52) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Cash
$ 21,000
$ 18,000
$ 3,000
Accounts receivable
31,000
35,000
(4,000)
Inventory
53,000
25,000
28,000
PP&E, net
120,000
90,000
30,000
Total assets
$225,000
$168,000
$57,000
Additional information provided:
Equipment costing $52,000 was purchased for cash.
Equipment with a net asset value of $10,000 was sold for $14,000.
Depreciation expense of $12,000 was recorded during the year.
What was the net amount of Cash from investing activities?
A) $30,000 negative
B) $60,000 positive
C) $52,000 negative
D) $38,000 negative
53) Avatar Company uses the indirect method to prepare its statement of cash flows and provides following
information about transactions for the year:
• Plant assets, net—beginning balance: $90,000
• Plant assets, net—ending balance: $120,000
• Equipment costing $52,000 was purchased for cash
• Equipment with a net asset value of $10,000 was sold for $14,000
• Depreciation expense of $12,000 was recorded during the year
What was the net amount of Cash from investing activities?
A) $38,000 negative
B) $60,000 positive
C) $52,000 negative
D) $30,000 negative
54) The Sonesta Company sold equipment for cash. The income statement shows a loss on sale of $5,000. The net
book value of the asset prior to sale was $24,000. Which of the following statements describes the cash effect of the
transaction?
A) Positive cash flow of $29,000 in investing activities
B) Negative cash flow of $19,000 in operating activities
C) Positive cash flow of $19,000 in investing activities
D) Negative cash flow of $14,000 in financing activities
55) The Sonesta Company sold equipment for cash. The income statement shows a gain on sale of $800. The net
book value of the asset prior to sale was $4,000. Which of the following statements describes the cash effect of the
transaction?
A) Negative cash flow of $4,800 in investing activities
B) Negative cash flow of $3,200 in operating activities
C) Positive cash flow of $4,800 in investing activities
D) Negative cash flow of $800 in financing activities
56) The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they sold equipment
for $4,800 cash. The net book value of the asset prior to sale was $4,000. Which of the following statements is
true?
A) The gain on sale of $800 would be added back to net income in the operating activities section.
B) The book value of the assets sold would be shown as a negative cash flow in the investing activities section.
C) The cash receipt of $4,800 would be shown as a positive cash flow in the investing activities section.
D) The gain on sale of $800 would be shown as a positive cash flow in the financing activities section.
57) The Sonesta Company uses the indirect method for the statement of cash flows. In 2013, they purchased
equipment for $10,000 cash. Which of the following statements is TRUE?
A) $10,000 would be shown as a negative cash flow in the operating activities section.
B) $10,000 would be shown as a negative cash flow in the investing activities section.
C) $10,000 would be shown as a positive cash flow in the investing activities section.
D) $10,000 would be shown as a positive cash flow in the financing activities section.
58) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Accounts payable
$ 4,000
$ 6,000
Accrued liabilities
2,000
1,000
Long-term notes payable
84,000
90,000
Total liabilities
$90,000
$97,000
Additional information provided:
During 2014, the company repaid $40,000 of long–term notes payable.
During 2014, the company borrowed $34,000 on a new note payable.
Based on the above information only, what amount of net cash flow would be shown in the financing section of the
statement of cash flows?
A) $6,000 negative
B) $6,000 positive
C) $5,000 positive
D) $7,000 negative
59) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
information:
• Repayments on long-term notes payable: $40,000
• New borrowing on long-term notes payable: $34,000
Which of the following statements is accurate regarding the statement of cash flows?
A) $34,000 will be shown as a positive cash flow in the investing section.
B) $40,000 will be shown as a positive cash flow in the financing section.
C) $34,000 will be shown as a positive cash flow in the financing section.
D) $40,000 will be shown as a negative cash flow in the investing section.
60) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Common stock
$ 30,000
$ 2,000
$28,000
Retained earnings
113,000
74,000
39,000
Treasury stock
(8,000)
(5,000)
(3,000)
Total equity
$135,000
$71,000
$64,000
Note: There were no stock retirements during the year.
There were no sales of treasury stock during the year.
Which of the following statements would be TRUE?
A) There was zero net cash flow from transactions involving common stock.
B) There was a negative cash flow of $28,000 from the issuance of common stock.
C) There was a positive cash flow of $28,000 from the issuance of common stock.
D) There was positive cash flow of $30,000 from issuance of common stock.
61) How would a new issue of common stock be shown on the statement of cash flows?
A) Negative cash flow in the investing section
B) Positive cash flow in the investing section
C) Negative cash flow in the financing section
D) Positive cash flow in the financing section
62) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Common stock
$ 30,000
$ 2,000
$28,000
Retained earnings
113,000
74,000
39,000
Treasury stock
(8,000)
(5,000)
(3,000)
Total equity
$135,000
$71,000
$64,000
Note: There were no stock retirements during the year.
There were no sales of treasury stock during the year.
Which of the following statements would be TRUE?
A) There was zero net cash flow from transactions involving treasury stock.
B) There was $3,000 of positive cash flow from transactions involving treasury stock.
C) There was $3,000 negative cash flow from transactions involving treasury stock.
D) There was $8,000 negative cash flow from transactions involving treasury stock.
63) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Common stock
$ 30,000
$ 2,000
$28,000
Retained earnings
113,000
74,000
39,000
Treasury stock
(8,000)
(5,000)
(3,000)
Total equity
$135,000
$71,000
$64,000
Note: Net income for the year was $49,000.
Based on the above, how much was paid out in dividends?
A) $28,000
B) $39,000
C) $3,000
D) $10,000
64) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Common stock
$ 30,000
$ 2,000
$28,000
Retained earnings
113,000
74,000
39,000
Treasury stock
(8,000)
(5,000)
(3,000)
Total equity
$135,000
$71,000
$64,000
Note: Net income for the year was $49,000.
How will dividend payments be shown on the statement of cash flows?
A) Positive $10,000 in the financing section
B) Negative $10,000 in the financing section
C) Positive $10,000 in the investing section
D) Negative $10,000 in the investing section
65) Harrison Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
information for the year 2014:
• Retained earnings, beginning balance: $125,000
• Retained earnings, ending balance: $117,000
Company reported net loss of $8,000 for the year.
What was the amount of dividends paid during the year?
A) $5,000
B) $2,000
C) Zero
D) $3,000
66) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
information for the year 2014:
Long-term notes payable, beginning balance $90,000
Long-term notes payable, ending balance 84,000
Common stock, beginning balance 2,000
Common stock, ending balance 30,000
Retained earnings, beginning balance 74,000
Retained earnings, ending balance 113,000
Treasury stock, beginning balance 5,000
Treasury stock, ending balance 8,000
• No stock was retired.
• No treasury stock was sold.
• During 2014, the company repaid $40,000 of long-term notes payable.
• During 2014, the company borrowed $34,000 on a new note payable.
• Net income for the year was $49,000.
How much was the net cash flow from financing activities?
A) $59,000 positive cash flow
B) $42,000 positive cash flow
C) $9,000 negative cash flow
D) $9,000 positive cash flow
67) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
information for the year 2014.
• Net cash flows from operating activities: $32,000 positive
• Net cash flows from investing activities: $38,000 negative
• Net cash flows from financing activities: $9,000 positive
How much was the net change in cash during the year?
A) $3,000 negative
B) $79,000 positive
C) $3,000 positive
D) $61,000 negative
68) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
information for the year 2014.
• Net cash flows from operating activities: $32,000 positive
• Net cash flows from investing activities: $38,000 negative
• Net cash flows from financing activities: $9,000 positive
Which of the following statements is TRUE?
A) The statement of cash flows will show an ending cash balance of $3,000.
B) The statement of cash flows will show total net cash flows of $70,000 positive.
C) The statement of cash flows will show total net cash flows of $3,000 negative.
D) The statement of cash flows will show total net cash flows of $3,000 positive.
69) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
information for the year 2014.
• Net cash flows from operating activities: $32,000 positive
• Net cash flows from investing activities: $38,000 negative
• Net cash flows from financing activities: $9,000 positive
If the beginning cash balance is $18,000, what would the ending cash balance be?
A) $21,000
B) $18,000
C) $3,000
D) $15,000
70) Which of the following items would be included as an operating activity on the statement of cash flows?
A) A purchase of treasury stock
B) A payment of dividends
C) An issuance of stock
D) A payment of interest
71) Sonesta Company owed one of its creditors $250,000, but did not have enough cash to repay the debt.
Following lengthy negotiations, the parties agreed that Sonesta would issue 100,000 shares of common stock to
settle the debt. How would this transaction be shown on the statement of cash flows?
A) In the investing activities section
B) In the financing activities section
C) In the operating activities section
D) In the noncash investing and financing activities section
72) Arturo Sales purchased some equipment for $12,000 by issuing a 6-month note payable. How would this
transaction be shown on the statement of cash flows?
A) In the noncash financing and investing activities section
B) In the investing activities section
C) In the operating activities section
D) In the financing activities section
73) Transnational Company just started in business and was looking for additional capital in order to purchase a
property to build their headquarters. They found an investor who was willing to sell them land worth $500,000 in
exchange for stock in the company. How would this transaction be shown on the statement of cash flows?
A) In the investing activities section
B) In the noncash investing and financing activities section
C) In the operating activities section
D) In the financing activities section
74) Which of the following transactions would be shown in the noncash investing and financing activities section of
the statement of cash flows?
A) Sold equipment with book value of $4,000 in exchange for $1,000 cash and a $3,000 note
B) Borrowed $22,000 cash on a note payable
C) Issued 10,000 shares of stock at $5 per share
D) Purchased a building in exchange for 10,000 shares of common stock
75) Which of the following transactions would be shown in the noncash investing and financing activities section of
the statement of cash flows?
A) Sold equipment with book value of $4,000 in exchange for $1,000 cash and a $3,000 note
B) Settled a long-term note payable by issuing common stock
C) Issued 10,000 shares of stock at $5 per share
D) Purchased land for a $20,000 down payment and a mortgage note for $180,000
76) Which of the following transactions would be shown in the noncash investing and financing activities section of
the statement of cash flows?
A) Sold equipment with book value of $4,000 in exchange for $1,000 cash and a $3,000 note
B) Retired company bonds before the maturity date by paying a negotiated amount
C) Issued 10,000 shares of stock at $5 per share
D) Purchased land by signing an 8-year note for $200,000
77) Partisan Services purchased 10 delivery vehicles by issuing a 10-year installment note payable for $320,000.
How would this transaction be shown on the statement of cash flows?
A) In the investing activities section
B) In the noncash investing and financing activities section
C) In the operating activities section
D) In the financing activities section
78) Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following
comparative balance sheet for Avatar Company and complete the third column for increases and decreases.
2014
2013
Cash
$ 33,000
$ 18,000
Accounts receivable
22,000
35,000
Inventory
170,000
115,000
Total assets
$225,000
$168,000
Accounts payable
$ 4,000
$ 6,000
Accrued liabilities
2,000
1,000
Long-term notes payable
84,000
90,000
Total liabilities
$ 0,000
$ 97,000
Common stock
30,000
2,000
Retained earnings
113,000
74,000
Treasury stock
(8,000)
(5,000)
Total stockholders’ equity
$135,000
$ 71,000
Total liabilities and
stockholders’
equity
$225,000
$168,000
Cash
$ 18,000
Accounts receivable
(13,000)
Inventory
Total assets
Accounts payable
$ 6,000
$(2,000)
Accrued liabilities
2,000
Long-term notes payable
Total liabilities
$(7,000)
Common stock
Retained earnings
Treasury stock
Total stockholders’ equity
79) Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following
income statement:
Sales revenue
$240,000
Interest revenue
1,000
Gain on sale of plant assets
4,000
Total revenues and gains
$245,000
Cost of goods sold
110,000
Salary expense
45,000
Depreciation expense
12,000
Other operating expenses
23,000
Interest expense
1,000
Income tax expense
5,000
Total expenses
$196,000
Net income/(loss)
$49,000
Other information provided:
• Current assets other than cash increase by $24,000.
• Current liabilities decrease by $1,000.
Please prepare the operating activities section of the statement of cash flows using the following format:
Operating activities:
Net income
Adjustments
Depreciation expense
Gain or loss on sale
Increase/decrease in current assets
Increase/decrease in current liabilities
Net cash from operating activities
Operating activities:
Net income
Adjustments
Depreciation expense
Gain or loss on sale
Increase/decrease in current assets
Increase/decrease in current liabilities
(17,000)
Net cash from operating activities
80) Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following
income statement:
Sales revenue
$240,000
Interest revenue
1,000
Gain on sale of plant assets
4,000
Total revenues and gains
$245,000
Cost of goods sold
110,000
Salary expense
45,000
Depreciation expense
12,000
Other operating expenses
23,000
Interest expense
1,000
Income tax expense
5,000
Total expenses
$196,000
Net income/(loss)
$49,000
Other information provided:
• Current assets other than cash increase by $24,000.
• Current liabilities decrease by $1,000.
Please prepare the operating activities section of the statement of cash flows using the following format:
Operating activities:
Net income
Adjustments
Net cash from operating activities
Operating activities:
Net income
Adjustments
Depreciation expense
Gain or loss on sale
Increase/decrease in current liabilities
Net cash from operating activities
81) Starfire Company uses the indirect method to prepare the statement of cash flows. Please refer to the following
income statement:
Sales revenue
$140,000
Interest revenue
5,000
Loss on sale of plant assets
(4,000)
Total revenues and (losses)
$141,000
Cost of goods sold
100,000
Salary expense
23,000
Depreciation expense
8,000
Other operating expenses
9,000
Interest expense
2,000
Income tax expense
5,000
Total expenses
$147,000
Net income/(loss)
$ (6,000)
Other information provided:
• Current assets other than cash decrease by $4,000.
• Current liabilities increase by $1,000.
Please prepare the operating activities section of the statement of cash flows using the following format:
Operating activities:
Net income
Adjustments
Depreciation expense
Gain or loss on sale
Increase/decrease in current assets
Increase/decrease in current liabilities
Net cash from operating activities
Operating activities:
Net income
Adjustments
Depreciation expense
Gain or loss on sale
Increase/decrease in current assets
Increase/decrease in current liabilities
17,000
Net cash from operating activities
$11,000
82) Starfire Company uses the indirect method to prepare the statement of cash flows. Please refer to the following
income statement:
Sales revenue
$140,000
Interest revenue
5,000
Loss on sale of plant assets
(4,000)
Total revenues and (losses)
$141,000
Cost of goods sold
100,000
Salary expense
23,000
Depreciation expense
8,000
Other operating expenses
9,000
Interest expense
2,000
Income tax expense
5,000
Total expenses
$147,000
Net income/(loss)
$ (6,000)
Other information provided:
• Current assets other than cash decrease by $4,000.
• Current liabilities increase by $1,000.
Please prepare the operating activities section of the statement of cash flows using the following format:
Operating activities:
Net income
Adjustments
Net cash from operating activities
Operating activities:
Net income
Adjustments
Depreciation expense
$8,000
Gain or loss on sale
4,000
Increase/decrease in current assets
4,000
Increase/decrease in current liabilities
1,000
17,000
Net cash from operating activities
$11,000
83) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Cash
$ 21,000
$ 18,000
$ 3,000
Accounts receivable
31,000
35,000
(4,000)
Inventory
53,000
25,000
28,000
PP&E, net
120,000
90,000
30,000
Total assets
$225,000
$168,000
$57,000
Additional information provided:
• Equipment costing $52,000 was purchased for cash.
• Equipment with a net asset value of $10,000 was sold for $14,000.
• Depreciation expense of $12,000 was recorded during the year.
Please prepare the investing activities section of the statement of cash flows using the following format:
Investing activities:
Proceeds from sale of assets
Acquisition of assets
Net cash from investing activities
Investing activities:
Proceeds from sale of assets
Acquisition of assets
Net cash from investing activities
84) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Cash
$ 21,000
$ 18,000
$ 3,000
Accounts receivable
31,000
35,000
(4,000)
Inventory
53,000
25,000
28,000
PP&E, net
120,000
90,000
30,000
Total assets
$225,000
$168,000
$57,000
Additional information provided:
• Equipment costing $52,000 was purchased for cash.
• Equipment with a net asset value of $10,000 was sold for $14,000.
• Depreciation expense of $12,000 was recorded during the year.
Please use the following T-account format to analyze the transactions affecting net Property, plant & equipment:
Property, plant & equipment, net
90,000
90,000
52,000
10,000
12,000
120,000
85) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
portion of the comparative balance sheet:
2014
2013
Increase/decrease
Accounts payable
$ 4,000
$ 6,000
$(2,000)
Accrued liabilities
2,000
1,000
1,000
Long-term notes payable
84,000
90,000
(6,000)
Total liabilities
$90,000
$97,000
$(7,000)
Additional information provided:
• During 2014, the company repaid $40,000 of long–term notes payable.
• During 2014, the company borrowed $34,000 on a new note payable.
Using the above information, please analyze the activity in the long-term notes payable account using the flowing T–
account format:
Long-term notes payable
90,000
90,000
40,000
34,000
84,000
86) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
sections of the comparative balance sheet:
2014
2013
Increase/decrease
Accounts payable
$ 4,000
$ 6,000
$ (2,000)
Accrued liabilities
2,000
1,000
1,000
Long-term notes payable
84,000
90,000
(6,000)
Total liabilities
$ 90,000
$ 97,000
$ (7,000)
Common stock
30,000
2,000
28,000
Retained earnings
113,000
74,000
39,000
Treasury stock
(8,000)
(5,000)
(3,000)
Total equity
$135,000
$ 71,000
$64,000
Total liabilities and equity
$225,000
$168,000
$57,000
Additional information:
• No stock was retired.
• No treasury stock was sold.
• During 2014, the company repaid $40,000 of long–term notes payable.
• During 2014, the company borrowed $34,000 on a new note payable.
• Net income for the year was $49,000.
Please prepare the financing section of the statement of cash flows using the following format:
Financing activities:
Issuance of stock
Purchase of treasury stock
Sale of treasury stock
Borrowing on notes payable
Repayments of notes payable
Payment of dividends
Net cash from financing activities
Financing activities:
Issuance of stock
Purchase of treasury stock
Sale of treasury stock
Borrowing on notes payable
Repayments of notes payable
Payment of dividends
Net cash from financing activities
87) Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following
sections of the comparative balance sheet:
2014
2013
Increase/decrease
Accounts payable
$ 4,000
$ 6,000
$ (2,000)
Accrued liabilities
2,000
1,000
1,000
Long-term notes payable
84,000
90,000
(6,000)
Total liabilities
$ 90,000
$ 97,000
$ (7,000)
Common stock
30,000
2,000
28,000
Retained earnings
113,000
74,000
39,000
Treasury stock
(8,000)
(5,000)
(3,000)
Total equity
$135,000
$ 71,000
$64,000
Total liabilities and equity
$225,000
$168,000
$57,000
Additional information:
• No stock was retired.
• No treasury stock was sold.
• During 2014, the company repaid $40,000 of long-term notes payable.
• During 2014, the company borrowed $34,000 on a new note payable.
• Net income for the year was $49,000.
Please prepare the financing section of the statement of cash flows using the following format:
Financing activities:
Net cash from financing activities
Financing activities:
Issuance of stock
Purchase of treasury stock
Sale of treasury stock
Borrowing on notes payable
Repayments of notes payable
Payment of dividends
Net cash from financing activities