Chapter 14
116. Chandler Company’s net income last year was $98,000 and cash dividends declared and paid to the company
stockholders was $13,000. Changes in selected balance sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Cash $ (3,000)
Accounts receivable 1,000
Inventory (1,000)
Prepaid expenses 13,000
Long-term investments 70,000
Plant and equipment 45,000
Credit balances:
Accumulated depreciation 61,000
Accounts payable (11,000)
Accrued liabilities (9,000)
Taxes payable 9,000
Bonds payable (50,000)
Common stock 40,000
Retained earnings 85,000
The net cash flows from financing activities to be reported in a statement of cash flows is
a. $10,000.
b. $(10,000).
c. $23,000.
d. $(23,000).
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117. The net income reported on the income statement for the current year was $635,000. Depreciation recorded on plant
assets was $29,000. Accounts receivable and inventories increased by $1,200 and $3,600, respectively. Prepaid expenses
and accounts payable decreased by $800 and $16,000 respectively. How much cash was provided by operating activities?
a. $642,400
b. $644,000
c. $652,000
d. $685,600
118. The net income reported on the income statement for the current year was $79,000. Depreciation was $6,000.
Account receivable and inventories decreased by $1,100 and $2,700, respectively. Prepaid expenses and accounts payable
increased, respectively, by $950 and $3,000. How much cash was provided by operating activities?
a. $86,750
b. $90,850
c. $85,150
d. $83,250
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119. If a gain of $30,000 is incurred in selling (for cash) long-term investments having a book value of $180,000, the total
amount reported in the cash flows from investing activities section of the statement of cash flows is
a. $30,000.
b. $210,000.
c. $180,000.
d. $150,000.
120. If a loss of $9,200 is incurred in selling (for cash) a patent having a book value of $80,000, the total amount reported
in the cash flows from investing activities section of the statement of cash flows is
a. $70,800.
b. $89,200.
c. $9,200.
d. $80,000.
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121. Harbor Company reported net income of $60,000 for the year ended December 31, Year 1. During the year,
inventories decreased by $12,000, accounts payable decreased by $18,000, depreciation expense was $20,000 and a gain
on disposal of equipment of $9,000 was recorded. Net cash provided by operating activities in Year 1 using the indirect
method was
a. $119,000.
b. $65,000.
c. $77,000.
d. $55,000.
122. In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is
a. added to net income.
b. deducted from net income.
c. ignored because it does not affect cash.
d. not reported on a statement of cash flows.
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123. Last year, Cyrstal Company reported sales of $180,000 on its income statement. During the year, accounts receivable
increased by $50,000 and accounts payable increased by $20,000. The company uses the direct method to determine net
cash flow from operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis would be:
a. $220,000.
b. $120,000.
c. $130,000.
d. $155,000.
124. Which of the following statement concerning the statement of cash flows is true?
a. The statement of cash flows is usually more accurate when using the indirect method.
b. If the direct method is used, a supplementary schedule reconciling the net income to net cash from operating
activities must still be provided.
c. The statement of cash flows reflects both earnings per share and cash per share.
d. The statement of cash flows is an optional financial statement for an SEC registered firm.
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125. Last year, Violet Company reported cost of goods sold of $120,000. Inventories decreased by $34,000 during the
year, and accounts payable increased by $30,000. The company uses the direct method to determine net cash flow from
operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:
a. $120,000.
b. $79,000.
c. $56,000.
d. $93,000.
126. Last year, Alloy Company reported cost of goods sold of $130,000. Inventories decreased by $15,000 during the
year, and accounts payable decreased by $10,000. The company uses the direct method to determine net cash flow from
operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be:
a. $140,000.
b. $125,000.
c. $295,000.
d. $340,000.
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127. Last year Maine Company reported cost of goods sold of $110,000. Inventories increased by $30,000 during the
year, and accounts payable decreased by $15,000. The company uses the direct method to determine the net cash flows
from operating activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would be
a. $140,000.
b. $65,000.
c. $155,000.
d. $125,000.
128. Last year, Amber Company reported sales of $200,000 on its income statement. During the year, accounts receivable
decreased by $33,000 and accounts payable decreased by $28,000. The company uses the direct method to determine net
cash flow from operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis would be:
a. $233,000.
b. $345,000.
c. $400,000.
d. $120,000.
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129. Total operating expenses on Pearl Company’s income statement for last year totaled $300,000. During the year, the
accounts payable stayed the same, the accrued liabilities stayed the same, and prepaid expenses stayed the same.
Depreciation expense for the year was $29,000. Based on this information, operating expenses adjusted to a cash basis
under the direct method on the statement of cash flows would be:
a. $341,000.
b. $271,000.
c. $100,000.
d. None of these.
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130. Total operating expenses on Opal Company’s income statement for last year totaled $350,000. During the year, the
accrued liabilities decreased by $15,000 and prepaid expenses increased by $10,000. Depreciation expense for the year
was $20,000. Based on this information, operating expenses adjusted to a cash basis under the direct method on the
statement of cash flows would be:
a. $195,000.
b. $145,000.
c. $230,000.
d. $355,000.
131. If accounts payable have increased during a period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. expenses on an accrual basis are less than expenses on a cash basis.
c. expenses on an accrual basis are greater than expenses on a cash basis.
d. expenses on an accrual basis are the same as expenses on a cash basis.
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132. If accounts receivable have increased during the period,
a. revenues on an accrual basis are less than revenues on a cash basis.
b. revenues on an accrual basis are greater than revenues on a cash basis.
c. revenues on an accrual basis are the same as revenues on a cash basis.
d. expenses on an accrual basis are greater than expenses on a cash basis.
133. Total operating expenses on Ocean Company’s income statement for last year totaled $400,000. During the year,
accrued liabilities increased by $23,000 and prepaid expenses increased by $16,000. Depreciation expense for the year
was $30,000. Based on this information, operating expenses adjusted to a cash basis under the direct method on the
statement of cash flows would be:
a. $300,000.
b. $363,000.
c. $272,000.
d. $518,000.
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134. The Prince Company reported net income of $260,000 for the current year. Depreciation recorded on buildings and
equipment amounted to $90,000 for the year. Balances of the current asset and current liability accounts for Year 1 and
Year 2 are as follows:
Year 2 Year 1
Cash $20,000 $15,000
Accounts receivable 19,000 32,000
Inventories 50,000 65,000
Prepaid expenses 7,500 5,000
Accounts payable 12,000 18,000
Income taxes payable 1,600 1,200
Prepare the cash flows from operating activities section of the statement of cash flows using the indirect method.
135. The balance sheets of Dolan Company, for December 31, Year 2 and Year 1 , are as follows:
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Year 2 Year 1
Cash $ 68,000 $ 42,500
Accounts receivable (net) 61,000 70,200
Inventories 121,000 105,000
Investments — 100,000
Equipment 515,000 425,000
Accumulated depreciation—equipment (153,000) (175,000)
$612,000 $567,700
Accounts payable $ 59,750 $ 47,250
Bonds payable, due Year 2 — 75,000
Common stock, $20 par 375,000 325,000
Premium on common stock 50,000 25,000
Retained earnings 127,250 95,450
$612,000 $567,700
Additional information:
(a) Net income, $71,800.
(b) Depreciation reported on income statement, $38,000.
(c) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $150,000.
(d) Bonds payable for $75,000 were retired by payment at their face amount.
(e) 2,500 shares of common stock were issued at $30 for cash.
(f) Cash dividends declared and paid, $40,000.
(g) Investments of $100,000 were sold for $125,000.
Required: Prepare a statement of cash flows using the indirect method.
Chapter 14
136. The balance sheets for Jenson Company, for the years ended December 31, Year 2 and Year 1 , are as follows:
Year 2 Year 1
Cash $ 53,000 $ 50,000
Accounts receivable (net) 37,000 48,000
Inventories 108,500 100,000
Investments — 70,000
Equipment 573,200 450,000
Accumulated depreciation—equipment (142,000) (176,000)
$629,700 $542,000
Accounts payable $ 62,500 $ 43,800
Bonds payable, due Year 2 — 100,000
Common stock, $10 par 325,000 285,000
Paid-in capital in excess of par—common stock 80,000 55,000
Retained earnings 162,200 58,200
$629,700 $542,000
The income statement for the current year is as follows:
Sales $625,700
Cost of merchandise sold 340,000
Gross profit $285,700
Operating expenses:
Depreciation expense $26,000
Other operating expenses 68,000 94,000
Income from operations $191,700
Other income:
Gain on sale of investment $ 4,000
Other expense:
Interest expense 6,000 (2,000)
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Income before income tax $189,700
Income tax 60,700
Net income $129,000
Additional information:
(a) Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was purchased for $183,200.
(b) Bonds payable for $100,000 were retired by payment at their face amount.
(c) 5,000 shares of common stock were issued at $13 for cash.
(d) Cash dividends declared and paid, $25,000.
Required: Prepare a statement of cash flows, using the indirect method.
Chapter 14
137. Using the indirect method, calculate the amount of net cash flows from operating activities from the following data:
Year 2 Year 1
Net Income $250,000
Accounts receivable 22,000 $25,000
Prepaid expenses 3,000 5,000
Accounts payable 14,000 15,000
Depreciation expense 51,000
Amortization expense (Patent) 4,000
Dividends declared and paid 11,000
138. Use the following information to perform the calculations below, using the indirect method. Show and clearly label
your calculations:
Current Year Prior Year
Net Income $365,000
Accounts receivable 439,000 $420,000
Inventory 560,000 516,000
Prepaid expenses 42,000 48,000
Accounts payable 146,000 119,000
Depreciation expense 107,000
Purchase of long-term assets 616,000
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Issuance of long-term debt 200,000
Issuance of stock for cash 160,000
Issuance of stock for long-term assets 110,000
Purchase of treasury stock 64,000
Sale of long-term investments at cost 49,000
A. Calculate the amount of the net cash flows from operating activities.
B. Calculate the amount of the net cash flows from investing activities.
C. Calculate the amount of the net cash flows from financing activities.
D. Calculate the net change in cash.
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139. Use the following selected data and additional information to answer the questions that follow:
Balance Sheet Data Current Year Prior Year
Accounts receivable $ 36,000 $ 42,000
Inventories 28,000 25,000
Accounts payable 31,000 35,000
Salaries payable 2,000 1,000
Equipment 60,000 40,000
Accumulated depreciation 12,000 16,000
Bonds payable 50,000 100,000
Common stock 150,000 100,000
Retained earnings 38,000 20,000
Income Statement Data Current Year
Net sales $420,000
Cost of goods sold 300,000
Operating expenses (excluding depreciation expense) 84,000
Net income 30,000
Gain on sale of equipment (included in net income above) 2,000
Additional information:
1. Equipment with a cost of $15,000 and a book value of $3,000 was sold for $5,000 during the current year.
2. Common stock was issued to retire bonds payable during the current year.
3. Dividends declared and paid during the current year were $12,000.
A. Prepare the operating activities section of a statement of cash flows for the current year using the indirect method.
B. Prepare the investing activities section of a statement of cash flows for the current year.
C. Prepare the financing activities section of a statement of cash flows for the current year.
Chapter 14
140. Bradley Company’s net income last year was $77,000. Changes in the company‘s balance sheet accounts for the year
appear below:
Increases
(Decreases)
Debit balances:
Cash $12,000
Accounts receivable (16,000)
Inventory 18,000
Prepaid expenses 7,000
Long-term investments 20,000
Plant and equipment 70,000
Credit balances:
Accumulated depreciation 32,000
Accounts payable 26,000
Accrued liabilities (4,000)
Taxes payable 7,000
Bonds payable (20,000)
Common stock 30,000
Retained earnings 40,000
The company declared and paid cash dividends of $37,000 last year.
Required:
A. Prepare the operating activities section of the company’s statement of cash flows for the year. (Use the indirect
method.)
B. Prepare the investing activities section of the company’s statement of cash flows for the year.
C. Prepare the financing activities section of the company’s statement of cash flows for the year.
Chapter 14
141. Baskin Company’s net income last year was $98,000. Changes in the company’s balance sheet accounts for the year
appear below:
Increases
(Decreases)
Debit balances:
Cash $24,000
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Accounts receivable 15,000
Inventory (18,000)
Prepaid expenses (6,000)
Long-term investments 10,000
Plant and equipment 40,000
Credit balances:
Accumulated depreciation 32,000
Accounts payable (14,000)
Accrued liabilities 11,000
Taxes payable 4,000
Bonds payable (40,000)
Common stock 10,000
Retained earnings 62,000
The company declared and paid cash dividends of $36,000 last year.
Required:
A. Prepare the operating activities section of the company’s statement of cash flows for the year. (Use the indirect
method.)
B. Prepare the investing activities section of the company’s statement of cash flows for the year.
C. Prepare the financing activities section of the company’s statement of cash flows for the year.