Accounting Chapter 15 Chapter 15_version1 The company did not dispose of any property, plant, and equipment, sell any long-term investments, issue any bonds payable, or repurchase any of its own common stock during the year

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Student name:__________

1) Burns Corporation’s net income last year was $97,400. Changes in the company’s balance

sheet accounts for the year appear below:

Increases

(Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ 22,700

Accounts receivable $ 13,800

Inventory $ (16,800)

Prepaid expenses $ 4,400

Long-term investments $ 10,400

Property, plant, and equipment $ 71,400

Accumulated depreciation $ 32,600

Liability and Equity Accounts:

Accounts payable $ (19,400)

Accrued liabilities $ 17,100

Income taxes payable $ 4,100

Bonds payable $ (64,800)

Common stock $ 43,200

Retained earnings $ 93,100

The company did not dispose of any property, plant, and equipment, sell any long-term

investments, issue any bonds payable, or repurchase any of its own common stock during the

year. The company declared and paid a cash dividend of $4,300.

Required:

a. Prepare the operating activities section of the company’s statement of cash flows for the year.

(Use the indirect method.) (Amounts to be deducted and cash outflows should be indicated

with a minus sign.)

b. Prepare the investing activities section of the company’s statement of cash flows for the year.

(Amounts to be deducted and cash outflows should be indicated with a minus sign.)

c. Prepare the financing activities section of the company’s statement of cash flows for the year.

(Amounts to be deducted and cash outflows should be indicated with a minus sign.)

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2) Clayborn Corporation’s net cash provided by operating activities was $119,900; its net

income was $105,000; its income taxes were $46,000; its capital expenditures were $95,400; and

its cash dividends were $29,400.

Required:

Determine the company’s free cash flow. (Negative amounts should be indicated by a minus

sign.)

3) Manila Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance

Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 42,000 $ 26,000

Accounts receivable* 22,000 26,000

Inventory* 77,000 75,000

Total current assets 141,000 127,000

Property, plant, and equipment* 340,000 315,000

Less accumulated depreciation* 218,000 187,000

Net property, plant, and equipment 122,000 128,000

Total assets $ 263,000 $ 255,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable* $ 13,000 $ 14,000

Accrued liabilities* 32,000 33,000

Income taxes payable* 63,000 54,000

Total current liabilities 108,000 101,000

Bonds payable* 93,000 94,000

Total liabilities 201,000 195,000

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Stockholders’ equity:

Common stock* 28,000 24,000

Retained earnings 34,000 36,000

Total stockholders’ equity 62,000 60,000

Total liabilities and stockholders’ equity $ 263,000 $ 255,000

The company’s net income (loss) for the year was $0 and its cash dividends were $2,000. It did

not dispose of any property, plant, and equipment, issue any bonds payable, or repurchase any of

its own common stock during the year.

Required:

Compute the change in each balance sheet account denoted with an asterisk (*). Indicate

whether the change in each balance will be recorded in the operating, investing, or financing

activities section of the statement of cash flows. For items recorded in the operating activities

section, also indicate whether the change will be added to or subtracted from net income. For all

other items, indicate whether the change will be added as a cash inflow or subtracted as a cash

outflow. The first entry has been filled in as an example.

Ending Balance Beginning Balance Change

Section Add or Subtract

Accounts receivable 22,000 26,000 −4,000 Operating Add

Inventory 77,000 75,000

Property, plant, and equipment 340,000 315,000

Accumulated depreciation 218,000 187,000

Accounts payable 13,000 14,000

Accrued liabilities 32,000 33,000

Income taxes payable 63,000 54,000

Bonds payable 93,000 94,000

Common stock 28,000 24,000

4) The ending and beginning balances of Farmer Corporation’s balance sheet accounts for

the most recent year are listed below:

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Ending Balance Beginning

Balance

Assets & Contra-Assets:

Cash and cash equivalents $ 40,000 $ 28,000

Accounts receivable $ 17,000 $ 14,000

Inventory $ 60,000 $ 62,000

Property, plant, and equipment $ 406,000 $ 383,000

Accumulated depreciation $ 234,000 $ 205,000

Liabilities and stockholders’ equity:

Accounts payable $ 15,000 $ 12,000

Accrued liabilities $ 35,000 $ 38,000

Income taxes payable $ 49,000 $ 42,000

Bonds payable $ 110,000 $ 109,000

Common stock $ 39,000 $ 36,000

Retained earnings $ 41,000 $ 45,000

The company’s net income (loss) for the year was $0 and its cash dividends were $4,000. It did

not dispose of any property, plant, and equipment, retire any bonds payable, or repurchase any of

its own common stock during the year.

Required:

Compute the change in each balance sheet account in the below table. Indicate whether the

change in each balance will be recorded in the operating, investing, or financing activities section

of the statement of cash flows. For items recorded in the operating activities section, also

indicate whether the change will be added to or subtracted from net income. For all other items,

indicate whether the change will be added as a cash inflow or subtracted as a cash outflow. The

first entry has been filled in as an example.

Ending Balance Beginning Balance Change

Section Add or Subtract

Accounts receivable 17,000 14,000 +3,000 Operating Add

Inventory 60,000 62,000

Property, plant, and equipment 406,000 383,000

Accumulated depreciation 234,000 205,000

Accounts payable 15,000 12,000

Accrued liabilities 35,000 38,000

Income taxes payable 49,000 42,000

Bonds payable 110,000 109,000

Common stock 39,000 36,000

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5) Belk Corporation’s balance sheet appears below:

Comparative Balance Sheet

Ending Balance

Beginning Balance

Assets:

Cash and cash equivalents $ 27 $ 29

Accounts receivable 30 26

Inventory 65 61

Property, plant, and equipment 500 390

Less accumulated depreciation 178 160

Total assets $ 444 $ 346

Liabilities and stockholders’ equity:

Accounts payable $ 46 $ 43

Accrued liabilities 23 24

Income taxes payable 46 47

Bonds payable 78 90

Common stock 34 30

Retained earnings 217 112

Total liabilities and equity $ 444 $ 346

The net income for the year was $126. Cash dividends were $21. The company did not dispose

of any property, plant, and equipment, issue any bonds payable, or repurchase any of its own

common stock during the year.

Required:

Prepare a statement of cash flows in good form using the indirect method.

6) Vandy Corporation’s balance sheet and income statement appear below:

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Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 31 $ 29

Accounts receivable 61 73

Inventory 59 61

Property, plant, and equipment 684 550

Less accumulated depreciation 349 319

Total assets $ 486 $ 394

Liabilities and stockholders’ equity:

Accounts payable $ 53 $ 54

Accrued liabilities 20 21

Income taxes payable 52 48

Bonds payable 203 190

Common stock 61 60

Retained earnings 97 21

Total liabilities and stockholders’ equity $ 486 $ 394

Income Statement

Sales $ 807

Cost of goods sold 492

Gross margin 315

Selling and administrative expense 182

Net operating income 133

Gain on sale of equipment 16

Income before taxes 149

Income taxes 45

Net income $ 104

The company sold equipment for $18 that was originally purchased for $14 and that had

accumulated depreciation of $12. It paid a cash dividend of $28 during the year and did not retire

any bonds payable or repurchase any of its own common stock.

Required:

Prepare a statement of cash flows for the year using the indirect method.

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7) Alden Corporation’s most recent comparative Balance Sheet is as follows:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 7,000 $ 12,000

Accounts receivable 11,000 2,000

Inventory 39,000 24,000

Long-term investments 23,000 9,000

Property, plant, and equipment 83,000 100,000

Less accumulated depreciation 66,000 62,000

Total assets $ 97,000 $ 85,000

Liabilities and Stockholders’ Equity:

Accounts payable $ 9,000 $ 28,000

Income taxes payable 1,000 2,000

Bonds Payable 16,000 10,000

Common Stock 42,000 30,000

Retained Earnings 29,000 15,000

Total liabilities and stockholders’ equity $ 97,000 $ 85,000

Alden’s net income was $34,000. No equipment was purchased and no long-term investments

were sold. There was a gain of $3,000 when equipment was sold. The accumulated depreciation

on the equipment that was sold was $12,000. Cash dividends of $20,000 were declared and paid

during the year.

Required:

Prepare Alden’s statement of cash flows using the indirect method.

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8) Thunder Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 28 $ 31

Accounts receivable 60 65

Inventory 41 42

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Property, plant, and equipment 454 380

Less accumulated depreciation 206 172

Total assets $ 377 $ 346

Liabilities and stockholders’ equity:

Accounts payable $ 43 $ 45

Bonds payable 190 260

Common stock 41 40

Retained earnings 103 1

Total liabilities and stockholders’ equity $ 377 $ 346

Income Statement

Sales $ 874

Cost of goods sold 533

Gross margin 341

Selling and administrative expense 161

Net operating income 180

Income taxes 54

Net income $ 126

The company did not dispose of any property, plant, and equipment, issue any bonds payable, or

repurchase any of its own common stock during the year. The company declared and paid a cash

dividend of $24.

Required:

Prepare a statement of cash flows in good form using the indirect method.

9) Marks Corporation’s balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 47 $ 37

Accounts receivable 53 57

Inventory 63 60

Property, plant, and equipment 548 440

Less accumulated depreciation 295 255

Total assets $ 416 $ 339

Liabilities and stockholders’ equity:

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Accounts payable $ 52 $ 50

Bonds payable 260 250

Common stock 51 50

Retained earnings 53 (11)

Total liabilities and stockholders’ equity $ 416 $ 339

Net income for the year was $77. Cash dividends were $13. The company did not dispose of any

property, plant, and equipment, retire any bonds payable, or repurchase any of its own common

stock during the year.

Required:

Prepare a statement of cash flows in good form using the indirect method.

10) Burns Corporation’s net income last year was $91,000. Changes in the company’s balance

sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ 19,000

Accounts receivable $ 13,000

Inventory $ (16,000)

Prepaid expenses $ 4,000

Long-term investments $ 10,000

Property, plant, and equipment $ 70,000

Accumulated depreciation $ 31,000

Liability and Equity Accounts:

Accounts payable $ (18,000)

Accrued liabilities $ 16,000

Income taxes payable $ 4,000

Bonds payable $ (60,000)

Common stock $ 40,000

Retained earnings $ 87,000

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The company did not dispose of any property, plant, and equipment, sell any long-term

investments, issue any bonds payable, or repurchase any of its own common stock during the

year. The company declared and paid a cash dividend of $4,000.

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.

11) Mattix Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 23 $ 22

Accounts receivable 39 40

Inventory 43 44

Property, plant, and equipment 587 500

Less accumulated depreciation 359 347

Total assets $ 333 $ 259

Liabilities and stockholders’ equity:

Accounts payable $ 30 $ 26

Accrued liabilities 15 18

Income taxes payable 39 40

Bonds payable 109 120

Common stock 51 50

Retained earnings 89 5

Total liabilities and stockholders’ equity $ 333 $ 259

Income Statement

Sales $ 972

Cost of goods sold 620

Gross margin 352

Selling and administrative expense 200

Net operating income 152

Gain on sale of equipment 14

Income before taxes 166

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Income taxes 50

Net income $ 116

The company sold equipment for $20 that was originally purchased for $7 and that had

accumulated depreciation of $1. It paid a cash dividend during the year and did not issue any

bonds payable or repurchase any of its own common stock.

Required:

Determine the net cash provided by (used in) operating activities for the year using the indirect

method.

12) Beltram Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 30 $ 26

Accounts receivable 37 43

Inventory 67 63

Property, plant, and equipment 601 560

Less accumulated depreciation 377 360

Total assets $ 358 $ 332

Liabilities and stockholders’ equity:

Accounts payable $ 42 $ 46

Accrued liabilities 23 22

Income taxes payable 39 39

Bonds payable 141 170

Common stock 63 60

Retained earnings 50 (5)

Total liabilities and stockholders’ equity $ 358 $ 332

Income Statement

Sales $ 710

Cost of goods sold 437

Gross margin 273

Selling and administrative expense 176

Net operating income 97

Income taxes 29

Net income $ 68

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The company did not dispose of any property, plant, and equipment, issue any bonds payable, or

repurchase any of its own common stock during the year. The company declared and paid a cash

dividend of $13.

Required:

Prepare a statement of cash flows in good form using the indirect method.

13) Dauber Corporation’s comparative balance sheet and income statement for last year

appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Cash and cash equivalents $ 64,000 $ 39,000

Accounts receivable 57,000 44,000

Inventory 58,000 70,000

Prepaid expenses 18,000 10,000

Long-term investments 290,000 230,000

Property, plant, and equipment 520,000 520,000

Less accumulated depreciation 390,000 358,000

Total assets $ 617,000 $ 555,000

Accounts payable $ 14,000 $ 38,000

Accrued liabilities 35,000 17,000

Income taxes payable 69,000 40,000

Bonds payable 160,000 180,000

Common stock 140,000 110,000

Retained earnings 199,000 170,000

Total liabilities and stockholders’ equity $ 617,000 $ 555,000

Income Statement

Sales $ 580,000

Cost of goods sold 250,000

Gross margin 330,000

Selling and administrative expense 210,000

Net operating income 120,000

Income taxes 36,000

Net income $ 84,000

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The company declared and paid a cash dividend of $55,000 during the year. It did not sell any

long-term investments, issue any bonds payable, or repurchase any of its own common stock.

Required:

a. Construct in good form the operating activities section of the company’s statement of cash

flows for the year.

b. Construct in good form the investing activities section of the company’s statement of cash

flows for the year.

c. Construct in good form the financing activities section of the company’s statement of cash

flows for the year.

14) Clayborn Corporation’s net cash provided by operating activities was $111,000; its net

income was $101,000; its income taxes were $43,000; its capital expenditures were $90,000; and

its cash dividends were $28,000.

Required:

Determine the company’s free cash flow.

15) Dukas Corporation’s net cash provided by operating activities was $218,000; its net

income was $203,000; its capital expenditures were $146,000; and its cash dividends were

$49,000.

Required:

Determine the company’s free cash flow.

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16) Mattix Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 23 $ 22

Accounts receivable 39 40

Inventory 43 44

Property, plant, and equipment 587 500

Less accumulated depreciation 359 347

Total assets $ 333 $ 259

Liabilities and stockholders’ equity:

Accounts payable $ 30 $ 26

Accrued liabilities 15 18

Income taxes payable 39 40

Bonds payable 109 120

Common stock 51 50

Retained earnings 89 5

Total liabilities and stockholders’ equity $ 333 $ 259

Income Statement

Sales $ 972

Cost of goods sold 620

Gross margin 352

Selling and administrative expense 200

Net operating income 152

Gain on sale of equipment 14

Income before taxes 166

Income taxes 50

Net income $ 116

The company sold equipment for $20 that was originally purchased for $7 and that had

accumulated depreciation of $1. It paid a cash dividend during the year and did not issue any

bonds payable or repurchase any of its own common stock.

Required:

Determine the net cash provided by (used in) operating activities for the year using the indirect

method.

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17) In a statement of cash flows, the sale of a long-term investment would ordinarily be

classified as:

A) an operating activity.

B) a financing activity.

C) an investing activity.

D) a lending activity.

18) Which one of the following transactions should be classified as a financing activity on the

statement of cash flows?

A) Purchase of equipment.

B) Purchase of the company’s own stock.

C) Sale of a long-term investment.

D) Payment of interest to a lender.

19) In a statement of cash flows, issuing bonds payable affects the:

A) operating activities section.

B) financing activities section.

C) investing activities section.

D) free cash flow activities section.

20) Which of the following would be considered a cash inflow in the financing activities

section of the statement of cash flows?

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A) Issuing bonds payable.

B) Receiving cash from customers.

C) Sale of equipment.

D) Collection of a loan made to another company.

21) In a statement of cash flows, a change in an income taxes payable account would be

recorded in the:

A) operating activities section.

B) financing activities section.

C) investing activities section.

D) stockholders’ equity section.

22) Which of the following items would not be classified as an operating activity on the

statement of cash flows?

A) Cash received from customers.

B) Dividends paid to the company’s own stockholders.

C) Payments to government agencies for taxes.

D) Cash paid to compensate employees.

23) In a statement of cash flows, which of the following would be classified as an investing

activity?

A) The sale of the company’s own common stock for cash.

B) The sale of equipment.

C) Interest paid to a lender.

D) The issuance of bonds payable.

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24) Which of the following would be classified as a financing activity on the statement of

cash flows?

A) Paying suppliers for inventory purchases.

B) Interest paid to lenders.

C) Lending money to another company.

D) Repurchasing capital stock from owners.

25) Tomlin Corporation prepares its statement of cash flows using the indirect method.

Which of the following would be subtracted from net income in the operating activities section

of the statement?

Increase in Accounts Receivable Decrease in Accrued Liabilities

A) Yes Yes

B) Yes No

C) No Yes

D) No No

A) Choice A

B) Choice B

C) Choice C

D) Choice D

26) Shoshoni Corporation prepares its statement of cash flows using the indirect method.

Which of the following would be added to net income in the operating activities section of the

statement?

Increase in Accounts Receivable Decrease in Accounts Payable

A) Yes Yes

B) Yes No

C) No Yes

D) No No

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A) Choice A

B) Choice B

C) Choice C

D) Choice D

27) An increase in accounts receivable of $1,000 over the course of a year would be shown

on the company’s statement of cash flows prepared under the indirect method as:

A) an addition to net income of $1,000 in order to arrive at net cash provided by

operating activities.

B) a deduction from net income of $1,000 in order to arrive at net cash provided by

operating activities.

C) an addition of $1,000 under financing activities.

D) a deduction of $1,000 under financing activities.

28) An increase in accrued liabilities of $1,000 during a year would be shown on the

company’s statement of cash flows prepared under the indirect method as:

A) an addition to net income of $1,000 in order to arrive at net cash provided by

operating activities.

B) a deduction from net income of $1,000 in order to arrive at net cash provided by

operating activities.

C) a deduction of $1,000 under investing activities.

D) an addition of $1,000 under financing activities.

29) When computing the net cash provided by operating activities using the indirect method

on the statement of cash flows, which item below would NOT be added to net income?

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A) Depreciation.

B) Loss on the sale of an asset.

C) Decrease in accounts payable.

D) Decrease in prepaid expenses.

30) An increase in the Inventory account from $10,000 at the beginning of the year to

$15,000 at the end of the year would be shown on the statement of cash flows prepared under the

indirect method as:

A) an addition to net income of $5,000 in order to arrive at net cash provided by

operating activities.

B) a deduction from net income of $5,000 in order to arrive at net cash provided by

operating activities.

C) an addition to net income of $15,000 in order to arrive at net cash provided by

operating activities.

D) a deduction from net income of $10,000 in order to arrive at net cash provided by

operating activities.

31) Which of the following would be added to net income in the operating activities section

of a statement of cash flows prepared using the indirect method?

A) an increase in accounts receivable.

B) an increase in prepaid expenses.

C) an increase in accrued liabilities.

D) an increase in property, plant, and equipment.

32) Adah Corporation prepares its statement of cash flows using the indirect method. Which

of the following would be subtracted from net income in the operating activities section of the

statement?

Decrease in Accounts Receivable Decrease in Inventory

A) Yes Yes

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B) Yes No

C) No Yes

D) No No

A) Choice A

B) Choice B

C) Choice C

D) Choice D

33) Partin Corporation’s cash and cash equivalents consist of cash and marketable securities.

Last year the company’s cash account increased by $31,000 and its marketable securities account

decreased by $22,000. Net cash provided by (used in) operating activities was $108,000. Net

cash provided by (used in) financing activities was $(70,000). Based on this information, the net

cash provided by (used in) investing activities on the statement of cash flows was:

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A) $9,000

B) ($29,000)

C) $38,000

D) ($38,000)

34) The following events occurred last year at Dorder Corporation:

Purchase of plant and equipment $ 67,200

Sale of long-term investment $ 46,500

Dividends received on long-term investments $ 24,000

Paid off bonds payable $ 47,000

Depreciation expense $ 26,500

Based on the above information, the net cash provided by (used in) investing activities for the

year on the statement of cash flows would be:

A) $(26,500)

B) $(47,000)

C) $(70,200)

D) $(20,700)

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35) The following events occurred last year at Dorder Corporation:

Purchase of plant and equipment $ 45,000

Sale of long-term investment $ 24,000

Dividends received on long-term investments $ 9,000

Paid off bonds payable $ 12,000

Depreciation expense $ 32,000

Based on the above information, the net cash provided by (used in) investing activities for the

year on the statement of cash flows would be:

A) $(21,000)

B) $(12,000)

C) $(32,000)

D) $(69,000)

36) Last year Burch Corporation’s cash account decreased by $16,000. Net cash provided by

(used in) investing activities was $7,100. Net cash provided by (used in) financing activities was

$(14,000). On the statement of cash flows, the net cash provided by (used in) operating activities

was:

A) $(16,000)

B) $6,900

C) $(9,100)

D) $(22,900)

37) Last year Burch Corporation’s cash account decreased by $6,000. Net cash provided by

(used in) investing activities was $13,000. Net cash provided by (used in) financing activities

was $(30,000). On the statement of cash flows, the net cash provided by (used in) operating

activities was:

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A) $(23,000)

B) $(17,000)

C) $(6,000)

D) $11,000

38) Klicker Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 27 $ 30

Accounts receivable 37 31

Inventory 61 58

Total current assets 125 119

Property, plant, and equipment 593 480

Less accumulated depreciation 223 205

Net property, plant, and equipment 370 275

Total assets $ 495 $ 394

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 39 $ 38

Accrued liabilities 15 18

Income taxes payable 28 28

Total current liabilities 82 84

Bonds payable 107 120

Total liabilities 189 204

Stockholders’ equity:

Common stock 34 30

Retained earnings 272 160

Total stockholders’ equity 306 190

Total liabilities and stockholders’ equity $ 495 $ 394

The company’s net income for the year was $152 and it did not issue any bonds or repurchase

any of its common stock during the year. Cash dividends were $40. The net cash provided by

(used in) financing activities for the year was:

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A) ($49)

B) ($40)

C) $4

D) ($13)

39) Excerpts from Aultman Corporation’s comparative balance sheet appear below:

Ending Balance Beginning Balance

Cash and cash equivalents $ 62,000 $ 29,000

Inventory $ 371,000 $ 345,000

Accounts payable $ 71,000 $ 73,000

Which of the following is the correct treatment within the operating activities section of the

statement of cash flows using the indirect method?

A) The change in Inventory is added to net income; The change in Accounts Payable is

added to net income

B) The change in Inventory is added to net income; The change in Accounts Payable is

subtracted from net income

C) The change in Inventory is subtracted from net income; The change in Accounts

Payable is added to net income

D) The change in Inventory is subtracted from net income; The change in Accounts

Payable is subtracted from net income

40) Marbry Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 62 $ 45

Accounts receivable 48 64

Inventory 82 64

Total current assets 192 173

Property, plant, and equipment 570 540

Less accumulated depreciation 277 264

Net property, plant, and equipment 293 276

Total assets $ 485 $ 449

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Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 75 $ 59

Accrued liabilities 48 30

Income taxes payable 59 59

Total current liabilities 182 148

Bonds payable 94 148

Total liabilities 276 296

Stockholders’ equity:

Common stock 51 44

Retained earnings 158 109

Total stockholders’ equity 209 153

Total liabilities and stockholders’ equity $ 485 $ 449

Income Statement

Sales $ 679

Cost of goods sold 456

Gross margin 223

Selling and administrative expense 159

Net operating income 64

Gain on sale of plant and equipment 27

Income before taxes 91

Income taxes 32

Net income $ 59

A) $(57)

B) $(10)

C) $54

D) $7

41) Marbry Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 44 $ 37

Accounts receivable 57 49

Inventory 48 42

Total current assets 149 128

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Property, plant, and equipment 441 360

Less accumulated depreciation 281 248

Net property, plant, and equipment 160 112

Total assets $ 309 $ 240

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 35 $ 43

Accrued liabilities 18 16

Income taxes payable 37 40

Total current liabilities 90 99

Bonds payable 15 20

Total liabilities 105 119

Stockholders’ equity:

Common stock 34 30

Retained earnings 170 91

Total stockholders’ equity 204 121

Total liabilities and stockholders’ equity $ 309 $ 240

Income Statement

Sales $ 807

Cost of goods sold 531

Gross margin 276

Selling and administrative expense 143

Net operating income 133

Gain on sale of plant and equipment 10

Income before taxes 143

Income taxes 43

Net income $ 100

Cash dividends were $21. The company did not issue any bonds or repurchase any of its own

common stock during the year. The net cash provided by (used in) financing activities for the

year was:

A) $4

B) ($22)

C) ($5)

D) ($21)

42) The following transactions occurred last year at Jolly Corporation:

Issuance of shares of the company’s own common stock $ 120,000

Dividends paid to the company’s own shareholders $ 1,000

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Sale of long-term investment $ 7,000

Interest paid to lenders $ 13,000

Retirement of the company’s own bonds payable $ 60,000

Proceeds from sale of the company’s used equipment $ 8,000

Purchase of property $ 170,000

Based solely on the above information, the net cash provided by (used in) financing activities for

the year on the statement of cash flows would be:

A) $179,000

B) $59,000

C) $(109,000)

D) $46,000

43) Tani Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 52 $ 40

Accounts receivable 37 32

Inventory 57 63

Total current assets 146 135

Property, plant, and equipment 515 470

Less accumulated depreciation 312 270

Net property, plant, and equipment 203 200

Total assets $ 349 $ 335

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 54 $ 46

Total current liabilities 54 46

Bonds payable 60 70

Total liabilities 114 116

Stockholders’ equity:

Common stock 52 50

Retained earnings 183 169

Total stockholders’ equity 235 219

Total liabilities and stockholders’ equity $ 349 $ 335

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The company’s net income for the year was $18 and it did not sell or retire any property, plant,

and equipment during the year. Cash dividends were $4. The net cash provided by (used in)

investing activities for the year was:

A) ($45)

B) $45

C) ($3)

D) $3

44) Sonier Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 47 $ 39

Accounts receivable 90 83

Inventory 72 69

Property, plant, and equipment 578 490

Less accumulated depreciation 254 218

Total assets $ 533 $ 463

Liabilities and stockholders’ equity:

Accounts payable $ 63 $ 61

Bonds payable 241 290

Common stock 39 35

Retained earnings 190 77

Total liabilities and stockholders’ equity $ 533 $ 463

The net income for the year was $158. Cash dividends were $45. The company did not issue any

bonds or repurchase any of its common stock during the year. The net cash provided by (used in)

financing activities for the year was:

A) $(49)

B) $(45)

C) $4

D) $(90)

45) Sonier Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

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Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 26 $ 27

Accounts receivable 45 49

Inventory 40 43

Property, plant, and equipment 474 380

Less accumulated depreciation 269 244

Total assets $ 316 $ 255

Liabilities and stockholders’ equity:

Accounts payable $ 42 $ 35

Bonds payable 245 270

Common stock 71 70

Retained earnings (42) (120)

Total liabilities and stockholders’ equity $ 316 $ 255

The net income for the year was $97. Cash dividends were $19. The company did not issue any

bonds or repurchase any of its common stock during the year. The net cash provided by (used in)

financing activities for the year was:

A) ($43)

B) ($19)

C) ($25)

D) $1

46) Kaeser Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 44 $ 36

Accounts receivable 54 60

Inventory 32 37

Total current assets 130 133

Property, plant, and equipment 527 460

Less accumulated depreciation 339 289

Net property, plant, and equipment 188 171

Total assets $ 318 $ 304

Liabilities and stockholders’ equity:

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Current liabilities:

Accounts payable $ 46 $ 41

Accrued liabilities 20 17

Income taxes payable 26 29

Total current liabilities 92 87

Bonds payable 145 180

Total liabilities 237 267

Stockholders’ equity:

Common stock 31 30

Retained earnings 50 7

Total stockholders’ equity 81 37

Total liabilities and stockholders’ equity $ 318 $ 304

The company’s net income for the year was $52 and it did not sell or retire any property, plant,

and equipment during the year. Cash dividends were $9. The net cash provided by (used in)

investing activities for the year was:

A) $17

B) $67

C) ($17)

D) ($67)

47) Excerpts from Neuwirth Corporation’s comparative balance sheet appear below:

Ending Balance Beginning Balance

Cash and cash equivalents $ 51,000 $ 41,000

Accounts receivable $ 38,000 $ 42,000

Inventory $ 79,000 $ 82,000

Which of the following is the correct treatment within the operating activities section of the

statement of cash flows using the indirect method?

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A) The change in Accounts Receivable is added to net income; The change in Inventory

is added to net income

B) The change in Accounts Receivable is subtracted from net income; The change in

Inventory is added to net income

C) The change in Accounts Receivable is added to net income; The change in Inventory

is subtracted from net income

D) The change in Accounts Receivable is subtracted from net income; The change in

Inventory is subtracted from net income

48) Excerpts from Neuwirth Corporation’s comparative balance sheet appear below:

Ending Balance Beginning Balance

Cash and cash equivalents $ 37,000 $ 27,000

Accounts receivable $ 24,000 $ 28,000

Inventory $ 65,000 $ 68,000

Which of the following is the correct treatment within the operating activities section of the

statement of cash flows using the indirect method?

A) The change in Accounts Receivable is added to net income; The change in Inventory

is added to net income

B) The change in Accounts Receivable is added to net income; The change in Inventory

is subtracted from net income

C) The change in Accounts Receivable is subtracted from net income; The change in

Inventory is subtracted from net income

D) The change in Accounts Receivable is subtracted from net income; The change in

Inventory is added to net income

49) The Warrel Corporation reported the following data for last year:

Increase in Cash and cash equivalents $ 22,000

Net cash provided by (used in) operating activities $ (18,000)

Net cash provided by (used in) investing activities $ 6,000

Based solely on this information, the net cash provided by (used in) financing activities on the

statement of cash flows would be:

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A) $12,000

B) $34,000

C) $(12,000)

D) $(18,000)

50) Excerpts from Deblois Corporation’s comparative balance sheet appear below:

Ending Balance Beginning Balance

Cash and cash equivalents $ 22,000 $ 28,000

Accounts payable $ 18,000 $ 17,000

Accrued liabilities $ 34,000 $ 37,000

Which of the following is the correct treatment within the operating activities section of the

statement of cash flows using the indirect method?

A) The change in Accounts Payable is added to net income; The change in Accrued

Liabilities is subtracted from net income

B) The change in Accounts Payable is added to net income; The change in Accrued

Liabilities is added to net income

C) The change in Accounts Payable is subtracted from net income; The change in

Accrued Liabilities is added to net income

D) The change in Accounts Payable is subtracted from net income; The change in

Accrued Liabilities is subtracted from net income

51) Autry Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 35 $ 36

Accounts receivable 68 67

Inventory 47 45

Total current assets 150 148

Property, plant, and equipment 542 480

Less accumulated depreciation 229 262

Net property, plant, and equipment 313 218

Total assets $ 463 $ 366

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Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 42 $ 46

Accrued liabilities 19 18

Income taxes payable 47 51

Total current liabilities 108 115

Bonds payable 76 70

Total liabilities 184 185

Stockholders’ equity:

Common stock 51 50

Retained earnings 228 131

Total stockholders’ equity 279 181

Total liabilities and stockholders’ equity $ 463 $ 366

Income Statement

Sales $ 760

Cost of goods sold 456

Gross margin 304

Selling and administrative expense 163

Net operating income 141

Gain on sale of plant and equipment 21

Income before taxes 162

Income taxes 49

Net income $ 113

Cash dividends were $16. The company sold equipment for $29 that was originally purchased

for $16 and that had accumulated depreciation of $8. The net cash provided by (used in)

investing activities for the year was:

A) $29

B) $49

C) $(49)

D) $(78)

52) Autry Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

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Current assets:

Cash and cash equivalents $ 33 $ 26

Accounts receivable 67 68

Inventory 54 65

Total current assets 154 159

Property, plant, and equipment 673 520

Less accumulated depreciation 315 293

Net property, plant, and equipment 358 227

Total assets $ 512 $ 386

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 35 $ 34

Accrued liabilities 19 18

Income taxes payable 29 29

Total current liabilities 83 81

Bonds payable 36 50

Total liabilities 119 131

Stockholders’ equity:

Common stock 33 30

Retained earnings 360 225

Total stockholders’ equity 393 255

Total liabilities and stockholders’ equity $ 512 $ 386

Income Statement

Sales $ 1,206

Cost of goods sold 795

Gross margin 411

Selling and administrative expense 178

Net operating income 233

Gain on sale of plant and equipment 17

Income before taxes 250

Income taxes 75

Net income $ 175

Cash dividends were $40. The company sold equipment for $19 that was originally purchased

for $6 and that had accumulated depreciation of $4. The net cash provided by (used in) investing

activities for the year was:

A) $19

B) $140

C) ($159)

D) ($140)

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53) Furis Corporation’s cash and cash equivalents consist of cash and marketable securities.

Last year the company’s cash account decreased by $12,000 and its marketable securities account

increased by $19,000. Net cash provided by (used in) operating activities was $18,000. Net cash

provided by (used in) financing activities was $(12,000). Based on this information, the net cash

provided by (used in) investing activities on the statement of cash flows was:

A) $(12,000)

B) $1,000

C) $(6,000)

D) $6,000

54) The following events occurred last year for the Cart Corporation:

Issuance of common stock $ 52,000

Dividends paid to shareholders $ 15,000

Sale of long-term investment $ 12,000

Interest paid to a lender $ 8,000

Proceeds from sale of used equipment $ 34,000

Repurchase of common stock $ 13,000

Based solely on the above information, the net cash provided by (used in) financing activities for

the year on the statement of cash flows was:

A) $12,000

B) $24,000

C) $20,000

D) $49,000

55) Illies Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 57,000 $ 50,000

Accounts receivable 36,000 39,700

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Inventory 84,000 87,700

Total current assets 177,000 177,400

Property, plant, and equipment 409,000 373,000

Less accumulated depreciation 190,000 149,000

Net property, plant, and equipment 219,000 224,000

Total assets $ 396,000 $ 401,400

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 35,000 $ 37,700

Accrued liabilities 71,000 77,700

Income taxes payable 68,400 59,000

Total current liabilities 174,400 174,400

Bonds payable 99,000 111,500

Total liabilities 273,400 285,900

Stockholders’ equity:

Common stock 48,500 39,000

Retained earnings 74,100 76,500

Total stockholders’ equity 122,600 115,500

Total liabilities and stockholders’ equity $ 396,000 $ 401,400

The company did not dispose of any property, plant, and equipment during the year. Its net

income for the year was $3,600 and its cash dividends were $6,000. The company did not issue

any bonds payable or purchase any of its own common stock during the year. Its net cash

provided by (used in) operating activities and net cash provided by (used in) financing activities

are:

A) net cash provided by (used in) operating activities, $52,000; net cash provided by

(used in) financing activities, $(9,500)

B) net cash provided by (used in) operating activities, $55,700; net cash provided by

(used in) financing activities, $(9,000)

C) net cash provided by (used in) operating activities, $52,000; net cash provided by

(used in) financing activities, $(9,000)

D) net cash provided by (used in) operating activities, $55,700; net cash provided by

(used in) financing activities, $(9,500)

56) Illies Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

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Current assets:

Cash and cash equivalents $ 40,000 $ 33,000

Accounts receivable 19,000 21,000

Inventory 67,000 69,000

Total current assets 126,000 123,000

Property, plant, and equipment 358,000 339,000

Less accumulated depreciation 156,000 132,000

Net property, plant, and equipment 202,000 207,000

Total assets $ 328,000 $ 330,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 18,000 $ 19,000

Accrued liabilities 54,000 59,000

Income taxes payable 48,000 42,000

Total current liabilities 120,000 120,000

Bonds payable 82,000 86,000

Total liabilities 202,000 206,000

Stockholders’ equity:

Common stock 23,000 22,000

Retained earnings 103,000 102,000

Total stockholders’ equity 126,000 124,000

Total liabilities and stockholders’ equity $ 328,000 $ 330,000

The company did not dispose of any property, plant, and equipment during the year. Its net

income for the year was $5,000 and its cash dividends were $4,000. The company did not issue

any bonds payable or purchase any of its own common stock during the year. Its net cash

provided by (used in) operating activities and net cash provided by (used in) financing activities

are:

A) net cash provided by (used in) operating activities, $33,000; net cash provided by

(used in) financing activities, $(1,000)

B) net cash provided by (used in) operating activities, $35,000; net cash provided by

(used in) financing activities, $(7,000)

C) net cash provided by (used in) operating activities, $33,000; net cash provided by

(used in) financing activities, $(7,000)

D) net cash provided by (used in) operating activities, $35,000; net cash provided by

(used in) financing activities, $(1,000)

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57) Birchett Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 27 $ 26

Accounts receivable 65 59

Inventory 49 55

Total current assets 141 140

Property, plant, and equipment 533 490

Less accumulated depreciation 234 231

Net property, plant, and equipment 299 259

Total assets $ 440 $ 399

Liabilities and stockholders’ equity

Current liabilities:

Accounts payable $ 28 $ 26

Total current liabilities 28 26

Bonds payable 169 200

Total liabilities 197 226

Stockholders’ equity:

Common stock 71 70

Retained earnings 172 103

Total stockholders’ equity 243 173

Total liabilities and stockholders’ equity $ 440 $ 399

The company’s net income for the year was $91 and it did not sell or retire any property, plant,

and equipment during the year. Cash dividends were $22. The net cash provided by (used in)

operating activities for the year was:

A) $86

B) $5

C) $96

D) $130

58) Norbury Corporation’s net income last year was $29,000. The company did not sell or

retire any property, plant, and equipment last year. Changes in selected balance sheet accounts

for the year appear below:

Increases (Decreases)

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Asset and Contra-Asset Accounts:

Accounts receivable $ 19,000

Inventory $ (4,700)

Prepaid expenses $ 14,500

Accumulated depreciation $ 35,000

Liability Accounts:

Accounts payable $ 18,500

Accrued liabilities $ (9,200)

Income taxes payable $ 3,800

Based solely on this information, the net cash provided by (used in) operating activities under the

indirect method on the statement of cash flows would be:

A) $105,900

B) $9,700

C) $86,100

D) $48,300

59) Norbury Corporation’s net income last year was $34,000. The company did not sell or

retire any property, plant, and equipment last year. Changes in selected balance sheet accounts

for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Accounts receivable $ 12,000

Inventory $ (9,000)

Prepaid expenses $ 4,000

Accumulated depreciation $ 19,000

Liability Accounts:

Accounts payable $ 5,000

Accrued liabilities $ 7,000

Income taxes payable $ (6,000)

Based solely on this information, the net cash provided by (used in) operating activities under the

indirect method on the statement of cash flows would be:

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A) $52,000

B) $66,000

C) $53,000

D) $16,000

60) Swinger Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 47,000 $ 31,000

Accounts receivable 23,000 22,000

Inventory 66,000 64,000

Total current assets 136,000 117,000

Property, plant, and equipment 356,000 338,000

Less accumulated depreciation 184,000 161,000

Net property, plant, and equipment 172,000 177,000

Total assets $ 308,000 $ 294,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 17,000 $ 16,000

Accrued liabilities 43,000 44,000

Income taxes payable 63,000 61,000

Total current liabilities 123,000 121,000

Bonds payable 83,000 80,000

Total liabilities 206,000 201,000

Stockholders’ equity:

Common stock 27,000 24,000

Retained earnings 75,000 69,000

Total stockholders’ equity 102,000 93,000

Total liabilities and stockholders’ equity $ 308,000 $ 294,000

The company did not dispose of any property, plant, and equipment during the year. Its net

income for the year was $10,000. The net cash provided by (used in) operating activities is:

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A) $32,000

B) $36,000

C) $34,000

D) $28,000

61) Majorn Auto Parts Store had net income of $100,000 for the year just ended. Majorn

collected the following additional information to prepare its statement of cash flows for the year:

Increase in accounts receivable $ 140,000

Decrease in inventory $ 37,000

Decrease in accounts payable $ 54,000

Increase in retained earnings $ 48,000

Cash received from sale of building $ 234,000

Gain on sale of building $ 66,000

Depreciation expense $ 51,000

Majorn uses the indirect method to prepare its statement of cash flows. What is Majorn’s net cash

provided by (used in) operating activities?

A) $60,000

B) $(72,000)

C) $242,000

D) $336,000

62) Majorn Auto Parts Store had net income of $81,000 for the year just ended. Majorn

collected the following additional information to prepare its statement of cash flows for the year:

Increase in accounts receivable $ 102,000

Decrease in inventory $ 18,000

Decrease in accounts payable $ 35,000

Increase in retained earnings $ 29,000

Cash received from sale of building $ 215,000

Gain on sale of building $ 47,000

Depreciation expense $ 32,000

Majorn uses the indirect method to prepare its statement of cash flows. What is Majorn’s net cash

provided by (used in) operating activities?

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A) $41,000

B) $(53,000)

C) $185,000

D) $279,000

63) Klutz Dance Studio had net income of $205,000 for the year just ended. Klutz collected

the following additional information to prepare its statement of cash flows for the year:

Decrease in accounts receivable $ 33,500

Increase in accounts payable $ 20,500

Increase in retained earnings $ 111,000

Cash paid for purchase of new music equipment $ 29,500

Depreciation expense $ 6,900

Klutz uses the indirect method to prepare its statement of cash flows. What is Klutz’s net cash

provided by (used in) operating activities?

A) $123,500

B) $157,900

C) $255,300

D) $265,900

64) Klutz Dance Studio had net income of $167,000 for the year just ended. Klutz collected

the following additional information to prepare its statement of cash flows for the year:

Decrease in accounts receivable $ 24,000

Increase in accounts payable $ 11,000

Increase in retained earnings $ 92,000

Cash paid for purchase of new music equipment $ 20,000

Depreciation expense $ 5,000

Klutz uses the indirect method to prepare its statement of cash flows. What is Klutz’s net cash

provided by (used in) operating activities?

A) $95,000

B) $137,000

C) $185,000

D) $207,000

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65) Carriveau Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 48 $ 37

Accounts receivable 46 27

Inventory 58 79

Total current assets 152 143

Property, plant, and equipment 862 558

Less accumulated depreciation 304 276

Net property, plant, and equipment 558 282

Total assets $ 710 $ 425

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 39 $ 60

Accrued liabilities 28 23

Income taxes payable 51 28

Total current liabilities 118 111

Bonds payable 155 174

Total liabilities 273 285

Stockholders’ equity:

Common stock 93 88

Retained earnings 344 52

Total stockholders’ equity 437 140

Total liabilities and stockholders’ equity $ 710 $ 425

Net income for the year was $360. Cash dividends were $68. The company did not sell or retire

any property, plant, and equipment during the year. The net cash provided by (used in) operating

activities for the year was:

A) $37

B) $513

C) $397

D) $323

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66) Carriveau Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 31 $ 34

Accounts receivable 73 67

Inventory 74 64

Total current assets 178 165

Property, plant, and equipment 456 370

Less accumulated depreciation 207 196

Net property, plant, and equipment 249 174

Total assets $ 427 $ 339

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 49 $ 56

Accrued liabilities 19 20

Income taxes payable 26 24

Total current liabilities 94 100

Bonds payable 152 200

Total liabilities 246 300

Stockholders’ equity:

Common stock 35 30

Retained earnings 146 9

Total stockholders’ equity 181 39

Total liabilities and stockholders’ equity $ 427 $ 339

Net income for the year was $172. Cash dividends were $35. The company did not sell or retire

any property, plant, and equipment during the year. The net cash provided by (used in) operating

activities for the year was:

A) $183

B) $246

C) $(11)

D) $161

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67) Morbeck Corporation’s net income last year was $56,000. The company paid a cash

dividend of $31,000 and did not sell or retire any property, plant, and equipment last year.

Changes in selected balance sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Accounts receivable $ (8,000)

Inventory $ (6,000)

Prepaid expenses $ 12,000

Accumulated depreciation $ 23,000

Liability Accounts:

Accounts payable $ (10,000)

Accrued liabilities $ 7,000

Income taxes payable $ 5,000

Bonds payable $ 40,000

Based solely on this information, the net cash provided by (used in) operating activities under the

indirect method on the statement of cash flows would be:

A) $83,000

B) $102,000

C) $29,000

D) $79,000

68) The following transactions occurred last year at Jogger Corporation:

Issuance of shares of the company’s own common stock $ 110,000

Dividends paid to the company’s own shareholders $ 3,000

Sale of long-term investment $ 4,000

Interest paid to lenders $ 8,000

Retirement of the company’s own bonds payable $ 100,000

Proceeds from sale of the company’s used equipment $ 29,000

Purchase of new equipment $ 170,000

Based solely on the above information, the net cash provided by (used in) financing activities for

the year on the statement of cash flows would be:

A) $424,000

B) $(138,000)

C) $(1,000)

D) $7,000

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69) Degeare Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 35 $ 28

Accounts receivable 65 77

Inventory 47 40

Total current assets 147 145

Property, plant, and equipment 518 490

Less accumulated depreciation 233 213

Net property, plant, and equipment 285 277

Total assets $ 432 $ 422

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 61 $ 54

Accrued liabilities 15 16

Income taxes payable 36 35

Total current liabilities 112 105

Bonds payable 72 100

Total liabilities 184 205

Stockholders’ equity:

Common stock 82 80

Retained earnings 166 137

Total stockholders’ equity 248 217

Total liabilities and stockholders’ equity $ 432 $ 422

Income Statement

Sales $ 590

Cost of goods sold 363

Gross margin 227

Selling and administrative expense 184

Net operating income 43

Gain on sale of plant and equipment 13

Income before taxes 56

Income taxes 17

Net income $ 39

Cash dividends were $10. The company sold equipment for $18 that was originally purchased

for $10 and that had accumulated depreciation of $5. The net cash provided by (used in)

operating activities for the year was:

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A) $73

B) $76

C) $43

D) $63

70) The data given below are from the accounting records of the Kuhn Corporation:

Net Income (accrual basis) $ 52,000

Depreciation Expense $ 12,500

Decrease in Accounts Payable $ 2,850

Decrease in Inventory $ 3,350

Increase in Bonds Payable $ 13,500

Sale of Common Stock for cash $ 30,700

Increase in Accounts Receivable $ 5,200

Based on this information, the net cash provided by (used in) operating activities using the

indirect method would be:

A) $65,500

B) $68,850

C) $59,800

D) $73,300

71) The data given below are from the accounting records of the Kuhn Corporation:

Net Income (accrual basis) $ 45,000

Depreciation Expense $ 9,000

Decrease in Accounts Payable $ 2,500

Decrease in Inventory $ 3,000

Increase in Bonds Payable $ 10,000

Sale of Common Stock for cash $ 30,000

Increase in Accounts Receivable $ 4,500

Based on this information, the net cash provided by (used in) operating activities using the

indirect method would be:

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A) $55,000

B) $58,000

C) $50,000

D) $60,000

72) Frankin Corporation’s net cash provided by operating activities was $165; its capital

expenditures were $77; and its cash dividends were $35. The company’s free cash flow was:

A) $53

B) $277

C) $130

D) $88

73) Frankin Corporation’s net cash provided by operating activities was $192; its capital

expenditures were $154; and its cash dividends were $27. The company’s free cash flow was:

A) $38

B) $373

C) $11

D) $165

74) Suggett Corporation’s net cash provided by operating activities was $34; its income taxes

were $12; its capital expenditures were $24; and its cash dividends were $7. The company’s free

cash flow was:

A) $(19)

B) $77

C) $3

D) $15

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75) Beacham Corporation’s net cash provided by operating activities was $115; its net

income was $95; its capital expenditures were $65; and its cash dividends were $17. The

company’s free cash flow was:

A) $292

B) $13

C) $33

D) $128

76) McCorey Corporation recorded the following events last year:

Repurchase by the company of its own common stock $ 32,000

Sale of long-term investment $ 51,000

Interest paid to lenders $ 11,000

Dividends paid to the company’s shareholders $ 61,000

Collection by McCorey of a loan made to another company $ 37,000

Payment of taxes to governmental bodies $ 21,000

On the statement of cash flows, some of these events are classified as operating activities, some

are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) financing activities

on the statement of cash flows would be:

A) $(93,000)

B) $104,000

C) $(176,000)

D) $213,000

77) McCorey Corporation recorded the following events last year:

Repurchase by the company of its own common stock $ 60,000

Sale of long-term investment $ 55,000

Interest paid to lenders $ 15,000

Dividends paid to the company’s shareholders $ 70,000

Collection by McCorey of a loan made to another company $ 75,000

Payment of taxes to governmental bodies $ 50,000

Version 1 49

On the statement of cash flows, some of these events are classified as operating activities, some

are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) financing activities

on the statement of cash flows would be:

A) $(70,000)

B) $70,000

C) $(130,000)

D) $130,000

78) McCorey Corporation recorded the following events last year:

Repurchase by the company of its own common stock $ 37,000

Sale of long-term investment $ 56,000

Interest paid to lenders $ 13,500

Dividends paid to the company’s shareholders $ 66,000

Collection by McCorey of a loan made to another company $ 42,000

Payment of taxes to governmental bodies $ 23,500

On the statement of cash flows, some of these events are classified as operating activities, some

are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) investing activities

on the statement of cash flows would be:

A) $56,000

B) $84,000

C) $98,000

D) $112,000

79) McCorey Corporation recorded the following events last year:

Repurchase by the company of its own common stock $ 60,000

Sale of long-term investment $ 55,000

Interest paid to lenders $ 15,000

Dividends paid to the company’s shareholders $ 70,000

Collection by McCorey of a loan made to another company $ 75,000

Payment of taxes to governmental bodies $ 50,000

Version 1 50

On the statement of cash flows, some of these events are classified as operating activities, some

are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) investing activities

on the statement of cash flows would be:

A) $110,000

B) $55,000

C) $150,000

D) $130,000

80) Randal Corporation recorded the following activity for the year just ended:

Proceeds from sale of property $ 300,000

Cash received from customers $ 120,000

Issuance of common stock $ 180,000

Issuance of bonds payable $ 500,000

Dividends paid to stockholders $ 130,000

Purchase of equipment $ 400,000

The net cash provided by (used in) financing activities for the year was:

A) $100,000

B) $550,000

C) $180,000

D) $680,000

81) Randal Corporation recorded the following activity for the year just ended:

Proceeds from sale of property $ 300,000

Cash received from customers $ 120,000

Issuance of common stock $ 180,000

Issuance of bonds payable $ 500,000

Dividends paid to stockholders $ 130,000

Purchase of equipment $ 400,000

The net cash provided by (used in) investing activities for the year was:

Version 1 51

A) $100,000

B) $(100,000)

C) $(400,000)

D) $400,000

82) Spackel Corporation recorded the following events last year:

Issuance of shares of the company’s own common stock $ 380,000

Purchase of long-term investment $ 40,000

Dividends paid to the company’s own shareholders $ 18,000

Cash paid to suppliers for inventory purchases $ 12,000

Repayment of principal on the company’s own bonds $ 370,000

Interest paid to lenders $ 6,000

Collection by Spackel of a loan made to another company $ 110,000

Purchase of equipment $ 350,000

On the statement of cash flows, some of these events are classified as operating activities, some

are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) financing activities

on the statement of cash flows would be:

A) $(8,000)

B) $(14,000)

C) $104,000

D) $1,286,000

83) Spackel Corporation recorded the following events last year:

Issuance of shares of the company’s own common stock $ 380,000

Purchase of long-term investment $ 40,000

Dividends paid to the company’s own shareholders $ 18,000

Cash paid to suppliers for inventory purchases $ 12,000

Repayment of principal on the company’s own bonds $ 370,000

Interest paid to lenders $ 6,000

Collection by Spackel of a loan made to another company $ 110,000

Purchase of equipment $ 350,000

Version 1 52

On the statement of cash flows, some of these events are classified as operating activities, some

are classified as investing activities, and some are classified as financing activities.

Based solely on the information above, the net cash provided by (used in) investing activities

on the statement of cash flows would be:

A) $(280,000)

B) $(390,000)

C) $(760,000)

D) $(1,286,000)

84) Alcoser Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 67 $ 33

Accounts receivable 45 48

Inventory 65 89

Property, plant, and equipment 602 522

Less accumulated depreciation 232 218

Total assets $ 547 $ 474

Liabilities and stockholders’ equity:

Accounts payable $ 53 $ 62

Accrued liabilities 29 28

Income taxes payable 28 40

Bonds payable 241 212

Common stock 87 81

Retained earnings 109 51

Total liabilities and equity $ 547 $ 474

Net income for the year was $73. Cash dividends were $15. The company did not dispose of any

property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own

common stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) operating activities for the year was:

A) $64

B) $94

C) $114

D) ($21)

Version 1 53

85) Alcoser Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 34 $ 29

Accounts receivable 32 36

Inventory 53 66

Property, plant, and equipment 554 480

Less accumulated depreciation 208 206

Total assets $ 465 $ 405

Liabilities and stockholders’ equity:

Accounts payable $ 41 $ 50

Accrued liabilities 17 16

Income taxes payable 28 30

Bonds payable 217 200

Common stock 75 70

Retained earnings 87 39

Total liabilities and equity $ 465 $ 405

Net income for the year was $60. Cash dividends were $12. The company did not dispose of any

property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own

common stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) operating activities for the year was:

A) $51

B) $69

C) $9

D) $86

86) Alcoser Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 34 $ 29

Accounts receivable 32 36

Inventory 53 66

Property, plant, and equipment 554 480

Version 1 54

Less accumulated depreciation 208 206

Total assets $ 465 $ 405

Liabilities and stockholders’ equity:

Accounts payable $ 41 $ 50

Accrued liabilities 17 16

Income taxes payable 28 30

Bonds payable 217 200

Common stock 75 70

Retained earnings 87 39

Total liabilities and stockholders’ equity $ 465 $ 405

Net income for the year was $60. Cash dividends were $12. The company did not dispose of any

property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own

common stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) investing activities for the year was:

A) $74

B) $(74)

C) $(72)

D) $72

87) Alcoser Corporation’s most recent balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 34 $ 29

Accounts receivable 32 36

Inventory 53 66

Property, plant, and equipment 554 480

Less accumulated depreciation 208 206

Total assets $ 465 $ 405

Liabilities and stockholders’ equity:

Accounts payable $ 41 $ 50

Accrued liabilities 17 16

Income taxes payable 28 30

Bonds payable 217 200

Common stock 75 70

Retained earnings 87 39

Total liabilities and stockholders’ equity $ 465 $ 405

Version 1 55

Net income for the year was $60. Cash dividends were $12. The company did not dispose of any

property, plant, and equipment. It did not issue any bonds payable or repurchase any of its own

common stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) financing activities for the year was:

A) $10

B) $5

C) $(12)

D) $17

88) Hirshberg Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 42,000 $ 31,000

Accounts receivable 22,000 18,000

Inventory 66,000 70,000

Total current assets 130,000 119,000

Property, plant, and equipment 401,000 377,000

Less accumulated depreciation 207,000 177,000

Net property, plant, and equipment 194,000 200,000

Total assets $ 324,000 $ 319,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 15,000 $ 17,000

Accrued liabilities 45,000 38,000

Income taxes payable 53,000 51,000

Total current liabilities 113,000 106,000

Bonds payable 83,000 91,000

Total liabilities 196,000 197,000

Stockholders’ equity:

Common stock 27,000 28,000

Retained earnings 101,000 94,000

Total stockholders’ equity 128,000 122,000

Total liabilities and stockholders’ equity $ 324,000 $ 319,000

Version 1 56

The company’s net income for the year was $11,000 and its cash dividends were $4,000. It did

not sell or retire any property, plant, and equipment during the year.

The company’s net cash provided by (used in) operating activities is:

A) $48,000

B) $18,000

C) $40,000

D) $52,000

89) Hirshberg Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 42,000 $ 22,000

Accounts receivable 17,800 22,000

Inventory 56,200 52,000

Total current assets 116,000 96,000

Property, plant, and equipment 346,000 332,000

Less accumulated depreciation 166,000 134,000

Net property, plant, and equipment 180,000 198,000

Total assets $ 296,000 $ 294,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 16,200 $ 13,000

Accrued liabilities 61,400 52,000

Income taxes payable 44,200 42,000

Total current liabilities 121,800 107,000

Bonds payable 59,500 72,000

Total liabilities 181,300 179,000

Stockholders’ equity:

Common stock 29,800 33,000

Retained earnings 84,900 82,000

Total stockholders’ equity 114,700 115,000

Total liabilities and stockholders’ equity $ 296,000 $ 294,000

Version 1 57

The company’s net income for the year was $4,300 and its cash dividends were $1,400. It did not

sell or retire any property, plant, and equipment during the year.

The company’s net cash provided by (used in) investing activities is:v: 02_23_2016_QC_CS-

43371

A) $(14,000)

B) $(18,000)

C) $46,000

D) $36,200

90) Hirshberg Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 42,000 $ 31,000

Accounts receivable 22,000 18,000

Inventory 66,000 70,000

Total current assets 130,000 119,000

Property, plant, and equipment 401,000 377,000

Less accumulated depreciation 207,000 177,000

Net property, plant, and equipment 194,000 200,000

Total assets $ 324,000 $ 319,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 15,000 $ 17,000

Accrued liabilities 45,000 38,000

Income taxes payable 53,000 51,000

Total current liabilities 113,000 106,000

Bonds payable 83,000 91,000

Total liabilities 196,000 197,000

Stockholders’ equity:

Common stock 27,000 28,000

Retained earnings 101,000 94,000

Total stockholders’ equity 128,000 122,000

Total liabilities and stockholders’ equity $ 324,000 $ 319,000

Version 1 58

The company’s net income for the year was $11,000 and its cash dividends were $4,000. It did

not sell or retire any property, plant, and equipment during the year.

The company’s net cash provided by (used in) investing activities is:

Garrison 16e Rechecks 2017-09-22

A) $(6,000)

B) $(54,000)

C) $(24,000)

D) $(44,000)

91) Walmouth Corporation’s comparative balance sheet and income statement for last year

appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Cash and cash equivalents $ 40,000 $ 32,000

Accounts receivable 89,000 79,000

Inventory 48,000 55,000

Prepaid expenses 8,000 11,000

Long-term investments 250,000 210,000

Property, plant, and equipment 550,000 550,000

Less accumulated depreciation 264,000 239,000

Total assets $ 721,000 $ 698,000

Accounts payable $ 58,000 $ 46,000

Accrued liabilities 15,000 19,000

Income taxes payable 55,000 41,000

Bonds payable 100,000 160,000

Common stock 150,000 140,000

Retained earnings 343,000 292,000

Total liabilities and stockholders’ equity $ 721,000 $ 698,000

Income Statement

Sales $ 870,000

Cost of goods sold 450,000

Gross margin 420,000

Selling and administrative expense 270,000

Net operating income 150,000

Income taxes 45,000

Net income $ 105,000

Version 1 59

The company declared and paid a cash dividend of $54,000 during the year. It did not purchase

or dispose of any property, plant, and equipment. It did not issue any bonds or repurchase any of

its own common stock. The following questions pertain to the company’s statement of cash

flows.

The net cash provided by (used in) operating activities last year was:

A) $105,000

B) $58,000

C) $130,000

D) $152,000

92) Walmouth Corporation’s comparative balance sheet and income statement for last year

appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Cash and cash equivalents $ 40,000 $ 32,000

Accounts receivable 89,000 79,000

Inventory 48,000 55,000

Prepaid expenses 8,000 11,000

Long-term investments 250,000 210,000

Property, plant, and equipment 550,000 550,000

Less accumulated depreciation 264,000 239,000

Total assets $ 721,000 $ 698,000

Accounts payable $ 58,000 $ 46,000

Accrued liabilities 15,000 19,000

Income taxes payable 55,000 41,000

Bonds payable 100,000 160,000

Common stock 150,000 140,000

Retained earnings 343,000 292,000

Total liabilities and stockholders’ equity $ 721,000 $ 698,000

Income Statement

Sales $ 870,000

Cost of goods sold 450,000

Gross margin 420,000

Selling and administrative expense 270,000

Net operating income 150,000

Income taxes 45,000

Net income $ 105,000

Version 1 60

The company declared and paid a cash dividend of $54,000 during the year. It did not purchase

or dispose of any property, plant, and equipment. It did not issue any bonds or repurchase any of

its own common stock. The following questions pertain to the company’s statement of cash

flows.

The net cash provided by (used in) investing activities last year was:

A) $30,000

B) $(30,000)

C) $(40,000)

D) $40,000

93) Walmouth Corporation’s comparative balance sheet and income statement for last year

appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Cash and cash equivalents $ 40,000 $ 32,000

Accounts receivable 89,000 79,000

Inventory 48,000 55,000

Prepaid expenses 8,000 11,000

Long-term investments 250,000 210,000

Property, plant, and equipment 550,000 550,000

Less accumulated depreciation 264,000 239,000

Total assets $ 721,000 $ 698,000

Accounts payable $ 58,000 $ 46,000

Accrued liabilities 15,000 19,000

Income taxes payable 55,000 41,000

Bonds payable 100,000 160,000

Common stock 150,000 140,000

Retained earnings 343,000 292,000

Total liabilities and stockholders’ equity $ 721,000 $ 698,000

Income Statement

Sales $ 870,000

Cost of goods sold 450,000

Gross margin 420,000

Selling and administrative expense 270,000

Net operating income 150,000

Income taxes 45,000

Net income $ 105,000

Version 1 61

The company declared and paid a cash dividend of $54,000 during the year. It did not purchase

or dispose of any property, plant, and equipment. It did not issue any bonds or repurchase any of

its own common stock. The following questions pertain to the company’s statement of cash

flows.

The net cash provided by (used in) financing activities last year was:

A) $(104,000)

B) $104,000

C) $(60,000)

D) $60,000

94) Stone Retail Corporation’s most recent comparative Balance Sheet is as follows:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 51,000 $ 64,000

Accounts receivable 83,000 41,000

Inventory 96,000 87,000

Property, plant, and equipment 120,000 120,000

Less accumulated depreciation 65,000 50,000

Total assets $ 285,000 $ 262,000

Liabilities and stockholders’ equity:

Accounts payable $ 12,000 $ 38,000

Income taxes payable 1,000 3,000

Bonds payable 30,000 5,000

Common stock 100,000 80,000

Retained earnings 142,000 136,000

Total liabilities and stockholders’ equity $ 285,000 $ 262,000

Stone’s net income was $46,000. No equipment was sold or purchased. Cash dividends of

$40,000 were declared and paid. Stone uses the indirect method to prepare its statement of cash

flows.

What is Stone’s net cash provided by (used in) operating activities?

A) $(18,000)

B) $(33,000)

C) $69,000

D) $84,000

Version 1 62

95) Stone Retail Corporation’s most recent comparative Balance Sheet is as follows:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 51,000 $ 64,000

Accounts receivable 83,000 41,000

Inventory 96,000 87,000

Property, plant, and equipment 120,000 120,000

Less accumulated depreciation 65,000 50,000

Total assets $ 285,000 $ 262,000

Liabilities and stockholders’ equity:

Accounts payable $ 12,000 $ 38,000

Income taxes payable 1,000 3,000

Bonds payable 30,000 5,000

Common stock 100,000 80,000

Retained earnings 142,000 136,000

Total liabilities and stockholders’ equity $ 285,000 $ 262,000

Stone’s net income was $46,000. No equipment was sold or purchased. Cash dividends of

$40,000 were declared and paid. Stone uses the indirect method to prepare its statement of cash

flows.

What is Stone’s net cash provided by (used in) investing activities?

Garrison 16e Rechecks 2017-11-20

A) $0

B) $(15,000)

C) $25,000

D) $45,000

96) Stone Retail Corporation’s most recent comparative Balance Sheet is as follows:

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 51,000 $ 64,000

Accounts receivable 83,000 41,000

Inventory 96,000 87,000

Property, plant, and equipment 120,000 120,000

Less accumulated depreciation 65,000 50,000

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Total assets $ 285,000 $ 262,000

Liabilities and stockholders’ equity:

Accounts payable $ 12,000 $ 38,000

Income taxes payable 1,000 3,000

Bonds payable 30,000 5,000

Common stock 100,000 80,000

Retained earnings 142,000 136,000

Total liabilities and stockholders’ equity $ 285,000 $ 262,000

Stone’s net income was $46,000. No equipment was sold or purchased. Cash dividends of

$40,000 were declared and paid. Stone uses the indirect method to prepare its statement of cash

flows.

What is Stone’s net cash provided by (used in) financing activities?

A) $(20,000)

B) $(15,000)

C) $5,000

D) $65,000

97) Krech Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 31,000 $ 28,000

Accounts receivable 18,000 20,000

Inventory 58,000 56,000

Prepaid expenses 12,000 10,000

Total current assets 119,000 114,000

Property, plant, and equipment 374,000 354,000

Less accumulated depreciation 190,000 165,000

Net property, plant, and equipment 184,000 189,000

Total assets $ 303,000 $ 303,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 13,000 $ 9,000

Accrued liabilities 52,000 53,000

Income taxes payable 67,000 69,000

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Total current liabilities 132,000 131,000

Bonds payable 76,000 73,000

Total liabilities 208,000 204,000

Stockholders’ equity:

Common stock 28,000 26,000

Retained earnings 67,000 73,000

Total stockholders’ equity 95,000 99,000

Total liabilities and stockholders’ equity $ 303,000 $ 303,000

The company’s net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It

did not sell or retire any property, plant, and equipment during the year. The company uses the

indirect method to determine the net cash provided by operating activities.

Which of the following is correct regarding the operating activities section of the statement of

cash flows?

Garrison 16e Rechecks 2017-12-19

A) The change in Accounts Receivable will be subtracted from net income; The change

in Inventory will be added to net income

B) The change in Accounts Receivable will be added to net income; The change in

Inventory will be subtracted from net income

C) The change in Accounts Receivable will be added to net income; The change in

Inventory will be added to net income

D) The change in Accounts Receivable will be subtracted from net income; The change

in Inventory will be subtracted from net income

98) Krech Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 31,000 $ 28,000

Accounts receivable 18,000 20,000

Inventory 58,000 56,000

Prepaid expenses 12,000 10,000

Total current assets 119,000 114,000

Property, plant, and equipment 374,000 354,000

Less accumulated depreciation 190,000 165,000

Net property, plant, and equipment 184,000 189,000

Version 1 65

Total assets $ 303,000 $ 303,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 13,000 $ 9,000

Accrued liabilities 52,000 53,000

Income taxes payable 67,000 69,000

Total current liabilities 132,000 131,000

Bonds payable 76,000 73,000

Total liabilities 208,000 204,000

Stockholders’ equity:

Common stock 28,000 26,000

Retained earnings 67,000 73,000

Total stockholders’ equity 95,000 99,000

Total liabilities and stockholders’ equity $ 303,000 $ 303,000

The company’s net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It

did not sell or retire any property, plant, and equipment during the year. The company uses the

indirect method to determine the net cash provided by operating activities.

Which of the following is correct regarding the operating activities section of the statement of

cash flows?

A) The change in Accounts Payable will be added to net income; The change in

Accrued Liabilities will be subtracted from net income

B) The change in Accounts Payable will be subtracted from net income; The change in

Accrued Liabilities will be added to net income

C) The change in Accounts Payable will be subtracted from net income; The change in

Accrued Liabilities will be subtracted from net income

D) The change in Accounts Payable will be added to net income; The change in

Accrued Liabilities will be added to net income

99) Krech Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 31,000 $ 28,000

Accounts receivable 18,000 20,000

Inventory 58,000 56,000

Version 1 66

Prepaid expenses 12,000 10,000

Total current assets 119,000 114,000

Property, plant, and equipment 374,000 354,000

Less accumulated depreciation 190,000 165,000

Net property, plant, and equipment 184,000 189,000

Total assets $ 303,000 $ 303,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 13,000 $ 9,000

Accrued liabilities 52,000 53,000

Income taxes payable 67,000 69,000

Total current liabilities 132,000 131,000

Bonds payable 76,000 73,000

Total liabilities 208,000 204,000

Stockholders’ equity:

Common stock 28,000 26,000

Retained earnings 67,000 73,000

Total stockholders’ equity 95,000 99,000

Total liabilities and stockholders’ equity $ 303,000 $ 303,000

The company’s net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It

did not sell or retire any property, plant, and equipment during the year. The company uses the

indirect method to determine the net cash provided by operating activities.

Which of the following is correct regarding the operating activities section of the statement of

cash flows?

A) The change in Prepaid Expenses will be added to net income; The change in Income

Taxes Payable will be subtracted from net income

B) The change in Prepaid Expenses will be subtracted from net income; The change in

Income Taxes Payable will be subtracted from net income

C) The change in Prepaid Expenses will be subtracted from net income; The change in

Income Taxes Payable will be added to net income

D) The change in Prepaid Expenses will be added to net income; The change in Income

Taxes Payable will be added to net income

100) Krech Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Version 1 67

Current assets:

Cash and cash equivalents $ 33,000 $ 26,300

Accounts receivable 19,000 22,000

Inventory 62,000 59,000

Prepaid expenses 12,400 10,200

Total current assets 126,400 117,500

Property, plant, and equipment 398,000 378,000

Less accumulated depreciation 199,000 170,100

Net property, plant, and equipment 199,000 207,900

Total assets $ 325,400 $ 325,400

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 16,200 $ 11,000

Accrued liabilities 54,000 58,000

Income taxes payable 72,000 74,000

Total current liabilities 142,200 143,000

Bonds payable 82,000 77,000

Total liabilities 224,200 220,000

Stockholders’ equity:

Common stock 32,000 28,000

Retained earnings 69,200 77,400

Total stockholders’ equity 101,200 105,400

Total liabilities and stockholders’ equity $ 325,400 $ 325,400

The company’s net income (loss) for the year was $(4,100) and its cash dividends were $4,100. It

did not sell or retire any property, plant, and equipment during the year. The company uses the

indirect method to determine the net cash provided by operating activities.

The company’s net cash provided by (used in) operating activities is:

A) $20,700

B) $21,800

C) $30,000

D) $33,000

101) Krech Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Version 1 68

Current assets:

Cash and cash equivalents $ 31,000 $ 28,000

Accounts receivable 18,000 20,000

Inventory 58,000 56,000

Prepaid expenses 12,000 10,000

Total current assets 119,000 114,000

Property, plant, and equipment 374,000 354,000

Less accumulated depreciation 190,000 165,000

Net property, plant, and equipment 184,000 189,000

Total assets $ 303,000 $ 303,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 13,000 $ 9,000

Accrued liabilities 52,000 53,000

Income taxes payable 67,000 69,000

Total current liabilities 132,000 131,000

Bonds payable 76,000 73,000

Total liabilities 208,000 204,000

Stockholders’ equity:

Common stock 28,000 26,000

Retained earnings 67,000 73,000

Total stockholders’ equity 95,000 99,000

Total liabilities and stockholders’ equity $ 303,000 $ 303,000

The company’s net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It

did not sell or retire any property, plant, and equipment during the year. The company uses the

indirect method to determine the net cash provided by operating activities.

The company’s net cash provided by (used in) operating activities is:

Garrison 16e Rechecks 2017-11-18

A) $29,000

B) $19,000

C) $27,000

D) $21,000

102) Krech Corporation’s comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

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Assets:

Current assets:

Cash and cash equivalents $ 31,000 $ 28,000

Accounts receivable 18,000 20,000

Inventory 58,000 56,000

Prepaid expenses 12,000 10,000

Total current assets 119,000 114,000

Property, plant, and equipment 374,000 354,000

Less accumulated depreciation 190,000 165,000

Net property, plant, and equipment 184,000 189,000

Total assets $ 303,000 $ 303,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 13,000 $ 9,000

Accrued liabilities 52,000 53,000

Income taxes payable 67,000 69,000

Total current liabilities 132,000 131,000

Bonds payable 76,000 73,000

Total liabilities 208,000 204,000

Stockholders’ equity:

Common stock 28,000 26,000

Retained earnings 67,000 73,000

Total stockholders’ equity 95,000 99,000

Total liabilities and stockholders’ equity $ 303,000 $ 303,000

The company’s net income (loss) for the year was ($3,000) and its cash dividends were $3,000. It

did not sell or retire any property, plant, and equipment during the year. The company uses the

indirect method to determine the net cash provided by operating activities.

The company’s net cash provided by (used in) investing activities is:

Garrison 16e Rechecks 2017-09-22

A) $(20,000)

B) $(5,000)

C) $(45,000)

D) $(22,000)

103) Salsedo Corporation’s balance sheet and income statement appear below:

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Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 31 $ 33

Accounts receivable 24 30

Inventory 53 47

Property, plant, and equipment 461 390

Less accumulated depreciation 306 256

Total assets $ 263 $ 244

Liabilities and stockholders’ equity:

Accounts payable $ 42 $ 49

Accrued liabilities 16 17

Income taxes payable 39 40

Bonds payable 75 90

Common stock 53 50

Retained earnings 38 (2)

Total liabilities and stockholders’ equity $ 263 $ 244

Income Statement

Sales $ 634

Cost of goods sold 400

Gross margin 234

Selling and administrative expense 174

Net operating income 60

Gain on sale of equipment 10

Income before taxes 70

Income taxes 21

Net income $ 49

Cash dividends were $9. The company sold equipment for $15 that was originally purchased for

$10 and that had accumulated depreciation of $5. It did not issue any bonds payable or

repurchase any of its own common stock.

The net cash provided by (used in) operating activities for the year was:

A) $60

B) $95

C) $94

D) $85

104) Salsedo Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

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Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 31 $ 33

Accounts receivable 24 30

Inventory 53 47

Property, plant, and equipment 461 390

Less accumulated depreciation 306 256

Total assets $ 263 $ 244

Liabilities and stockholders’ equity:

Accounts payable $ 42 $ 49

Accrued liabilities 16 17

Income taxes payable 39 40

Bonds payable 75 90

Common stock 53 50

Retained earnings 38 (2)

Total liabilities and stockholders’ equity $ 263 $ 244

Income Statement

Sales $ 634

Cost of goods sold 400

Gross margin 234

Selling and administrative expense 174

Net operating income 60

Gain on sale of equipment 10

Income before taxes 70

Income taxes 21

Net income $ 49

Cash dividends were $9. The company sold equipment for $15 that was originally purchased for

$10 and that had accumulated depreciation of $5. It did not issue any bonds payable or

repurchase any of its own common stock.

The net cash provided by (used in) investing activities for the year was:

A) $(81)

B) $(66)

C) $66

D) $15

105) Salsedo Corporation’s balance sheet and income statement appear below:

Comparative Balance Sheet

Ending Balance Beginning Balance

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Assets:

Cash and cash equivalents $ 31 $ 33

Accounts receivable 24 30

Inventory 53 47

Property, plant, and equipment 461 390

Less accumulated depreciation 306 256

Total assets $ 263 $ 244

Liabilities and stockholders’ equity:

Accounts payable $ 42 $ 49

Accrued liabilities 16 17

Income taxes payable 39 40

Bonds payable 75 90

Common stock 53 50

Retained earnings 38 (2)

Total liabilities and stockholders’ equity $ 263 $ 244

Income Statement

Sales $ 634

Cost of goods sold 400

Gross margin 234

Selling and administrative expense 174

Net operating income 60

Gain on sale of equipment 10

Income before taxes 70

Income taxes 21

Net income $ 49

Cash dividends were $9. The company sold equipment for $15 that was originally purchased for

$10 and that had accumulated depreciation of $5. It did not issue any bonds payable or

repurchase any of its own common stock.

The net cash provided by (used in) financing activities for the year was:

A) $(9)

B) $(15)

C) $(21)

D) $3

106) The most recent balance sheet and income statement of Penaloza Corporation appear

below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Version 1 73

Assets:

Cash and cash equivalents $ 47 $ 39

Accounts receivable 49 55

Inventory 36 39

Property, plant, and equipment 474 370

Less accumulated depreciation 250 218

Total assets $ 356 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 36 $ 35

Accrued liabilities 27 25

Income taxes payable 36 44

Bonds payable 88 80

Common stock 45 40

Retained earnings 124 61

Total liabilities and stockholders’ equity $ 356 $ 285

Income Statement

Sales $ 773

Cost of goods sold 468

Gross margin 305

Selling and administrative expense 189

Net operating income 116

Income taxes 35

Net income $ 81

The company paid a cash dividend of $18. It did not dispose of any property, plant, and

equipment. The company did not retire any bonds payable or repurchase any of its own common

stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) operating activities for the year was:

A) $117

B) $45

C) $36

D) $116

107) The most recent balance sheet and income statement of Penaloza Corporation appear

below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 47 $ 39

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Accounts receivable 49 55

Inventory 36 39

Property, plant, and equipment 474 370

Less accumulated depreciation 250 218

Total assets $ 356 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 36 $ 35

Accrued liabilities 27 25

Income taxes payable 36 44

Bonds payable 88 80

Common stock 45 40

Retained earnings 124 61

Total liabilities and stockholders’ equity $ 356 $ 285

Income Statement

Sales $ 773

Cost of goods sold 468

Gross margin 305

Selling and administrative expense 189

Net operating income 116

Income taxes 35

Net income $ 81

The company paid a cash dividend of $18. It did not dispose of any property, plant, and

equipment. The company did not retire any bonds payable or repurchase any of its own common

stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) investing activities for the year was:

A) $72

B) $104

C) $(104)

D) $(72)

108) The most recent balance sheet and income statement of Penaloza Corporation appear

below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 47 $ 39

Accounts receivable 49 55

Inventory 36 39

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Property, plant, and equipment 474 370

Less accumulated depreciation 250 218

Total assets $ 356 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 36 $ 35

Accrued liabilities 27 25

Income taxes payable 36 44

Bonds payable 88 80

Common stock 45 40

Retained earnings 124 61

Total liabilities and stockholders’ equity $ 356 $ 285

Income Statement

Sales $ 773

Cost of goods sold 468

Gross margin 305

Selling and administrative expense 189

Net operating income 116

Income taxes 35

Net income $ 81

The company paid a cash dividend of $18. It did not dispose of any property, plant, and

equipment. The company did not retire any bonds payable or repurchase any of its own common

stock. The following questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) financing activities for the year was:

A) $(18)

B) $5

C) $(5)

D) $8

109) Financial statements of Rukavina Corporation follow:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 22 $ 29

Accounts receivable 42 47

Inventory 36 37

Property, plant, and equipment 396 370

Less accumulated depreciation 198 185

Total assets $ 298 $ 298

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Liabilities and stockholders’ equity:

Accounts payable $ 74 $ 63

Bonds payable 186 230

Common stock 82 81

Retained earnings (44) (76)

Total liabilities and stockholders’ equity $ 298 $ 298

Income Statement

Sales $ 530

Cost of goods sold 371

Gross margin 159

Selling and administrative expense 106

Net operating income 53

Income taxes 16

Net income $ 37

Cash dividends were $5. The company did not dispose of any property, plant, and equipment. It

did not issue any bonds payable or repurchase any of its own common stock. The following

questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) operating activities for the year was:

A) $59

B) $67

C) $76

D) $24

110) Financial statements of Rukavina Corporation follow:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 36 $ 38

Accounts receivable 39 44

Inventory 34 35

Property, plant, and equipment 386 360

Less accumulated depreciation 202 191

Total assets $ 293 $ 286

Liabilities and stockholders’ equity:

Accounts payable $ 71 $ 61

Bonds payable 176 220

Common stock 81 80

Retained earnings (35) (75)

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Total liabilities and stockholders’ equity $ 293 $ 286

Income Statement

Sales $ 518

Cost of goods sold 336

Gross margin 182

Selling and administrative expense 113

Net operating income 69

Income taxes 21

Net income $ 48

Cash dividends were $8. The company did not dispose of any property, plant, and equipment. It

did not issue any bonds payable or repurchase any of its own common stock. The following

questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) operating activities for the year was:

A) $21

B) $75

C) $27

D) $69

111) Financial statements of Rukavina Corporation follow:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 32 $ 29

Accounts receivable 82 80

Inventory 41 39

Property, plant, and equipment 648 560

Less accumulated depreciation 346 307

Total assets $ 457 $ 401

Liabilities and stockholders’ equity:

Accounts payable $ 49 $ 68

Bonds payable 135 190

Common stock 92 80

Retained earnings 181 63

Total liabilities and stockholders’ equity $ 457 $ 401

Income Statement

Sales $ 745

Cost of goods sold 373

Gross margin 372

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Selling and administrative expense 127

Net operating income 245

Income taxes 87

Net income $ 158

Cash dividends were $40. The company did not dispose of any property, plant, and equipment. It

did not issue any bonds payable or repurchase any of its own common stock. The following

questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) investing activities for the year was:

A) $(88)

B) $88

C) $(40)

D) $40

112) Financial statements of Rukavina Corporation follow:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 36 $ 38

Accounts receivable 39 44

Inventory 34 35

Property, plant, and equipment 386 360

Less accumulated depreciation 202 191

Total assets $ 293 $ 286

Liabilities and stockholders’ equity:

Accounts payable $ 71 $ 61

Bonds payable 176 220

Common stock 81 80

Retained earnings (35) (75)

Total liabilities and stockholders’ equity $ 293 $ 286

Income Statement

Sales $ 518

Cost of goods sold 336

Gross margin 182

Selling and administrative expense 113

Net operating income 69

Income taxes 21

Net income $ 48

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Cash dividends were $8. The company did not dispose of any property, plant, and equipment. It

did not issue any bonds payable or repurchase any of its own common stock. The following

questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) investing activities for the year was:

A) $26

B) $15

C) $(26)

D) $(15)

113) Financial statements of Rukavina Corporation follow:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 36 $ 38

Accounts receivable 39 44

Inventory 34 35

Property, plant, and equipment 386 360

Less accumulated depreciation 202 191

Total assets $ 293 $ 286

Liabilities and stockholders’ equity:

Accounts payable $ 71 $ 61

Bonds payable 176 220

Common stock 81 80

Retained earnings (35) (75)

Total liabilities and stockholders’ equity $ 293 $ 286

Income Statement

Sales $ 518

Cost of goods sold 336

Gross margin 182

Selling and administrative expense 113

Net operating income 69

Income taxes 21

Net income $ 48

Cash dividends were $8. The company did not dispose of any property, plant, and equipment. It

did not issue any bonds payable or repurchase any of its own common stock. The following

questions pertain to the company’s statement of cash flows.

The net cash provided by (used in) financing activities for the year was:

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A) $(8)

B) $(44)

C) $(51)

D) $1

114) Buckley Corporation’s most recent comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 19 $ 20

Accounts receivable 26 27

Inventory 56 51

Property, plant, and equipment 686 550

Less accumulated depreciation 430 363

Total assets $ 357 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 30 $ 34

Bonds payable 43 40

Common stock 54 50

Retained earnings 230 161

Total liabilities and stockholders’ equity $ 357 $ 285

The company’s net income for the year was $91 and it paid a cash dividend of $22. It did not

dispose of any property, plant, and equipment during the year. The company did not retire any

bonds payable or repurchase any of its own common stock.

The net cash provided by (used in) operating activities for the year was:

A) $32

B) $59

C) $130

D) $150

115) Buckley Corporation’s most recent comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

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Cash and cash equivalents $ 19 $ 20

Accounts receivable 26 27

Inventory 56 51

Property, plant, and equipment 686 550

Less accumulated depreciation 430 363

Total assets $ 357 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 30 $ 34

Bonds payable 43 40

Common stock 54 50

Retained earnings 230 161

Total liabilities and stockholders’ equity $ 357 $ 285

The company’s net income for the year was $91 and it paid a cash dividend of $22. It did not

dispose of any property, plant, and equipment during the year. The company did not retire any

bonds payable or repurchase any of its own common stock.

The net cash provided by (used in) investing activities for the year was:

A) $(69)

B) $69

C) $136

D) $(136)

116) Buckley Corporation’s most recent comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 19 $ 20

Accounts receivable 26 27

Inventory 56 51

Property, plant, and equipment 686 550

Less accumulated depreciation 430 363

Total assets $ 357 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 30 $ 34

Bonds payable 43 40

Common stock 54 50

Retained earnings 230 161

Total liabilities and stockholders’ equity $ 357 $ 285

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The company’s net income for the year was $91 and it paid a cash dividend of $22. It did not

dispose of any property, plant, and equipment during the year. The company did not retire any

bonds payable or repurchase any of its own common stock.

The net cash provided by (used in) financing activities for the year was:

A) $(22)

B) $3

C) $4

D) $(15)

117) Buckley Corporation’s most recent comparative balance sheet appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Cash and cash equivalents $ 19 $ 20

Accounts receivable 26 27

Inventory 56 51

Property, plant, and equipment 686 550

Less accumulated depreciation 430 363

Total assets $ 357 $ 285

Liabilities and stockholders’ equity:

Accounts payable $ 30 $ 34

Bonds payable 43 40

Common stock 54 50

Retained earnings 230 161

Total liabilities and stockholders’ equity $ 357 $ 285

The company’s net income for the year was $91 and it paid a cash dividend of $22. It did not

dispose of any property, plant, and equipment during the year. The company did not retire any

bonds payable or repurchase any of its own common stock.

The free cash flow for the year was:

A) $(8)

B) $14

C) $128

D) $308

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118) Megan Corporation’s net income last year was $98,000. Changes in the company’s

balance sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ (3,000)

Accounts receivable $ (14,000)

Inventory $ 3,000

Prepaid expenses $ (7,000)

Long-term investments $ 80,000

Property, plant, and equipment $ 55,000

Accumulated depreciation $ 58,000

Liability and Equity Accounts:

Accounts payable $ 0

Accrued liabilities $ 15,000

Income taxes payable $ (11,000)

Bonds payable $ (30,000)

Common stock $ 20,000

Retained earnings $ 62,000

The company paid a cash dividend of $36,000 and it did not dispose of any long-term

investments or property, plant, and equipment. The company did not issue any bonds payable or

repurchase any of its own common stock. The following questions pertain to the company’s

statement of cash flows.

The net cash provided by (used in) operating activities last year was:

A) $98,000

B) $178,000

C) $156,000

D) $120,000

119) Megan Corporation’s net income last year was $98,000. Changes in the company’s

balance sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ (3,000)

Accounts receivable $ (14,000)

Inventory $ 3,000

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Prepaid expenses $ (7,000)

Long-term investments $ 80,000

Property, plant, and equipment $ 55,000

Accumulated depreciation $ 58,000

Liability and Equity Accounts:

Accounts payable $ 0

Accrued liabilities $ 15,000

Income taxes payable $ (11,000)

Bonds payable $ (30,000)

Common stock $ 20,000

Retained earnings $ 62,000

The company paid a cash dividend of $36,000 and it did not dispose of any long-term

investments or property, plant, and equipment. The company did not issue any bonds payable or

repurchase any of its own common stock. The following questions pertain to the company’s

statement of cash flows.

The net cash provided by (used in) investing activities last year was:

A) $115,000

B) $(115,000)

C) $135,000

D) $(135,000)

120) Megan Corporation’s net income last year was $98,000. Changes in the company’s

balance sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ (3,000)

Accounts receivable $ (14,000)

Inventory $ 3,000

Prepaid expenses $ (7,000)

Long-term investments $ 80,000

Property, plant, and equipment $ 55,000

Accumulated depreciation $ 58,000

Liability and Equity Accounts:

Accounts payable $ 0

Accrued liabilities $ 15,000

Income taxes payable $ (11,000)

Bonds payable $ (30,000)

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Common stock $ 20,000

Retained earnings $ 62,000

The company paid a cash dividend of $36,000 and it did not dispose of any long-term

investments or property, plant, and equipment. The company did not issue any bonds payable or

repurchase any of its own common stock. The following questions pertain to the company’s

statement of cash flows.

The net cash provided by (used in) financing activities last year was:

A) $(46,000)

B) $46,000

C) $(10,000)

D) $10,000

121) Megan Corporation’s net income last year was $106,000. Changes in the company’s

balance sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ (9,400)

Accounts receivable $ (22,000)

Inventory $ 7,000

Prepaid expenses $ (12,600)

Long-term investments $ 88,000

Property, plant, and equipment $ 71,000

Accumulated depreciation $ 74,000

Liability and Equity Accounts:

Accounts payable $ 0

Accrued liabilities $ 19,120

Income taxes payable $ (12,720)

Bonds payable $ (42,000)

Common stock $ 28,000

Retained earnings $ 55,600

The company paid a cash dividend of $50,400 and it did not dispose of any long-term

investments or property, plant, and equipment. The company did not issue any bonds payable or

repurchase any of its own common stock. The following questions pertain to the company’s

statement of cash flows.

The free cash flow for the year was:

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A) $143,000

B) $92,600

C) $163,600

D) $314,720

122) Megan Corporation’s net income last year was $98,000. Changes in the company’s

balance sheet accounts for the year appear below:

Increases (Decreases)

Asset and Contra-Asset Accounts:

Cash and cash equivalents $ (3,000)

Accounts receivable $ (14,000)

Inventory $ 3,000

Prepaid expenses $ (7,000)

Long-term investments $ 80,000

Property, plant, and equipment $ 55,000

Accumulated depreciation $ 58,000

Liability and Equity Accounts:

Accounts payable $ 0

Accrued liabilities $ 15,000

Income taxes payable $ (11,000)

Bonds payable $ (30,000)

Common stock $ 20,000

Retained earnings $ 62,000

The company paid a cash dividend of $36,000 and it did not dispose of any long-term

investments or property, plant, and equipment. The company did not issue any bonds payable or

repurchase any of its own common stock. The following questions pertain to the company’s

statement of cash flows.

The free cash flow for the year was:

A) $123,000

B) $87,000

C) $142,000

D) $269,000

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123) The most recent comparative balance sheet of Giacomelli Corporation appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 37,000 $ 29,000

Accounts receivable 20,000 24,000

Inventory 65,000 61,000

Prepaid expenses 5,000 7,000

Total current assets 127,000 121,000

Property, plant, and equipment 424,000 399,000

Less accumulated depreciation 231,000 200,000

Net property, plant, and equipment 193,000 199,000

Total assets $ 320,000 $ 320,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 19,000 $ 17,000

Accrued liabilities 58,000 51,000

Income taxes payable 47,000 42,000

Total current liabilities 124,000 110,000

Bonds payable 77,000 80,000

Total liabilities 201,000 190,000

Stockholders’ equity:

Common stock 31,000 30,000

Retained earnings 88,000 100,000

Total stockholders’ equity 119,000 130,000

Total liabilities and stockholders’ equity $ 320,000 $ 320,000

The company uses the indirect method to construct the operating activities section of its

statement of cash flows.

Which of the following is correct regarding the operating activities section of the statement of

cash flows?

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A) The change in Accounts Receivable will be subtracted from net income; The change

in Inventory will be added to net income

B) The change in Accounts Receivable will be added to net income; The change in

Inventory will be subtracted from net income

C) The change in Accounts Receivable will be added to net income; The change in

Inventory will be added to net income

D) The change in Accounts Receivable will be subtracted from net income; The change

in Inventory will be subtracted from net income

124) The most recent comparative balance sheet of Giacomelli Corporation appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 37,000 $ 29,000

Accounts receivable 20,000 24,000

Inventory 65,000 61,000

Prepaid expenses 5,000 7,000

Total current assets 127,000 121,000

Property, plant, and equipment 424,000 399,000

Less accumulated depreciation 231,000 200,000

Net property, plant, and equipment 193,000 199,000

Total assets $ 320,000 $ 320,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 19,000 $ 17,000

Accrued liabilities 58,000 51,000

Income taxes payable 47,000 42,000

Total current liabilities 124,000 110,000

Bonds payable 77,000 80,000

Total liabilities 201,000 190,000

Stockholders’ equity:

Common stock 31,000 30,000

Retained earnings 88,000 100,000

Total stockholders’ equity 119,000 130,000

Total liabilities and stockholders’ equity $ 320,000 $ 320,000

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The company uses the indirect method to construct the operating activities section of its

statement of cash flows.

Which of the following is correct regarding the operating activities section of the statement of

cash flows?

A) The change in Accounts Payable will be added to net income; The change in

Accrued Liabilities will be subtracted from net income

B) The change in Accounts Payable will be subtracted from net income; The change in

Accrued Liabilities will be added to net income

C) The change in Accounts Payable will be subtracted from net income; The change in

Accrued Liabilities will be subtracted from net income

D) The change in Accounts Payable will be added to net income; The change in

Accrued Liabilities will be added to net income

125) The most recent comparative balance sheet of Giacomelli Corporation appears below:

Comparative Balance Sheet

Ending Balance Beginning Balance

Assets:

Current assets:

Cash and cash equivalents $ 37,000 $ 29,000

Accounts receivable 20,000 24,000

Inventory 65,000 61,000

Prepaid expenses 5,000 7,000

Total current assets 127,000 121,000

Property, plant, and equipment 424,000 399,000

Less accumulated depreciation 231,000 200,000

Net property, plant, and equipment 193,000 199,000

Total assets $ 320,000 $ 320,000

Liabilities and stockholders’ equity:

Current liabilities:

Accounts payable $ 19,000 $ 17,000

Accrued liabilities 58,000 51,000

Income taxes payable 47,000 42,000

Total current liabilities 124,000 110,000

Bonds payable 77,000 80,000

Total liabilities 201,000 190,000

Stockholders’ equity:

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Common stock 31,000 30,000

Retained earnings 88,000 100,000

Total stockholders’ equity 119,000 130,000

Total liabilities and stockholders’ equity $ 320,000 $ 320,000

The company uses the indirect method to construct the operating activities section of its

statement of cash flows.

Which of the following is correct regarding the operating activities section of the statement of

cash flows?

A) The change in Prepaid Expenses will be added to net income; The change in Income

Taxes Payable will be subtracted from net income

B) The change in Prepaid Expenses will be subtracted from net income; The change in

Income Taxes Payable will be subtracted from net income

C) The change in Prepaid Expenses will be subtracted from net income; The change in

Income Taxes Payable will be added to net income

D) The change in Prepaid Expenses will be added to net income; The change in Income

Taxes Payable will be added to net income

126) Kaze Corporation’s cash and cash equivalents consist of cash and marketable securities.

Last year the company’s cash account increased by $25,000 and its marketable securities account

decreased by $15,000. Net cash provided by (used in) operating activities was $38,000. Net cash

provided by (used in) investing activities was $9,000. Based on this information, the net cash

provided by (used in) financing activities on the statement of cash flows was:

A) $(37,000).

B) $37,000.

C) $(47,000).

D) $47,000.

127) Collecting the principal on a loan to another company would be reported on the investing

activities section of the statement of cash flows.

⊚ true

⊚ false

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128) Money received from issuing bonds payable would be included as part of a company’s

financing activities on the statement of cash flows.

⊚ true

⊚ false

129) The collection of a loan made to a supplier would be treated as an investing activity on a

statement of cash flows.

⊚ true

⊚ false

130) Paying taxes to governmental bodies is considered a cash outflow in the operating

activities section on the statement of cash flows.

⊚ true

⊚ false

131) When a company pays cash to repurchase its own common stock, this is reported as a

cash outflow in the financing activities section of the statement of cash flows.

⊚ true

⊚ false

132) When a company pays a supplier for inventory it has purchased, the cash outflow is

recorded in the investing activities section of the statement of cash flows.

⊚ true

⊚ false

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133) In the statement of cash flows, collecting cash from customers is treated as a cash inflow

in the financing activities section.

⊚ true

⊚ false

134) Paying wages and salaries to employees is classified as a cash outflow in the operating

activities section of the statement of cash flows.

⊚ true

⊚ false

135) Investing activities on the statement of cash flows generate cash inflows and outflows

related to borrowing from and repaying principal to creditors and completing transactions with

the company’s owners such as selling or repurchasing shares of common stocks and paying

dividends.

⊚ true

⊚ false

136) Paying interest to lenders is classified as an operating activity on the statement of cash

flows.

⊚ true

⊚ false

137) Cash received from the sale of equipment the company had used in its own operations

would be considered an operating activity on a statement of cash flows.

⊚ true

⊚ false

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138) Buying property, plant, or equipment would be reported as a cash outflow on the

investing activities section of the statement of cash flows.

⊚ true

⊚ false

139) Cash payments to repay the principal amount of debt are reported as a cash outflow in the

investing activities section of the statement of cash flows.

⊚ true

⊚ false

140) Cash payments to insurers and utility providers are considered operating activities on the

statement of cash flows.

⊚ true

⊚ false

141) The net cash provided by operating activities on the statement of cash flows does not

include any dividends paid to the company’s own shareholders.

⊚ true

⊚ false

142) Cash equivalents on the statement of cash flows consist of any investment that can be

converted into cash within one year.

⊚ true

⊚ false

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143) The statement of cash flows relies on a fundamental principle of double-entry

bookkeeping; namely, the change in the cash balance must equal the change in total liabilities

and stockholders’ equity.

⊚ true

⊚ false

144) When computing the net cash provided by operating activities under the indirect method

on the statement of cash flows, an increase in prepaid expenses would be added to net income.

⊚ true

⊚ false

145) Under the indirect method of determining the net cash provided by operating activities on

the statement of cash flows, a decrease in inventory would be added to net income.

⊚ true

⊚ false

146) Under the indirect method of determining the net cash provided by operating activities on

the statement of cash flows, a loss on the sale of an asset would be added to net income.

⊚ true

⊚ false

147) Under the indirect method of determining the net cash provided by operating activities on

the statement of cash flows, an increase in property, plant, and equipment is subtracted from net

income.

⊚ true

⊚ false

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148) When computing the net cash provided by operating activities under the indirect method

on the statement of cash flows, a decrease in common stock would be subtracted from net

income.

⊚ true

⊚ false

149) Under the indirect method of determining the net cash provided by operating activities on

the statement of cash flows, an increase in accounts receivable would be subtracted from net

income.

⊚ true

⊚ false

150) The direct method of preparing the statement of cash flows will show the same increase

or decrease in cash as the indirect method.

⊚ true

⊚ false

151) The amount of depreciation added to net income equals the sum of the debits to the

Accumulated Depreciation account.

⊚ true

⊚ false

152) Free cash flow will increase if a company increases its accounts payable balance by

delaying payments to suppliers.

⊚ true

⊚ false

153) Free cash flow is net cash provided by operating activities less capital expenditures.

⊚ true

⊚ false

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154) Negative free cash flow suggests that the company generated enough cash flow from its

operating activities to fund its capital expenditures and dividend payments.

⊚ true

⊚ false

155) Negative free cash flow does not automatically signal poor performance.

⊚ true

⊚ false

156) Free cash flow decreases when a company issues common stock for cash.

⊚ true

⊚ false

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Answer Key

Test name: chapter 15

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