease in prepaid insurance
______ 4. Increase in income taxes payable
______ 5. Depreciation expense
______ 6. Decrease in accounts payable
______ 7. Increase in supplies
______ 8. Amortization expense
______ 9. Increase in merchandise inventory
______ 10. Decrease in unearned revenue
______ 11. Proceeds from the sale of equipment
Answer
Chapter 13 Statement of Cash Flows 13-31
EXERCISES
117. Determine for each item below whether the transaction results in a cash inflow or outflow in
the statement of cash flows using the direct method, and indicate whether the item is an
operating, investing, or financing activity by placing an X in the appropriate columns.
Transaction Inflow Outflow Operating Investing Financing
A. Receipt of interest
B. Payment of dividends
C. Purchase of building for cash
D. Receipt from a credit customer
E. Loan repayment to bank
F. Cash sale to customer
G. Payment to supplier
H. Payment of taxes
I. Cash received from sale of land
J. Proceeds from note payable
Answer
13–32 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
118. Nature’s Dairy produces dairy products and has incurred the following transactions during
the year:
A. Retired $62,000 of long-term bonds
B. Sold a warehouse for $320,000
C. Issued a long-term note payable for $440,000
D. Purchased a new packaging machine for $145,000
E. Purchased new equipment for $80,000
F. Reported a loss on the disposal of old equipment of $6,500
G. Obtained a long-term bank loan for $120,000
H. Paid cash dividends of $88,000
Classify each of these transactions as an operating, investing, or a financing activity on the
statement of cash flows, and indicate whether each activity is a source of cash or a use of
cash. If an item is not reported in any activity section, indicate so.
Answer
119. Ergonomic Enterprises reported the following transactions during 2017:
1. Purchased $120,000 of 8-year bonds issued by PM Motors
2. Purchased common stock in Delta Enterprises, as a long-term investment, for
$33,000
3. Acquired land valued at $98,000 in exchange for one of Ergonomic’s warehouses
4. Sold equipment with an original cost of $43,000 for a gain of $11,000; accumulated
depreciation on the equipment sold was $40,000
5. Paid dividends totaling $32,000
5. Purchased new equipment for $55,000 cash
Prepare the investing activities section of Ergonomic Enterprises’ statement of cash flows for
2017.
Answer
Chapter 13 Statement of Cash Flows 13-33
120. Euclid Brewery reported the following balances in its Equipment and Accumulated
Depreciation accounts during 2017:
January 1 December 31
Equipment $115,000 $140,000
Accumulated depreciation, equipment 30,000 12,000
During 2017, Euclid sold equipment for $18,500 that originally cost $35,000. The book value
of the equipment at the time of sale was $9,000. Net income for 2017 was $380,000.
A. How much depreciation expense was recorded for equipment by Euclid Brewery
during 2017?
B. What was the cost of equipment purchased during the year?
C. Show how the effects of these transactions will be reported by preparing Euclid
Brewery’s operating and investing activities sections of its statement of cash flows.
13–34 Test Bank to accompany Jiambalvo Managerial Accounting 6th Edition
121. The income statement for 2018 and comparative balance sheets of Daniel Divers for 2017
and 2018 appear below. Dividends totaling $51,200 were paid during the year. Equipment
costing $21,500 with a book value of $19,200 was sold for $8,900 cash during the year.
December 31
Assets
2018
2017
Cash
$ 56,800
$ 58,300
Accounts receivable
14,500
12,200
Merchandise inventories
22,600
30,000
Equipment
112,000
98,700
Accumulated depreciation
(35,600)
(28,400)
Total assets
$170,300
$170,800
Liabilities and Stockholders’ Equity
Accounts payable
$ 31,500
$ 34,700
Income taxes payable
8,900
7,400
Long-term notes payable
46,700
52,300
Common stock, $0.50 par
37,600
32,100
Retained earnings
45,600
44,300
Total liabilities and stockholders‘ equity
$170,300
$170,800
Sales
$389,000
Cost of goods sold
178,000
Depreciation expense
24,000
Interest expense
Other expenses
2,700
109,700
Gain on sale of equipment
6,600
Income taxes expense
28,700
Net income
$ 52,500
Use the direct method and prepare the operating activities section of the statement of cash
flows for Daniel Divers for the year ending December 31, 2018. You may omit the statement
heading.
Answer
Chapter 13 Statement of Cash Flows 13-35
122. The income statement for 2018 and comparative balance sheets of Daniel Divers for 2017
and 2018 appear below. Dividends totaling $51,200 were paid during the year. Equipment
costing $21,500 with a book value of $19,200 was sold for $8,900 cash during the year.
December 31
Assets
2018
2017
Cash
$ 56,800
$ 58,300
Accounts receivable
14,500
12,200
Merchandise inventories
22,600
30,000
Equipment
112,000
98,700
Accumulated depreciation
(35,600)
(28,400)
Total assets
$170,300
$170,800
Liabilities and Stockholders’ Equity
Accounts payable
$ 31,500
$ 34,700
Income taxes payable
8,900
7,400
Long-term notes payable
46,700
52,300
Common stock, $0.50 par
37,600
32,100
Retained earnings
45,600
44,300
Total liabilities and stockholders’ equity
$170,300
$170,800
Sales
$389,000
Cost of goods sold
178,000
Depreciation expense
24,000
Interest expense
Other expenses
2,700
109,700
Gain on sale of equipment
6,600
Income taxes expense
28,700
Net income
$ 52,500
Prepare the operating activities section of the 2018 statement of cash flows using the
indirect method. You may omit the statement heading.
Answer
Net income
$52,500
Depreciation
24,000
Gain on sale of equipment
(6,600)
Increase in accounts receivable
(2,300)
Decrease in merchandise inventory
7,400
Decrease in accounts payable
(3,200)
Increase in income taxes payable
1,500
Net cash provided by operating activities
$73,300