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41) Last year, Knox Corporation reported on its income statement sales of $375,000 and cost of
goods sold of $140,000. During the year, the balance in accounts receivable increased $30,000,
the balance in accounts payable decreased $25,000, and the balance in inventory increased
$10,000. The company uses the direct method to determine the net cash provided by (used in)
operating activities on its statement of cash flows.
Under the direct method, sales adjusted to a cash basis would be:
A) $295,000
B) $345,000
C) $405,000
D) $355,000
42) Last year, Knox Corporation reported on its income statement sales of $375,000 and cost of
goods sold of $140,000. During the year, the balance in accounts receivable increased $30,000,
the balance in accounts payable decreased $25,000, and the balance in inventory increased
$10,000. The company uses the direct method to determine the net cash provided by (used in)
operating activities on its statement of cash flows.
Under the direct method, cost of goods sold adjusted to a cash basis would be:
A) $105,000
B) $125,000
C) $175,000
D) $155,000
43
Van Beeber Corporation's comparative balance sheet and income statement for last year appear
below:
Comparative Balance Sheet
Ending
Balance
Beginning
Balance
Cash and cash equivalents
$58,000
$34,000
Accounts receivable
48,000
36,000
Inventory
56,000
67,000
Prepaid expenses
24,000
16,000
Long-term investments
280,000
220,000
Property, plant, and equipment
580,000
580,000
Less accumulated depreciation
270,000
235,000
Total assets
776,000
718,000
Accounts payable
$32,000
$53,000
Accrued liabilities
38,000
21,000
Income taxes payable
61,000
31,000
Bonds payable
90,000
60,000
Common stock
80,000
60,000
Retained earnings
475,000
433,000
Total liabilities and stockholders' equity
776,000
718,000
Income Statement
Sales
$700,000
Cost of goods sold
360,000
Gross margin
340,000
Selling and administrative expense
210,000
Net operating income
130,000
Income taxes
39,000
Net income
$91,000
The company declared and paid $49,000 in cash dividends during the year. It did not sell or
retire any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
43) On the statement of cash flows, the sales adjusted to a cash basis would be:
A) $700,000
B) $688,000
C) $677,000
D) $712,000
44) On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:
A) $360,000
B) $350,000
C) $370,000
D) $381,000
45) On the statement of cash flows, the selling and administrative expense adjusted to a cash
basis would be:
A) $201,000
B) $166,000
C) $254,000
D) $210,000
46) On the statement of cash flows, the income tax expense adjusted to a cash basis would be:
A) $39,000
B) $69,000
C) $9,000
D) $25,000
47) Hayward Corporation had net sales of $610,000 and cost of goods sold of $360,000 for the
just completed year. Shown below are the beginning and ending balances for the year of various
accounts:
Ending
Beginning
Cash
$
42,000
$
31,000
Accounts receivable
$
87,000
$
72,000
Inventory
$
96,000
$
83,000
Accounts payable
$
23,000
$
29,000
The company prepares its statement of cash flows using the direct method.
On its statement of cash flows, what amount should Howard show for its net sales adjusted to a
cash basis (i.e., cash received from sales)?
A) $616,000
B) $623,000
C) $625,000
D) $595,000
48) Hayward Corporation had net sales of $610,000 and cost of goods sold of $360,000 for the
just completed year. Shown below are the beginning and ending balances for the year of various
accounts:
Ending
Beginning
Cash
$
42,000
$
31,000
Accounts receivable
$
87,000
$
72,000
Inventory
$
96,000
$
83,000
Accounts payable
$
23,000
$
29,000
The company prepares its statement of cash flows using the direct method.
On its statement of cash flows, what amount should Howard show for its cost of goods sold
adjusted to a cash basis (i.e., cash paid to suppliers)?
A) $345,000
B) $366,000
C) $379,000
D) $373,000
49
49) Comparative balance sheets and the income statements for Ellis Corporation are presented
below:
Ending
Balance
Beginning
Balance
Assets:
Current assets:
Cash and cash equivalents
$
45,000
$
30,000
Accounts receivable
38,000
40,000
Inventory
67,000
60,000
Total current assets
150,000
130,000
Long-term investments
162,000
200,000
Property, plant and equipment
278,000
150,000
Less accumulated depreciation
52,000
50,000
Total assets
$
538,000
$
430,000
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable
$
36,000
$
40,000
Accrued liabilities
24,000
30,000
Income taxes payable
15,000
20,000
Total current liabilities
75,000
90,000
Bonds payable
120,000
30,000
Total liabilities
195,000
120,000
Stockholders' equity:
Common stock
295,000
270,000
Retained earnings
48,000
40,000
Total stockholders' equity
343,000
310,000
Total liabilities and stockholders' equity
$
538,000
$
430,000
Income Statement
Sales
$150,000
Cost of goods sold
76,500
Gross margin
73,500
Selling and administrative expense
16,000
Net operating income
57,500
Loss on sale of investment
2,500
Income before taxes
55,000
Income taxes
22,000
Net income
$33,000
50
The following additional information is available for the year:
* During the year, the company sold long-term investments for $35,500 that had been purchased
for $38,000.
* The company did not sell any property, plant, and equipment during the year or repurchase any
of its own common stock.
* All sales were on credit.
* The company paid a cash dividend of $25,000.
* The company paid cash to retire $15,000 of bonds payable.
Required:
a. Using the indirect method, determine the net cash provided by (used in) operating activities.
b. Using the direct method, determine the net cash provided by (used in) operating activities.
c. Using the net cash provided by (used in) operating activities amount from either part a or b,
prepare a statement of cash flows.
53
50) Harkey Corporation's balance sheet and income statement appear below:
Comparative Balance Sheet
Ending
Balance
Beginning
Balance
Assets:
Cash and cash equivalents
$
32
$
35
Accounts receivable
74
71
Inventory
41
42
Property, plant and equipment
443
370
Less accumulated depreciation
194
164
Total assets
$
396
$
354
Liabilities and stockholders' equity:
Accounts payable
$
26
$
28
Accrued liabilities
28
25
Income taxes payable
40
36
Bonds payable
120
170
Common stock
83
80
Retained earnings
99
15
Total liabilities and stockholders' equity
$
396
$
354
Income Statement
Sales
$923
Cost of goods sold
604
Gross margin
319
Selling and administrative expense
169
Net operating income
150
Gain on sale of equipment
11
Income before taxes
161
Income taxes
48
Net income
$113
Cash dividends were $29. The company sold equipment for $15 that was originally purchased
for $6 and that had accumulated depreciation of $2.
Required:
Using the direct method, determine the net cash provided by (used in) operating activities.
