Credit balances:
Accumulated Depreciation
23,000
Accounts payable
(10,000)
Accrued liabilities
7,000
Taxes payable
5,000
Bonds payable
40,000
Based solely on this information, the net cash flows from operating activities under the indirect
method on the statement of cash flows would be
a.
$79,000.
b.
$102,000.
c.
$29,000.
d.
$83,000.
42. Nelson Company’s net income last year was $18,000 and cash dividends declared and paid to the
company stockholders was $12,000. Changes in selected balance sheet accounts for the year appear
below:
Increases
(Decreases)
Debit balances:
Accounts receivable
$(6,000)
Inventory
5,000
Long-term investments
20,000
Credit balances:
Accumulated Depreciation
12,000
Accounts payable
8,000
Accrued liabilities
(7,000)
Taxes payable
(3,000)
Based solely on this information, the net cash flows from operating activities under the indirect
method on the statement of cash flows would be
a.
$7,000.
b.
$30,000.
c.
$17,000.
d.
$29,000.
Accounts receivable
Inventory
Prepaid expenses
Accumulated Depreciation
Accrued liabilities
Taxes payable
Income
Net cash flows from operating activities
43. Long Company’s net income last year was $43,000 and cash dividends declared and paid to the
company stockholders was $28,000. Changes in selected balance sheet accounts for the year appear
below:
Increases
(Decreases)
Debit balances:
Accounts receivable
$(6,000)
Inventory
2,000
Long-term investments
40,000
Credit balances:
Accumulated Depreciation
19,000
Accounts payable
18,000
Accrued liabilities
(5,000)
Taxes payable
4,000
Based solely on this information, the net cash flows from operating activities under the indirect
method on the statement of cash flows would be
a.
$25,000.
b.
$62,000.
c.
$83,000.
d.
$3,000.
44. Stacy Company’s net income last year was $27,000. Changes in selected balance sheet accounts for the
year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable
$(8,000)
Inventory
5,000
Prepaid expenses
(4,000)
Credit balances:
Accumulated Depreciation
12,000
Accounts payable
11,000
Accrued liabilities
(7,000)
Taxes payable
2,000
Based solely on this information, the net cash flows from operating activities under the indirect
method on the statement of cash flows would be
a.
$38,000.
b.
$2,000.
c.
$39,000.
d.
$52,000.
45. The data given below are from the accounting records of Kain Company:
Net Income
$40,000
Depreciation expense
8,000
Decrease in accounts payable
1,800
Decrease in merchandise inventory
2,500
Increase in long-term liabilities
10,000
Increase in common stock
25,000
Increase in accounts receivable
4,000
Based on this information, the net cash flows from operating activities on the statement of cash flows
using the indirect method would be
a.
$51,300.
b.
$50,000.
c.
$42,100.
d.
$44,700.
46. The following events occurred last year at Taylor Company:
Purchase of plant & equipment
$33,000
Sale of long-term investment
12,000
Stock dividend paid
6,000
Paid off bonds payable
15,000
Depreciation expense
7,000
Based on the above information, the net cash flows from investing activities for the year on the
statement of cash flows would be
a.
($15,000).
b.
($21,000).
c.
($7,000).
d.
($37,000).
47. The following events occurred last year for the Cronin Company:
Purchase of treasury stock
30,000
Issuance of common stock
50,000
Payment of dividends to common stockholders
15,000
Sale of equipment
10,000
Considering just the above transactions, the net cash flows from financing activities on the statement
of cash flows was
a.
$20,000.
b.
$5,000.
c.
$15,000.
d.
$25,000.
48. Last year Kinslow Company’s cash account increased by $16,000. Net cash flows from investing
activities were ($39,000). Net cash flows from financing activities were $17,000. On the statement of
cash flows, the net cash flows from operating activities were
a.
$(22,000).
b.
$38,000.
c.
$(6,000).
d.
$16,000.
49. Last year Frye Company’s cash account increased by $17,000. Net cash flows from investing activities
were ($40,000). Net cash flows from financing activities were $2,000. On the statement of cash flows,
the net cash flows from operating activities were
a.
$17,000.
b.
$(21,000).
c.
$55,000.
d.
$(38,000).
50. Last year Sheeder Company’s cash account decreased by $10,000. Net cash flows from investing
activities were $19,000. Net cash flows from financing activities were $(17,000). On the statement of
cash flows, the net cash flows from operating activities were
a.
$(12,000).
b.
$(3,000).
c.
$(10,000).
d.
$7,000.
51. Stillwater Inc. reported the following information for 2013 and 2014:
2013
2014
Accounts receivable
$51,000
$57,000
Inventories
42,000
39,000
Accounts payable
43,000
48,000
Net income
49,000
Depreciation Expense
8,000
If Stillwater Inc. uses the indirect method to prepare the operating activities section of the statement of
cash flows, what amount will be reported as net cash flows from operating activities for 2014?
a.
$49,000
b.
$55,000
c.
$57,000
d.
$59,000
Net income
49,000
Depreciation Expense
8,000
Net Cash Change
$59,000
52. Advance Systems Inc. reported the following information for 2013 and 2014:
2013
2014
Accounts receivable
$101,000
$93,000
Prepaid expenses
5,000
6,000
Accounts payable
71,000
76,000
Salaries payable
5,000
4,000
Net income
67,000
Loss on sale of equipment
5,000
Depreciation expense
11,000
If Advance Systems uses the indirect method to prepare the operating activities section of the
statement of cash flows, what amount will be reported as net cash flows from operating activities for
2014?
a.
$72,000
b.
$78,000
c.
$94,000
d.
$98,000
53. Jamestown Inc. reported the following information for 2013 and 2014:
2013
2014
Cash
$ 42,000
$ 49,000
Noncash current assets
162,000
175,000
Cash flows from financing activities
313,000
Cash flows from operating activities
72,000
What was the amount of net cash flows from investing activities for 2014?
a.
Cash inflow of $378,000.
b.
Cash outflow of $391,000
c.
Cash inflow of 7,000.
d.
Cash outflow of $378,000.
54. Accounts receivable arising from sales to customers amounted to $62,000 and $40,000 at the
beginning and end of the year, respectively. Income reported on the income statement for the year was
$215,000. Exclusive of the effect of other adjustments, the cash inflows from operating activities to be
reported on the statement of cash flows are
a.
$213,000.
b.
$215,000.
c.
$193,000.
d.
$237,000.
55. Dance Unlimited Company reported net income of $80,000 for the year. During the year, accounts
receivable decreased by $3,000, accounts payable increased by $4,500 and depreciation expense of
$9,000 was recorded and there was a gain on the sale of long-term investments of $2,000. Using the
indirect method, net cash flows from operating activities for the year are
a.
$94,500.
b.
$88,500.
c.
$79,500.
d.
$89,500.
56. A company had net income of $230,000. Depreciation expense is $26,000. During the year accounts
receivable and inventory increased $15,000 and $40,000, respectively. Prepaid expenses and accounts
payable decreased $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of
$3,000. Using the indirect method, what is the amount of net cash flows from operating activities on
the statement of cash flows?
a.
$196,000
b.
$202,000
c.
$276,000
d.
$288,000
57. The net income reported on the income statement for the current year was $200,000. Depreciation
recorded on plant assets was $38,000. Accounts receivable and inventories increased by $2,000 and
$8,000, respectively. Prepaid expenses and accounts payable decreased by $1,000 and $11,000,
respectively. Using the indirect method, how much would be reported for net cash flows from
operating activities in the statement of cash flows?
a.
$180,000
b.
$200,000
c.
$218,000
d.
$238,000
58. The net income reported on the income statement for the current year was $100,000. Depreciation
recorded on plant assets was $25,000. Accounts receivable and inventories decreased by $5,000 and
$15,000, respectively. Prepaid expenses and accounts payable increased by $500 and $4,000,
respectively. Using the indirect method, how much would be reported for net cash flows from
operating activities in the statement of cash flows?
a.
$130,500
b.
$148,500
c.
$141,500
d.
$98,500
59. If a gain of $25,000 is incurred in selling (for cash) office equipment having a book value of $100,000,
the total amount reported in the cash flows from the investing activities section of the statement of
cash flows is
a.
$75,000.
b.
$100,000.
c.
$125,000.
d.
$25,000.
60. If a loss of $12,500 is incurred in selling (for cash) office equipment having a book value of $50,000,
the total amount reported in the cash flows from investing activities section of the statement of cash
flows is
a.
$37,500.
b.
$50,000.
c.
$62,500.
d.
$12,500.
61. Land costing $78,000 was sold for $93,000 cash. The gain on the sale was reported on the income
statement as other income. On the statement of cash flows, what amount should be reported as an
investing activity from the sale of land?
a.
$78,000
b.
$108,000
c.
$93,000
d.
$15,000
62. The following transactions occurred last year at Jackson Inc.
Issuance of common stock
$ 80,000
Dividends paid to the company’s stockholders
1,000
Depreciation expense
4,000
Repayment of principal on bonds
60,000
Proceeds from sale of the company’s used equipment
22,000
Purchase of land
140,000
Based solely on the above information, the net cash flows from financing activities for the year on the
statement of cash flows would be
a.
$19,000.
b.
$(120,000).
c.
$(6,000).
d.
$332,000.
63. The following transactions occurred last year at Jackson Inc.
Issuance of common stock
$140,000
Dividends paid to the common stockholders
7,000
Depreciation expense
4,000
Repayment of principal on the company’s own bonds
90,000
Sale of equipment
16,000
Purchase of a building
110,000
Based solely on the above information, the net cash flows from financing activities for the year on the
statement of cash flows would be
a.
$31,000.
b.
$(59,000).
c.
$43,000.
d.
$379,000.
64. The following transactions occurred last year at Dempsey Inc.
Issuance of common stock
$ 50,000
Dividends paid to common stockholders
3,000
Depreciation expense
6,000
Repayment of principal on the company’s own bonds
40,000
Sale of equipment
17,000
Purchase of land
120,000
Based solely on the above information, the net cash flows from financing activities for the year on the
statement of cash flows would be
a.
$249,000.
b.
$7,000.
c.
$(103,000).
d.
$(6,000).
65. The Laurel Company reported the following data for last year:
Decrease in the Cash account
$25,000
Net cash provided by operating activities
20,000
Net cash provided by investing activities
15,000
Based solely on this information, the net cash flows from financing activities on the statement of cash
flows would be
a.
$2,000.
b.
$(30,000).
c.
$(60,000).
d.
$(8,000).
Figure 15-1.
Master Company’s net income last year was $88,000 and cash dividends declared and paid to the
company stockholders was $60,000. Changes in selected balance sheet accounts for the year appear
below:
Increases
(Decreases)
Debit balances:
Cash
$ (4,000)
Accounts receivable
$(11,000)
Inventory
6,000
Prepaid expenses
0
Long-term investments
50,000
Plant and equipment
35,000
Credit balances:
Accumulated depreciation
62,000
Accounts payable
1,000
Accrued liabilities
(5,000)
Taxes payable
10,000
Bonds payable
(60,000)
Common stock
40,000
Retained earnings
28,000
66. Refer to Figure 15-1. The net cash flows from operating activities last year was
a.
$181,000.
b.
$150,000.
c.
$88,000.
d.
$161,000.
67. Refer to Figure 15-1. The net cash flows from investing activities last year was
a.
$45,000.
b.
$(45,000).
c.
$85,000.
d.
$(85,000).
68. Refer to Figure 15-1. The net cash flows from financing activities last year was
a.
$80,000.
b.
$(80,000).
c.
$20,000.
d.
$(20,000).
Figure 15-2.
Chandler Company’s net income last year was $98,000 and cash dividends declared and paid to the
company stockholders was $13,000. Changes in selected balance sheet accounts for the year appear
below:
Increases
(Decreases)
Debit balances:
Cash
$ (3,000)
Accounts receivable
1,000
Inventory
(1,000)
Prepaid expenses
13,000
Long-term investments
70,000
Plant and equipment
45,000
Credit balances:
Accumulated depreciation
61,000
Accounts payable
(11,000)
Accrued liabilities
(9,000)
Taxes payable
9,000
Bonds payable
(50,000)
Common stock
40,000
Retained earnings
85,000
69. Refer to Figure 15-2. The net cash flows from operating activities to be reported in a statement of cash
flows is
a.
$135,000.
b.
$98,000.
c.
$159,000.
d.
$74,000.
70. Refer to Figure 15-2. The net cash flows from investing activities to be reported in a statement of cash
flows is
a.
$(75,000).
b.
$75,000.
c.
$(115,000).
d.
$115,000.
71. Refer to Figure 15-2. The net cash flows from financing activities to be reported in a statement of cash
flows is
a.
$10,000.
b.
$(10,000).
c.
$23,000.
d.
$(23,000).
72. The net income reported on the income statement for the current year was $635,000. Depreciation
recorded on plant assets was $29,000. Accounts receivable and inventories increased by $1,200 and
$3,600, respectively. Prepaid expenses and accounts payable decreased by $800 and $16,000
respectively. How much cash was provided by operating activities?
a.
$642,400
b.
$644,000
c.
$652,000
d.
$685,600
73. The net income reported on the income statement for the current year was $79,000. Depreciation was
$6,000. Account receivable and inventories decreased by $1,100 and $2,700, respectively. Prepaid
expenses and accounts payable increased, respectively, by $950 and $3,000. How much cash was
provided by operating activities?
a.
$86,750
b.
$90,850
c.
$85,150
d.
$83,250
74. If a gain of $30,000 is incurred in selling (for cash) long-term investments having a book value of
$180,000, the total amount reported in the cash flows from investing activities section of the statement
of cash flows is
a.
$30,000.
b.
$210,000.
c.
$180,000.
d.
$150,000.
75. If a loss of $9,200 is incurred in selling (for cash) a patent having a book value of $80,000, the total
amount reported in the cash flows from investing activities section of the statement of cash flows is
a.
$70,800.
b.
$89,200.
c.
$9,200.
d.
$80,000.
76. Harbor Company reported net income of $60,000 for the year ended December 31, 2014. During the
year, inventories decreased by $12,000, accounts payable decreased by $18,000, depreciation expense
was $20,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided by
operating activities in 2014 using the indirect method was
a.
$119,000.
b.
$65,000.
c.
$77,000.
d.
$55,000.
77. In calculating cash flows from operating activities using the indirect method, a gain on the sale of
equipment is
a.
added to net income.
b.
deducted from net income.
c.
ignored because it does not affect cash.
d.
not reported on a statement of cash flows.
78. Last year Snyder Company reported sales of $125,000 on its income statement. During the year,
accounts receivable increased by $30,000 and accounts payable increased by $10,000. The company
uses the direct method to determine the net cash flows from operating activities on the statement of
cash flows. The sales revenue adjusted to a cash basis would be
a.
$105,000.
b.
$115,000.
c.
$95,000.
d.
$145,000.
79. Which of the following statement concerning the statement of cash flows is true?
a.
The statement of cash flows is usually more accurate when using the indirect method.
b.
If the direct method is used, a supplementary schedule reconciling the net income to net
cash from operating activities must still be provided.
c.
The statement of cash flows reflects both earnings per share and cash per share.
d.
The statement of cash flows is an optional financial statement for an SEC registered firm.
80. Last year Simpson Company reported cost of goods sold of $105,000. Inventories decreased by
$10,000 during the year, and accounts payable increased by $25,000. The company uses the direct
method to determine the net cash flows from operating activities on the statement of cash flows. The
cost of goods sold adjusted to a cash basis would be
a.
$140,000.
b.
$95,000.
c.
$70,000.
d.
$80,000.
81. Last year Emmons Company reported cost of goods sold of $115,000. Inventories decreased by
$20,000 during the year, and accounts payable decreased by $15,000. The company uses the direct
method to determine the net cash flows from operating activities on the statement of cash flows. The
cost of goods sold adjusted to a cash basis would be
a.
$120,000.
b.
$110,000.
c.
$95,000.
d.
$130,000.
82. Last year Maine Company reported cost of goods sold of $110,000. Inventories increased by $30,000
during the year, and accounts payable decreased by $15,000. The company uses the direct method to
determine the net cash flows from operating activities on the statement of cash flows. The cost of
goods sold adjusted to a cash basis would be
a.
$140,000.
b.
$65,000.
c.
$155,000.
d.
$125,000.
83. Last year Lawson Company reported sales of $150,000 on its income statement. During the year,
accounts receivable decreased by $15,000 and accounts payable decreased by $35,000. The company
uses the direct method to determine the net cash flows from operating activities on the statement of
cash flows. The sales revenue adjusted to a cash basis would be
a.
$165,000.
b.
$185,000.
c.
$170,000.
d.
$130,000.
84. Total operating expenses on Tucker Company’s income statement for last year totaled $215,000.
During the year the accounts payable stayed the same, the accrued liabilities stayed the same, and
prepaid expenses stayed the same. Depreciation expense for the year was $11,000. Based on this
information, operating expenses adjusted to cash basis under the direct method on the statement of
cash flows would be
a.
$215,000.
b.
$204,000.
c.
$226,000.
d.
none of these.
85. Total operating expenses on Legg Company’s income statement for last year totaled $260,000. During
the year the accrued liabilities decreased by $12,000, and prepaid expenses increased by $18,000.
Depreciation expense for the year was $25,000. Based on this information, operating expenses
adjusted to cash basis under the direct method on the statement of cash flows would be
a.
$255,000.
b.
$315,000.
c.
$205,000.
d.
$265,000.
86. If accounts payable have increased during a period,
a.
revenues on an accrual basis are less than revenues on a cash basis.
b.
expenses on an accrual basis are less than expenses on a cash basis.
c.
expenses on an accrual basis are greater than expenses on a cash basis.
d.
expenses on an accrual basis are the same as expenses on a cash basis.
87. If accounts receivable have increased during the period,
a.
revenues on an accrual basis are less than revenues on a cash basis.
b.
revenues on an accrual basis are greater than revenues on a cash basis.
c.
revenues on an accrual basis are the same as revenues on a cash basis.
d.
expenses on an accrual basis are greater than expenses on a cash basis.
88. Total operating expenses on Harmon Company’s income statement for last year totaled $370,000.
During the year accrued liabilities increased by $18,000, and prepaid expenses increased by $25,000.
Depreciation expense for the year was $45,000. Based on this information, operating expenses
adjusted to cash basis under the direct method on the statement of cash flows would be
a.
$318,000.
b.
$332,000.
c.
$422,000.
d.
$408,000.
PROBLEM
1. The Prince Company reported net income of $260,000 for the current year. Depreciation recorded on
buildings and equipment amounted to $90,000 for the year. Balances of the current asset and current
liability accounts for 2013 and 2014 are as follows:
2014
2013
Cash
$20,000
$15,000
Accounts receivable
19,000
32,000
Inventories
50,000
65,000
Prepaid expenses
7,500
5,000
Accounts payable
12,000
18,000
Income taxes payable
1,600
1,200
Prepare the cash flows from operating activities section of the statement of cash flows using the
indirect method.
Operating net Income
Add (deduct) adjusting items:
Decrease in accounts receivable
13,000
Decrease in inventories
15,000
2. The balance sheets of Dolan Company, for December 31, 2014 and 2013, are as follows:
2014
2013
Cash
$ 68,000
$ 42,500
Accounts receivable (net)
61,000
70,200
Inventories
121,000
105,000
Investments
…..
100,000
Equipment
515,000
425,000
Accumulated depreciation-equipment
(153,000)
(175,000)
$612,000
$567,700
Accounts payable
$ 59,750
$ 47,250
Bonds payable, due 2010
…..
75,000
Common stock, $20 par
375,000
325,000
Premium on common stock
50,000
25,000
Retained earnings
127,250
95,450
$612,000
$567,700
Additional information:
(a)
Net income, $71,800.
(b)
Depreciation reported on income statement, $38,000.
(c)
Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was
purchased for $150,000.
(d)
Bonds payable for $75,000 were retired by payment at their face amount.
(e)
2,500 shares of common stock were issued at $30 for cash.
(f)
Cash dividends declared and paid, $40,000.
(g)
Investments of $100,000 were sold for $125,000.
Required: Prepare a statement of cash flows using the indirect method.
Cash flows from operating activities:
Decrease in accounts receivable
400
3. The balance sheets for Jenson Company, for the years ended December 31, 2014 and 2013, are as
follows:
2014
2013
Cash
$ 53,000
$ 50,000
Accounts receivable (net)
37,000
48,000
Inventories
108,500
100,000
Investments
…..
70,000
Equipment
573,200
450,000
Accumulated depreciation-equipment
(142,000)
(176,000)
$629,700
$542,000
Accounts payable
$ 62,500
$ 43,800
Bonds payable, due 2014
…..
100,000
Common stock, $10 par
325,000
285,000
Paid-in capital in excess of par—
common stock
80,000
55,000
Retained earnings
162,200
58,200
$629,700
$542,000
The income statement for the current year is as follows:
Sales
$625,700
Cost of merchandise sold
340,000
Increase in accounts payable
Increase in inventories
Gain on sale of investments
Net operating cash
Cash flows from investing activities:
Sale of investments
Purchase of equipment
Net cash from investing activities
(25,000)
Cash flows from financing activities:
Sale of common stock
Retired bonds payable
($75,000)
Payment of dividends
Net cash from financing activities
Increase in cash
Cash at the beginning of the year
Cash at the end of the year
Gross profit
$285,700
Operating expenses:
Depreciation expense
$26,000
Other operating expenses
68,000
94,000
Income from operations
$191,700
Other income:
Gain on sale of investment
$ 4,000
Other expense:
Interest expense
6,000
(2,000)
Income before income tax
$189,700
Income tax
60,700
Net income
$129,000
Additional information:
(a)
Fully depreciated equipment costing $60,000 was scrapped, no salvage, and equipment was
purchased for $183,200.
(b)
Bonds payable for $100,000 were retired by payment at their face amount.
(c)
5,000 shares of common stock were issued at $13 for cash.
(d)
Cash dividends declared and paid, $25,000.
Required: Prepare a statement of cash flows, using the indirect method.
Cash flows from operating activities:
Net income
Add (deduct) adjusting items:
Depreciation
$26,000
Decrease in accounts receivable
Increase in accounts payable
18,700
Increase in inventories
Gain on sale of investments
Net operating cash
Cash flows from investing activities:
Sale of investments
Purchase of equipment
Net cash from investing activities
(109,200)
Cash flows from financing activities:
Sale of common stock
Retired bonds payable
(100,000)
Payment of dividends
Net cash from financing activities
Increase in cash
$ 3,000
Cash at the beginning of the year
50,000
4. Using the indirect method, calculate the amount of net cash flows from operating activities from the
following data:
2014
2013
Net Income
$250,000
Accounts receivable
22,000
25,000
Prepaid expenses
3,000
5,000
Accounts payable
14,000
15,000
Depreciation expense
51,000
Amortization expense (Patent)
4,000
Dividends declared and paid
11,000
Net Income
$250,000
Decrease in accounts receivable
3,000
Decrease in prepaid expenses
2,000
Depreciation expense
51,000
Amortization expense
4,000
Net Operating Cash
$309,000
5. Use the following information to perform the calculations below, using the indirect method. Show and
clearly label your calculations:
2014
2013
Net Income
$365,000
Accounts receivable
439,000
420,000
Inventory
560,000
516,000
Prepaid expenses
42,000
48,000
Accounts payable
146,000
119,000
Depreciation expense
107,000
Purchase of long-term assets
616,000
Issuance of long-term debt
200,000
Issuance of stock for cash
160,000
Issuance of stock for long-term assets
110,000
Purchase of treasury stock
64,000
Sale of long-term investments at cost
49,000
A.
Calculate the amount of the net cash flows from operating activities.
B.
Calculate the amount of the net cash flows from investing activities.
C.
Calculate the amount of the net cash flows from financing activities.
D.
Calculate the net change in cash.