Version 1 1
Student name:__________
1) Comparative balance sheets and the income statements for Ellis Corporation are
presented below:
Comparative Balance Sheet
Ending Balance
Beginning Balance
Assets:
Current assets:
Cash and cash equivalents $ 45,900 $ 31,500
Accounts receivable 38,800 41,200
Inventory 71,700 62,400
Total current assets 156,400 135,100
Long-term investments 165,200 210,000
Property, plant and equipment 300,200 156,000
Less accumulated depreciation 53,600 52,000
Total assets $ 568,200 $ 449,100
Liabilities and stockholders‘ equity:
Current liabilities:
Accounts payable $ 37,400 $ 42,400
Accrued liabilities 25,700 32,100
Income taxes payable 15,900 21,400
Total current liabilities 79,000 95,900
Bonds payable 127,200 32,100
Total liabilities 206,200 128,000
Stockholders’ equity:
Common stock 312,700 294,300
Retained earnings 49,300 26,800
Total stockholders’ equity 362,000 321,100
Total liabilities and stockholders’ equity $ 568,200 $ 449,100
Income Statement
Sales $ 156,000
Cost of goods sold 81,900
Gross margin 74,100
Selling and administrative expense 17,400
Net operating income 56,700
Loss on sale of investment 2,500
Income before taxes 54,200
Income taxes 23,800
Net income $ 30,400
Version 1 2
The following additional information is available for the year:
* During the year, the company sold long-term investments for $42,300 that had been
purchased for $44,800.
* The company did not sell any property, plant, and equipment during the year or repurchase
any of its own common stock.
* All sales were on credit.
* The company paid a cash dividend of $7,900.
* The company paid cash to retire $16,200 of bonds payable.
Required:
a. Using the indirect method, determine the net cash provided by (used in) operating activities.
b. Using the direct method, determine the net cash provided by (used in) operating activities.
c. Using the net cash provided by (used in) operating activities amount from either part a or b,
prepare a statement of cash flows. (Amounts to be deducted should be indicated with a minus
sign.)
2) Harkey Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance
Beginning Balance
Assets:
Cash and cash equivalents $ 34 $ 38
Accounts receivable 80 73
Inventory 44 45
Property, plant, and equipment 478 407
Less accumulated depreciation 211 177
Total assets $ 425 $ 386
Liabilities and stockholders‘ equity:
Accounts payable $ 27 $ 29
Accrued liabilities 29 26
Income taxes payable 44 37
Bonds payable 130 175
Common stock 87 86
Version 1 3
Retained earnings 108 33
Total liabilities and stockholders’ equity $ 425 $ 386
Income Statement
Sales $ 1,129
Cost of goods sold 628
Gross margin 501
Selling and administrative expense 179
Net operating income 322
Gain on sale of equipment 12
Income before taxes 334
Income taxes 52
Net income $ 282
Cash dividends were $207. The company sold equipment for $16 that was originally purchased
for $6 and that had accumulated depreciation of $2.
Required:
Using the direct method, determine the net cash provided by (used in) operating activities.
3) The changes in each balance sheet account for Carver Corporation during the year just
completed are as follows:
Increase Decrease
Cash and cash equivalents $ 3,240
Accounts receivable $ 5,350
Inventory $ 6,300
Prepaid expenses $ 3,090
Long-term investments $ 18,020
Property, plant and equipment $ 11,880
Accumulated depreciation $ 9,540
Accounts payable $ 8,320
Accrued liabilities $ 5,250
Bonds Payable $ 13,200
Common Stock $ 3,060
Version 1 4
Retained Earnings $ 18,340
Carver Corporation’s income statement for the year just ended shows the following:
Income Statement
Sales $ 385,000
Cost of goods sold 197,600
Gross margin 187,400
Selling and administrative expense 169,060
Net income $ 18,340
The company did not dispose of any property, plant, and equipment, buy any long-term
investments, issue any bonds payable, or repurchase any of its own common stock during the
year. Carver Corporation uses the direct method to construct its statement of cash flows.
Required:
a. Determine the sales adjusted to the cash basis.
b. Determine the cost of goods sold adjusted to the cash basis.
c. Determine the selling and administrative expenses adjusted to a cash basis.
d. Determine the net cash provided by (used in) operating activities. (Negative amounts
should be indicated by a minus sign.)
e. Determine the net cash provided by (used in) investing activities. (Negative amounts
should be indicated by a minus sign.)
f. Determine the net cash provided by (used in) financing activities. (Negative amounts
should be indicated by a minus sign.)
4) Carr Corporation’s comparative balance sheet and income statement for last year appear
below:
Comparative Balance Sheet
Ending Balance Beginning
Balance
Cash and cash equivalents $ 3,090 $ 23,920
Accounts receivable 87,200 72,420
Version 1 5
Inventory 41,700 49,350
Prepaid expenses 9,720 16,500
Long-term investments 254,400 212,000
Property, plant and equipment 525,300 513,600
Less accumulated depreciation 326,400 303,850
Total assets $ 595,010 $ 583,940
Accounts payable $ 9,270 $ 26,750
Accrued liabilities 25,200 17,510
Income taxes payable 51,900 50,140
Bonds payable 171,200 220,000
Common stock 163,000 140,000
Retained earnings 174,440 129,540
Total liabilities and stockholders’ equity $ 595,010 $ 583,940
Income Statement
Sales $ 875,500
Cost of goods sold 472,500
Gross margin 403,000
Selling and administrative expense 283,500
Net operating income 119,500
Income taxes 40,200
Net income $ 79,300
The company declared and paid $34,400 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year.
Required:
Prepare the operating activities section of the company’s statement of cash flows for the year
using the direct method. (Enter all amounts as positive values except for adjustments to cash
basis that are deducted.)
5) Comparative balance sheets and the income statements for Ellis Corporation are
presented below:
Ending Balance Beginning Balance
Assets:
Current assets:
Version 1 6
Cash and cash equivalents $ 45,000 $ 30,000
Accounts receivable 38,000 40,000
Inventory 67,000 60,000
Total current assets 150,000 130,000
Long-term investments 162,000 200,000
Property, plant and equipment 278,000 150,000
Less accumulated depreciation 52,000 50,000
Total assets $ 538,000 $ 430,000
Liabilities and stockholders‘ equity:
Current liabilities:
Accounts payable $ 36,000 $ 40,000
Accrued liabilities 24,000 30,000
Income taxes payable 15,000 20,000
Total current liabilities 75,000 90,000
Bonds payable 120,000 30,000
Total liabilities 195,000 120,000
Stockholders’ equity:
Common stock 295,000 270,000
Retained earnings 48,000 40,000
Total stockholders’ equity 343,000 310,000
Total liabilities and stockholders’ equity$ 538,000 $ 430,000
Income Statement
Sales $ 150,000
Cost of goods sold 76,500
Gross margin 73,500
Selling and administrative expense 16,000
Net operating income 57,500
Loss on sale of investment 2,500
Income before taxes 55,000
Income taxes 22,000
Net income $ 33,000
Version 1 7
The following additional information is available for the year:
* During the year, the company sold long-term investments for $35,500 that had been
purchased for $38,000.
* The company did not sell any property, plant, and equipment during the year or repurchase
any of its own common stock.
* All sales were on credit.
* The company paid a cash dividend of $25,000.
* The company paid cash to retire $15,000 of bonds payable.
Required:
a. Using the indirect method, determine the net cash provided by (used in) operating activities.
b. Using the direct method, determine the net cash provided by (used in) operating activities.
c. Using the net cash provided by (used in) operating activities amount from either part a or b,
prepare a statement of cash flows.
Garrison 16e Rechecks 2017-11-21
6) Harkey Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 32 $ 35
Accounts receivable 74 71
Inventory 41 42
Property, plant and equipment 443 370
Less accumulated depreciation 194 164
Total assets $ 396 $ 354
Liabilities and stockholders‘ equity:
Accounts payable $ 26 $ 28
Accrued liabilities 28 25
Income taxes payable 40 36
Bonds payable 120 170
Common stock 83 80
Retained earnings 99 15
Total liabilities and stockholders’ equity$ 396 $ 354
Income Statement
Version 1 8
Sales $ 923
Cost of goods sold 604
Gross margin 319
Selling and administrative expense 169
Net operating income 150
Gain on sale of equipment 11
Income before taxes 161
Income taxes 48
Net income $ 113
Cash dividends were $29. The company sold equipment for $15 that was originally purchased
for $6 and that had accumulated depreciation of $2.
Required:
Using the direct method, determine the net cash provided by (used in) operating activities.
7) Maloney Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 26 $ 22
Accounts receivable 44 49
Inventory 38 40
Property, plant and equipment 646 500
Less accumulated depreciation 273 260
Total assets $ 481 $ 351
Liabilities and stockholders‘ equity:
Accounts payable $ 65 $ 64
Accrued liabilities 22 25
Income taxes payable 33 35
Bonds payable 72 70
Common stock 73 70
Retained earnings 216 87
Total liabilities and stockholders’ equity$ 481 $ 351
Income Statement
Sales $ 1,059
Cost of goods sold 698
Version 1 9
Gross margin 361
Selling and administrative expense 117
Net operating income 244
Income taxes 73
Net income $ 171
Cash dividends were $42. The company did not dispose of any property, plant, and equipment
during the year.
Required:
Prepare the operating activities section of the statement of cash flows using the direct method.
8) Carson Corporation’s comparative balance sheet and income statement for last year
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Cash $ 20,000 $ 15,000
Accounts receivable 27,000 25,000
Inventory 32,000 35,000
Prepaid expenses 8,000 5,000
Long-term investments 36,000 38,000
Property, plant and equipment 108,000 92,000
Less accumulated depreciation 49,000 30,000
Total assets $ 182,000 $ 180,000
Accounts payable $ 30,000 38,000
Income taxes payable 17,000 35,000
Bonds payable 40,000 32,000
Common stock 45,000 40,000
Retained earnings 50,000 35,000
Total liabilities and stockholders’ equity$ 182,000 $ 180,000
Income Statement
Sales $ 200,000
Cost of goods sold 100,000
Gross margin 100,000
Selling and administrative expense 52,000
Net operating income 48,000
Gain on sale of investments 2,000
Income before taxes 50,000
Version 1 10
Income taxes 20,000
Net income $ 30,000
Carson did not dispose of any property, plant, and equipment during the year. It constructs its
statement of cash flows using the direct method.
Required:
Using the direct method, prepare in good form the operating activities section of the statement
of cash flows.
9) The changes in each balance sheet account for Carver Corporation during the year just
completed are as follows:
Increase Decrease
Cash and cash equivalents $ 3,000
Accounts receivable $ 5,000
Inventory $ 6,000
Prepaid expenses $ 3,000
Long-term investments $ 17,000
Property, plant and equipment $ 11,000
Accumulated depreciation $ 9,000
Accounts payable $ 8,000
Accrued liabilities $ 5,000
Bonds Payable $ 12,000
Common Stock $ 3,000
Retained Earnings $ 2,000
Carver Corporation’s income statement for the year just ended shows the following:
Income Statement
Sales $ 350,000
Cost of goods sold 190,000
Gross margin 160,000
Selling and administrative expense 158,000
Net income $ 2,000
Version 1 11
The company did not dispose of any property, plant, and equipment, buy any long-term
investments, issue any bonds payable, or repurchase any of its own common stock during the
year. Carver Corporation uses the direct method to construct its statement of cash flows.
Required:
a. Determine the sales adjusted to the cash basis.
b. Determine the cost of goods sold adjusted to the cash basis.
c. Determine the selling and administrative expenses adjusted to a cash basis.
d. Determine the net cash provided by (used in) operating activities.
e. Determine the net cash provided by (used in) investing activities.
f. Determine the net cash provided by (used in) financing activities.
10) Carr Corporation’s comparative balance sheet and income statement for last year appear
below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Cash and cash equivalents $ 3,000 $ 23,000
Accounts receivable 83,000 71,000
Inventory 39,000 47,000
Prepaid expenses 9,000 15,000
Long-term investments 240,000 200,000
Property, plant and equipment 515,000 480,000
Less accumulated depreciation 320,000 295,000
Total assets $ 569,000 $ 541,000
Accounts payable $ 9,000 $ 25,000
Accrued liabilities 24,000 17,000
Income taxes payable 49,000 46,000
Bonds payable 160,000 200,000
Common stock 170,000 140,000
Retained earnings 157,000 113,000
Total liabilities and stockholders’ equity$ 569,000 $ 541,000
Income Statement
Sales $ 850,000
Cost of goods sold 450,000
Gross margin 400,000
Selling and administrative expense 270,000
Net operating income 130,000
Version 1 12
Income taxes 39,000
Net income $ 91,000
The company declared and paid $47,000 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year.
Required:
Construct in good form the operating activities section of the company’s statement of cash
flows for the year using the direct method.
11) Digby Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 34 $ 28
Accounts receivable 76 65
Inventory 34 38
Property, plant and equipment 607 490
Less accumulated depreciation 350 328
Total assets $ 401 $ 293
Liabilities and stockholders‘ equity:
Accounts payable $ 30 $ 36
Bonds payable 265 290
Common stock 43 40
Retained earnings 63 (73)
Total liabilities and stockholders’ equity$ 401 $ 293
Income Statement
Sales $ 1,075
Cost of goods sold 654
Gross margin 421
Selling and administrative expense 185
Net operating income 236
Income taxes 71
Net income $ 165
Version 1 13
Cash dividends were $29. The company did not dispose of any property, plant, and equipment
during the year.
Required:
Prepare the operating activities section of the statement of cash flows in good form using the
direct method.
12) Freeport Corporation’s income statement for last year appears below:
Income Statement
Sales $ 300,000
Cost of goods sold 200,000
Gross margin 100,000
Selling and administrative expense 60,000
Income before income taxes 40,000
Income taxes 16,000
Net income $ 24,000
The beginning and ending balances for last year are available for the following selected accounts
(the company did not dispose of any property, plant, and equipment during the year):
Ending Balance Beginning Balance
Accounts receivable $ 32,000 $ 40,000
Inventory $ 60,000 $ 50,000
Prepaid expenses $ 12,000 $ 8,000
Accumulated depreciation $ 40,000 $ 30,000
Accounts payable $ 30,000 $ 45,000
Accrued liabilities $ 16,000 $ 10,000
Income taxes payable $ 2,000 $ 5,000
Required:
Using the direct method, prepare in good form the operating activities section of the statement
of cash flows.
Version 1 14
13) During the year the balance in the Accounts Receivable account increased by $6,000. In
order to adjust the company’s net income to a cash basis using the direct method on the statement
of cash flows, it would be necessary to:
A) subtract the $6,000 from the sales revenue reported on the income statement.
B) add the $6,000 to the sales revenue reported on the income statement.
C) subtract the $6,000 from the cost of goods sold reported on the income statement.
D) add the $6,000 to the cost of goods sold reported on the income statement.
14) Evita Corporation prepares its statement of cash flows using the indirect method. Evita’s
statement showed “Net cash provided by (used in) operating activities” of $46,000. Under the
direct method, this number would have been:
A) $0.
B) $46,000.
C) greater than $46,000.
D) less than $46,000 but greater than $0.
15) During the year the balance in the Prepaid Expenses account increased by $6,000. In
order to adjust the company’s net income to a cash basis using the direct method on the statement
of cash flows, it would be necessary to:
A) subtract the $6,000 from the selling and administrative expenses reported on the
income statement.
B) add the $6,000 to the selling and administrative expenses reported on the income
statement.
C) subtract the $6,000 from the cost of goods sold reported on the income statement.
D) add the $6,000 to the cost of goods sold reported on the income statement.
Version 1 15
16) Brew Corporation’s most recent comparative balance sheet and income statement appear
below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets
Current assets:
Cash and cash equivalents $ 47 $ 39
Accounts receivable 38 35
Inventory 68 61
Total current assets 153 135
Property, plant, and equipment 600 500
Less accumulated depreciation 397 332
Net property, plant, and equipment 203 168
Total assets $ 356 $ 303
Liabilities and stockholders‘ equity:
Current liabilities:
Accounts payable $ 59 $ 63
Total current liabilities 59 63
Bonds payable 219 260
Total liabilities 278 323
Stockholders’ equity:
Common stock 71 70
Retained earnings 7 (90)
Total stockholders’ equity 78 (20)
Total liabilities and stockholders’ equity$ 356 $ 303
Income Statement
Sales $ 975
Cost of goods sold 619
Gross margin 356
Selling and administrative expense 165
Net operating income 191
Income taxes 57
Net income $ 134
Cash dividends were $37. The company did not retire or sell any property, plant, and equipment
during the year. The net cash provided by (used in) operating activities for the year was:
Version 1 16
A) $185
B) $51
C) $83
D) $191
17) Last year Lawn Corporation reported sales of $300,000 on its income statement. During
the year, accounts receivable increased by $31,000 and accounts payable increased by $36,000.
The company uses the direct method to determine the net cash provided by (used in) operating
activities on the statement of cash flows. The sales revenue adjusted to a cash basis for the year
would be:
A) $305,000
B) $295,000
C) $269,000
D) $264,000
18) Last year Lawn Corporation reported sales of $115,000 on its income statement. During
the year, accounts receivable decreased by $10,000 and accounts payable increased by $15,000.
The company uses the direct method to determine the net cash provided by (used in) operating
activities on the statement of cash flows. The sales revenue adjusted to a cash basis for the year
would be:
A) $125,000
B) $90,000
C) $140,000
D) $100,000
Version 1 17
19) Reven Corporation prepares its statement of cash flows using the direct method. Last
year, Reven reported Income Tax Expense of $25,000. At the beginning of last year, Reven had a
$5,000 balance in the Income Taxes Payable account. At the end of last year, Reven had a
$9,000 balance in the account. On its statement of cash flows for last year, what amount should
Reven have shown for its Income Tax Expense adjusted to a cash basis (i.e., income taxes paid)?
A) $29,000
B) $21,000
C) $25,000
D) $4,000
20) Dorris Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets
Current assets:
Cash and cash equivalents $ 42 $ 40
Accounts receivable 49 57
Inventory 52 44
Total current assets 143 141
Property, plant, and equipment 456 410
Less accumulated depreciation 203 186
Net property, plant, and equipment 253 224
Total assets $ 396 $ 365
Liabilities and stockholders‘ equity:
Current liabilities:
Accounts payable $ 27 $ 33
Accrued liabilities 16 19
Income taxes payable 42 42
Total current liabilities 85 94
Bonds payable 76 70
Total liabilities 161 164
Stockholders’ equity:
Common stock 45 40
Retained earnings 190 161
Total stockholders’ equity 235 201
Version 1 18
Total liabilities and stockholders’ equity$ 396 $ 365
Income Statement
Sales $ 587
Cost of goods sold 385
Gross margin 202
Selling and administrative expense 167
Net operating income 35
Gain on sale of plant and equipment 16
Income before taxes 51
Income taxes 15
Net income $ 36
Cash dividends were $7. The company sold equipment for $18 that was originally purchased for
$8 and that had accumulated depreciation of $6. The net cash provided by (used in) operating
activities for the year was:
A) $34
B) $35
C) $50
D) $41
21) The ending balance of accounts receivable was $80,000. Sales, adjusted to a cash basis
using the direct method on the statement of cash flows, were $365,000. Sales reported on the
income statement were $394,500. Based on this information, the beginning balance in accounts
receivable was:
A) $109,500
B) $29,500
C) $110,500
D) $50,500
22) The ending balance of accounts receivable was $69,000. Sales, adjusted to a cash basis
using the direct method on the statement of cash flows, were $354,000. Sales reported on the
income statement were $378,000. Based on this information, the beginning balance in accounts
receivable was:
Version 1 19
A) $93,000
B) $24,000
C) $94,000
D) $45,000
23) Kuma, Incorporated had cost of goods sold of $106,000 for the just completed year.
Shown below are the beginning and ending balances of various Kuma accounts:
Ending Beginning
Cash and cash equivalents $ 59,000 $ 45,000
Accounts receivable $ 75,000 $ 81,000
Inventory $ 36,000 $ 42,000
Accounts payable $ 18,000 $ 14,000
Retained earnings $ 79,000 $ 64,000
Kuma prepares its statement of cash flows using the direct method. On its statement of cash
flows, what amount should Kuma show for its cost of goods sold adjusted to a cash basis (i.e.,
cash paid to suppliers)?
A) $100,000
B) $96,000
C) $102,000
D) $116,000
24) Sales reported on the income statement totaled $754,000. The beginning balance in
accounts receivable was $74,000. The ending balance in accounts receivable was $85,000. Under
the direct method of determining the net cash provided by (used in) operating activities on the
statement of cash flows, sales adjusted to a cash basis are:
A) $765,000
B) $743,000
C) $680,000
D) $839,000
Version 1 20
25) Sales reported on the income statement totaled $750,000. The beginning balance in
accounts receivable was $70,000. The ending balance in accounts receivable was $80,000. Under
the direct method of determining the net cash provided by (used in) operating activities on the
statement of cash flows, sales adjusted to a cash basis are:
A) $760,000
B) $740,000
C) $680,000
D) $830,000
26) Wister Corporation had sales of $462,000 for the just completed year. Shown below are
the beginning and ending balances of various Wister accounts:
Ending Beginning
Cash and cash equivalents $ 105,000 $ 132,000
Accounts receivable $ 168,000 $ 142,000
Inventory $ 472,000 $ 536,000
Accounts payable $ 74,000 $ 91,000
Retained earnings $ 364,000 $ 292,000
Wister prepares its statement of cash flows using the direct method. On its statement of cash
flows, what amount should Wister show for its sales adjusted to a cash basis (i.e., cash received
from sales)?
A) $488,000
B) $436,000
C) $462,000
D) $445,000
27) LFM Corporation reported cost of goods sold on its income statement of $15,000. The
following account balances appeared on the company’s comparative balance sheet for the same
year:
Ending Balance Beginning Balance
Inventory $ 33,000 $ 30,000
Accounts Payable $ 23,000 $ 21,000
The company uses the direct method to determine the net cash provided by (used in) operating
activities. The cost of goods sold, adjusted to a cash basis, on the company’s statement of cash
flows for the year would be:
Version 1 21
A) $14,000
B) $16,000
C) $10,000
D) $15,000
28) Cridberg Corporation’s selling and administrative expenses for last year totaled $264,000.
During the year the company’s prepaid expense account balance increased by $20,000 and
accrued liabilities decreased by $14,000. Depreciation for the year was $29,000. Based on this
information, selling and administrative expenses adjusted to a cash basis under the direct method
on the statement of cash flows would be:
A) $259,000
B) $327,000
C) $201,000
D) $269,000
29) Cridberg Corporation’s selling and administrative expenses for last year totaled $260,000.
During the year the company’s prepaid expense account balance increased by $18,000 and
accrued liabilities decreased by $12,000. Depreciation for the year was $25,000. Based on this
information, selling and administrative expenses adjusted to a 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
30) Last year Cumberland Corporation reported a cost of goods sold of $86,000. Inventories
increased by $40,000 during the year, and accounts payable increased by $28,000. The company
uses the direct method to determine the net cash provided by (used in) operating activities on the
statement of cash flows. The cost of goods sold adjusted to a cash basis would be:
Version 1 22
A) $46,000
B) $98,000
C) $58,000
D) $154,000
31) Last year Cumberland Corporation reported a cost of goods sold of $120,000. Inventories
increased by $35,000 during the year, and accounts payable increased by $20,000. The company
uses the direct method to determine the net cash provided by (used in) operating activities on the
statement of cash flows. The cost of goods sold adjusted to a cash basis would be:
A) $135,000
B) $100,000
C) $155,000
D) $105,000
32) Crossland Corporation reported sales on its income statement of $443,000. On the
statement of cash flows, which used the direct method, sales adjusted to a cash basis were
$467,000. Crossland Corporation reported the following account balances on its balance sheet
for the year:
Ending Balance Beginning Balance
Accounts receivable $ 34,000 ?
Prepaid expenses $ 14,800 $ 11,800
Inventory $ 19,600 $ 21,600
Based on this information, the beginning balance in accounts receivable was:
A) $58,000
B) $48,000
C) $34,000
D) $24,000
Version 1 23
33) Crossland Corporation reported sales on its income statement of $435,000. On the
statement of cash flows, which used the direct method, sales adjusted to a cash basis were
$455,000. Crossland Corporation reported the following account balances on its balance sheet
for the year:
Ending Balance Beginning Balance
Accounts receivable $ 30,000 ?
Prepaid expenses $ 14,000 $ 11,000
Inventory $ 18,000 $ 20,000
Based on this information, the beginning balance in accounts receivable was:
A) $50,000
B) $40,000
C) $30,000
D) $20,000
34) The most recent balance sheet and income statement of Dallavalle Corporation appear
below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets
Current assets:
Cash and cash equivalents $ 36 $ 35
Accounts receivable 50 51
Inventory 55 50
Total current assets 141 136
Property, plant and equipment 624 570
Less accumulated depreciation 304 279
Net property, plant and equipment 320 291
Total assets $ 461 $ 427
Liabilities and stockholders‘ equity:
Current liabilities:
Accounts payable $ 24 $ 25
Accrued liabilities 16 15
Income taxes payable 30 37
Total current liabilities 70 77
Bonds payable 16 20
Total liabilities 86 97
Stockholders’ equity:
Version 1 24
Common stock 43 40
Retained earnings 332 290
Total stockholders’ equity 375 330
Total liabilities and stockholders’ equity$ 461 $ 427
Income Statement
Sales $ 649
Cost of goods sold 414
Gross margin 235
Selling and administrative expense 158
Net operating income 77
Income taxes 23
Net income $ 54
Cash dividends were $12. The company did not retire or sell any property, plant, and equipment
during the year. The net cash provided by (used in) operating activities for the year was:
A) $77
B) $68
C) $40
D) $14
35) Last year Anderson Corporation reported a cost of goods sold of $105,000. The
company’s inventory at the beginning of the year was $12,000, and its inventory at the end of the
year was $20,500. The prepaid expense account increased by $2,500 between the beginning and
end of the year, and the accounts payable account decreased by $4,500. Cost of goods sold
adjusted to the cash basis under the direct method would be:
A) $98,000
B) $112,000
C) $118,000
D) $116,000
36) Last year Anderson Corporation reported a cost of goods sold of $100,000. The
company’s inventory at the beginning of the year was $11,000, and its inventory at the end of the
year was $19,000. The prepaid expense account increased by $2,000 between the beginning and
end of the year, and the accounts payable account decreased by $4,000. Cost of goods sold
adjusted to the cash basis under the direct method would be:
Version 1 25
A) $94,000
B) $106,000
C) $112,000
D) $110,000
37) Last year Marton Corporation reported a cost of goods sold of $720,000 on its income
statement. The following additional data were taken from the company’s comparative balance
sheet for the year:
Ending Beginning
Inventory $ 105,000 $ 85,000
Accounts Payable $ 65,000 $ 92,000
The company uses the direct method to determine the net cash provided by (used in) operating
activities on the statement of cash flows. The cost of goods sold adjusted to a cash basis would
be:
A) $740,000
B) $767,000
C) $747,000
D) $673,000
38) Shimko Corporation’s most recent comparative balance sheet and income statement
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 34 $ 32
Accounts receivable 80 72
Inventory 58 74
Property, plant, and equipment 853 730
Less accumulated depreciation 325 282
Total assets $ 700 $ 626
Liabilities and stockholders‘ equity:
Accounts payable $ 77 $ 47
Bonds payable 436 470
Common stock 67 50
Version 1 26
Retained earnings 120 59
Total liabilities and equity $ 700 $ 626
Income Statement
Sales $ 720
Cost of goods sold 425
Gross margin 295
Selling and administrative expense 168
Net operating income 127
Income taxes 45
Net income $ 82
The company paid a cash dividend of $21 and it did not dispose of any property, plant, and
equipment. The company 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) $163
B) $127
C) $208
D) $193
39) Shimko Corporation’s most recent comparative balance sheet and income statement
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 37 $ 32
Accounts receivable 34 32
Inventory 59 55
Property, plant and equipment 447 390
Less accumulated depreciation 212 188
Total assets $ 365 $ 321
Liabilities and stockholders‘ equity:
Accounts payable $ 37 $ 32
Bonds payable 217 270
Common stock 21 20
Retained earnings 90 (1)
Total liabilities and equity $ 365 $ 321
Income Statement
Sales $ 891
Version 1 27
Cost of goods sold 539
Gross margin 352
Selling and administrative expense 195
Net operating income 157
Income taxes 47
Net income $ 110
The company paid a cash dividend of $19 and it did not dispose of any 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 for the year was:
A) $23
B) $133
C) $157
D) $87
40) Shimko Corporation’s most recent comparative balance sheet and income statement
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 37 $ 32
Accounts receivable 34 32
Inventory 59 55
Property, plant and equipment 447 390
Less accumulated depreciation 212 188
Total assets $ 365 $ 321
Liabilities and stockholders‘ equity:
Accounts payable $ 37 $ 32
Bonds payable 217 270
Common stock 21 20
Retained earnings 90 (1)
Total liabilities and equity $ 365 $ 321
Income Statement
Sales $ 891
Cost of goods sold 539
Gross margin 352
Selling and administrative expense 195
Net operating income 157
Version 1 28
Income taxes 47
Net income $ 110
The company paid a cash dividend of $19 and it did not dispose of any 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 for the year was:
A) $57
B) $(57)
C) $33
D) $(33)
41) Shimko Corporation’s most recent comparative balance sheet and income statement
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 37 $ 32
Accounts receivable 34 32
Inventory 59 55
Property, plant and equipment 447 390
Less accumulated depreciation 212 188
Total assets $ 365 $ 321
Liabilities and stockholders‘ equity:
Accounts payable $ 37 $ 32
Bonds payable 217 270
Common stock 21 20
Retained earnings 90 (1)
Total liabilities and equity $ 365 $ 321
Income Statement
Sales $ 891
Cost of goods sold 539
Gross margin 352
Selling and administrative expense 195
Net operating income 157
Income taxes 47
Net income $ 110
Version 1 29
The company paid a cash dividend of $19 and it did not dispose of any 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 for the year was:
A) $(19)
B) $(53)
C) $1
D) $(71)
42) The most recent balance sheet and income statement of Oldaker Corporation appear
below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 31 $ 29
Accounts receivable 73 79
Inventory 44 45
Property, plant and equipment 728 590
Less accumulated depreciation 253 242
Total assets $ 623 $ 501
Liabilities and stockholders‘ equity:
Accounts payable $ 56 $ 63
Accrued liabilities 21 22
Income taxes payable 26 28
Bonds payable 121 110
Common stock 33 30
Retained earnings 366 248
Total liabilities and stockholders’ equity$ 623 $ 501
Income Statement
Sales $ 921
Cost of goods sold 575
Gross margin 346
Selling and administrative expense 117
Net operating income 229
Income taxes 69
Net income $ 160
Version 1 30
The company paid a cash dividend of $42 and 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) $168
B) $8
C) $152
D) $229
43) The most recent balance sheet and income statement of Oldaker Corporation appear
below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets
Cash and cash equivalents $ 31 $ 29
Accounts receivable 73 79
Inventory 44 45
Property, plant and equipment 728 590
Less accumulated depreciation 253 242
Total assets $ 623 $ 501
Liabilities and stockholders‘ equity:
Accounts payable $ 56 $ 63
Accrued liabilities 21 22
Income taxes payable 26 28
Bonds payable 121 110
Common stock 33 30
Retained earnings 366 248
Total liabilities and stockholders’ equity$ 623 $ 501
Income Statement
Sales $ 921
Cost of goods sold 575
Gross margin 346
Selling and administrative expense 117
Net operating income 229
Income taxes 69
Net income $ 160
Version 1 31
The company paid a cash dividend of $42 and 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) $(127)
B) $(138)
C) $138
D) $127
44) The most recent balance sheet and income statement of Oldaker Corporation appear
below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets
Cash and cash equivalents $ 31 $ 29
Accounts receivable 73 79
Inventory 44 45
Property, plant and equipment 728 590
Less accumulated depreciation 253 242
Total assets $ 623 $ 501
Liabilities and stockholders‘ equity:
Accounts payable $ 56 $ 63
Accrued liabilities 21 22
Income taxes payable 26 28
Bonds payable 121 110
Common stock 33 30
Retained earnings 366 248
Total liabilities and stockholders’ equity$ 623 $ 501
Income Statement
Sales $ 921
Cost of goods sold 575
Gross margin 346
Selling and administrative expense 117
Net operating income 229
Income taxes 69
Net income $ 160
Version 1 32
The company paid a cash dividend of $42 and 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) $(42)
B) $3
C) $11
D) $(28)
45) Kilduff Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 36 $ 38
Accounts receivable 36 32
Inventory 49 55
Property, plant and equipment 707 580
Less accumulated depreciation 316 315
Total assets $ 512 $ 390
Liabilities and stockholders‘ equity:
Accounts payable $ 71 $ 64
Accrued liabilities 22 19
Income taxes payable 34 41
Bonds payable 71 100
Common stock 32 30
Retained earnings 282 136
Total liabilities and stockholders’ equity$ 512 $ 390
Income Statement
Sales $ 1,174
Cost of goods sold 771
Gross margin 403
Selling and administrative expense 146
Net operating income 257
Gain on sale of equipment 14
Income before taxes 271
Income taxes 81
Net income $ 190
Version 1 33
The company sold equipment for $19 that was originally purchased for $10 and that had
accumulated depreciation of $5. The company paid a cash dividend of $44 and 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) $187
B) $231
C) $257
D) $201
46) Kilduff Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 36 $ 38
Accounts receivable 36 32
Inventory 49 55
Property, plant and equipment 707 580
Less accumulated depreciation 316 315
Total assets $ 512 $ 390
Liabilities and stockholders‘ equity:
Accounts payable $ 71 $ 64
Accrued liabilities 22 19
Income taxes payable 34 41
Bonds payable 71 100
Common stock 32 30
Retained earnings 282 136
Total liabilities and stockholders’ equity$ 512 $ 390
Income Statement
Sales $ 1,174
Cost of goods sold 771
Gross margin 403
Selling and administrative expense 146
Net operating income 257
Gain on sale of equipment 14
Income before taxes 271
Income taxes 81
Net income $ 190
Version 1 34
The company sold equipment for $19 that was originally purchased for $10 and that had
accumulated depreciation of $5. The company paid a cash dividend of $44 and 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) $19
B) $(118)
C) $(137)
D) $118
47) Kilduff Corporation’s balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Assets:
Cash and cash equivalents $ 36 $ 38
Accounts receivable 36 32
Inventory 49 55
Property, plant and equipment 707 580
Less accumulated depreciation 316 315
Total assets $ 512 $ 390
Liabilities and stockholders‘ equity:
Accounts payable $ 71 $ 64
Accrued liabilities 22 19
Income taxes payable 34 41
Bonds payable 71 100
Common stock 32 30
Retained earnings 282 136
Total liabilities and stockholders’ equity$ 512 $ 390
Income Statement
Sales $ 1,174
Cost of goods sold 771
Gross margin 403
Selling and administrative expense 146
Net operating income 257
Gain on sale of equipment 14
Income before taxes 271
Income taxes 81
Net income $ 190
Version 1 35
The company sold equipment for $19 that was originally purchased for $10 and that had
accumulated depreciation of $5. The company paid a cash dividend of $44 and 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) $(44)
B) $(71)
C) $2
D) $(29)
48) The change in each of Kendall Corporation’s balance sheet accounts last year follows:
Increase Decrease
Cash and cash equivalents $ 3,000
Accounts receivable $ 2,000
Inventory $ 3,000
Prepaid Expenses $ 4,000
Long-term Investments $ 15,000
Property, Plant and Equipment $ 10,000
Accumulated Depreciation $ 8,000
Accounts payable $ 9,000
Accrued Liabilities $ 6,000
Bonds Payable $ 13,000
Common Stock $ 5,000
Retained Earnings $ 4,000
Kendall Corporation’s income statement for the year was:
Sales $ 300,000
Cost of goods sold 180,000
Gross margin 120,000
Selling and administrative expense 116,000
Net income $ 4,000
Version 1 36
There were no sales or retirements of property, plant, and equipment and no dividends paid
during the year. The company pays no income taxes and it did not purchase any long-term
investments, issue any bonds payable, or repurchase any of its own common stock. The net cash
provided by (used in) operating activities on the statement of cash flows is determined using the
direct method.
Using the direct method, sales adjusted to a cash basis would be:
A) $300,000
B) $302,000
C) $298,000
D) $305,000
49) The change in each of Kendall Corporation’s balance sheet accounts last year follows:
Increase Decrease
Cash and cash equivalents $ 3,000
Accounts receivable $ 2,000
Inventory $ 3,000
Prepaid Expenses $ 4,000
Long-term Investments $ 15,000
Property, Plant and Equipment $ 10,000
Accumulated Depreciation $ 8,000
Accounts payable $ 9,000
Accrued Liabilities $ 6,000
Bonds Payable $ 13,000
Common Stock $ 5,000
Retained Earnings $ 4,000
Kendall Corporation’s income statement for the year was:
Sales $ 300,000
Cost of goods sold 180,000
Gross margin 120,000
Selling and administrative expense 116,000
Net income $ 4,000
Version 1 37
There were no sales or retirements of property, plant, and equipment and no dividends paid
during the year. The company pays no income taxes and it did not purchase any long-term
investments, issue any bonds payable, or repurchase any of its own common stock. The net cash
provided by (used in) operating activities on the statement of cash flows is determined using the
direct method.
Using the direct method, the cost of goods sold adjusted to a cash basis would be:
A) $180,000
B) $174,000
C) $177,000
D) $186,000
50) The change in each of Kendall Corporation’s balance sheet accounts last year follows:
Increase Decrease
Cash and cash equivalents $ 3,000
Accounts receivable $ 2,000
Inventory $ 3,000
Prepaid Expenses $ 4,000
Long-term Investments $ 15,000
Property, Plant and Equipment $ 10,000
Accumulated Depreciation $ 8,000
Accounts payable $ 9,000
Accrued Liabilities $ 6,000
Bonds Payable $ 13,000
Common Stock $ 5,000
Retained Earnings $ 4,000
Kendall Corporation’s income statement for the year was:
Sales $ 300,000
Cost of goods sold 180,000
Gross margin 120,000
Selling and administrative expense 116,000
Net income $ 4,000
Version 1 38
There were no sales or retirements of property, plant, and equipment and no dividends paid
during the year. The company pays no income taxes and it did not purchase any long-term
investments, issue any bonds payable, or repurchase any of its own common stock. The net cash
provided by (used in) operating activities on the statement of cash flows is determined using the
direct method.
The selling and administrative expense adjusted to a cash basis would be:
A) $120,000
B) $106,000
C) $110,000
D) $112,000
51) The change in each of Kendall Corporation’s balance sheet accounts last year follows:
Increase Decrease
Cash and cash equivalents $ 3,000
Accounts receivable $ 2,000
Inventory $ 3,000
Prepaid Expenses $ 4,000
Long-term Investments $ 15,000
Property, Plant and Equipment $ 10,000
Accumulated Depreciation $ 8,000
Accounts payable $ 9,000
Accrued Liabilities $ 6,000
Bonds Payable $ 13,000
Common Stock $ 5,000
Retained Earnings $ 4,000
Kendall Corporation’s income statement for the year was:
Sales $ 300,000
Cost of goods sold 180,000
Gross margin 120,000
Selling and administrative expense 116,000
Net income $ 4,000
Version 1 39
There were no sales or retirements of property, plant, and equipment and no dividends paid
during the year. The company pays no income taxes and it did not purchase any long-term
investments, issue any bonds payable, or repurchase any of its own common stock. The net cash
provided by (used in) operating activities on the statement of cash flows is determined using the
direct method.
The net cash provided by (used in) investing activities would be:
A) $15,000
B) $(10,000)
C) $(8,000)
D) $5,000
52) The change in each of Kendall Corporation’s balance sheet accounts last year follows:
Increase Decrease
Cash and cash equivalents $ 3,000
Accounts receivable $ 2,000
Inventory $ 3,000
Prepaid Expenses $ 4,000
Long-term Investments $ 15,000
Property, Plant and Equipment $ 10,000
Accumulated Depreciation $ 8,000
Accounts payable $ 9,000
Accrued Liabilities $ 6,000
Bonds Payable $ 13,000
Common Stock $ 5,000
Retained Earnings $ 4,000
Kendall Corporation’s income statement for the year was:
Income Statement
Sales $ 300,000
Cost of goods sold 180,000
Gross margin $ 120,000
Selling and administrative expense 116,000
Net income $ 4,000
Version 1 40
There were no sales or retirements of property, plant, and equipment and no dividends paid
during the year. The company pays no income taxes and it did not purchase any long-term
investments, issue any bonds payable, or repurchase any of its own common stock. The net cash
provided by (used in) operating activities on the statement of cash flows is determined using the
direct method.
The net cash provided by (used in) financing activities would be:
A) $(8,000)
B) $(13,000)
C) $20,000
D) $(3,000)
53) The changes in Northrup Corporation’s balance sheet account balances for last year
appear below:
Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents $ (24,000)
Accounts receivable $ (21,000)
Inventory $ 0
Prepaid expenses $ 28,000
Long-term investments $ 58,000
Property, plant, and equipment $ 33,000
Accumulated depreciation $ 73,000
Liability and Equity Accounts:
Accounts payable $ 21,000
Accrued liabilities $ (31,000)
Income taxes payable $ 32,000
Bonds payable $ (70,000)
Common stock $ 29,000
Retained earnings $ 33,600
The company’s income statement for the year appears below:
Income Statement
Sales $ 930,000
Cost of goods sold 540,000
Gross margin 390,000
Selling and administrative expense 279,000
Net operating income 111,000
Income taxes 44,400
Net income $ 66,600
Version 1 41
The company declared and paid $33,000 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the sales adjusted to a cash basis would be:
A) $762,000
B) $1,029,600
C) $972,000
D) $951,000
54) The changes in Northrup Corporation’s balance sheet account balances for last year
appear below:
Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents $ 4,000
Accounts receivable $ (4,000)
Inventory $ (2,000)
Prepaid expenses $ 2,000
Long-term investments $ 40,000
Property, plant and equipment $ 25,000
Accumulated depreciation $ 68,000
Liability and Equity Accounts:
Accounts payable $ (6,000)
Accrued liabilities $ 8,000
Income taxes payable $ (8,000)
Bonds payable $ (70,000)
Common stock $ 10,000
Retained earnings $ 63,000
The company’s income statement for the year appears below:
Income Statement
Sales $ 980,000
Cost of goods sold 540,000
Gross margin 440,000
Selling and administrative expense 310,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
Version 1 42
The company declared and paid $28,000 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the sales adjusted to a cash basis would be:
A) $976,000
B) $982,000
C) $984,000
D) $980,000
55) The changes in Northrup Corporation’s balance sheet account balances for last year
appear below:
Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents $ 4,000
Accounts receivable $ (4,000)
Inventory $ (2,000)
Prepaid expenses $ 2,000
Long-term investments $ 40,000
Property, plant and equipment $ 25,000
Accumulated depreciation $ 68,000
Liability and Equity Accounts:
Accounts payable $ (6,000)
Accrued liabilities $ 8,000
Income taxes payable $ (8,000)
Bonds payable $ (70,000)
Common stock $ 10,000
Retained earnings $ 63,000
The company’s income statement for the year appears below:
Income Statement
Sales $ 980,000
Cost of goods sold 540,000
Gross margin 440,000
Selling and administrative expense 310,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
Version 1 43
The company declared and paid $28,000 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:
A) $546,000
B) $536,000
C) $544,000
D) $540,000
56) The changes in Northrup Corporation’s balance sheet account balances for last year
appear below:
Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents $ 4,000
Accounts receivable $ (4,000)
Inventory $ (2,000)
Prepaid expenses $ 2,000
Long-term investments $ 40,000
Property, plant and equipment $ 25,000
Accumulated depreciation $ 68,000
Liability and Equity Accounts:
Accounts payable $ (6,000)
Accrued liabilities $ 8,000
Income taxes payable $ (8,000)
Bonds payable $ (70,000)
Common stock $ 10,000
Retained earnings $ 63,000
The company’s income statement for the year appears below:
Income Statement
Sales $ 980,000
Cost of goods sold 540,000
Gross margin 440,000
Selling and administrative expense 310,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
Version 1 44
The company declared and paid $28,000 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the selling and administrative expense adjusted to a cash basis
would be:
A) $304,000
B) $384,000
C) $310,000
D) $236,000
57) The changes in Northrup Corporation’s balance sheet account balances for last year
appear below:
Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash and cash equivalents $ 4,000
Accounts receivable $ (4,000)
Inventory $ (2,000)
Prepaid expenses $ 2,000
Long-term investments $ 40,000
Property, plant and equipment $ 25,000
Accumulated depreciation $ 68,000
Liability and Equity Accounts:
Accounts payable $ (6,000)
Accrued liabilities $ 8,000
Income taxes payable $ (8,000)
Bonds payable $ (70,000)
Common stock $ 10,000
Retained earnings $ 63,000
The company’s income statement for the year appears below:
Income Statement
Sales $ 980,000
Cost of goods sold 540,000
Gross margin 440,000
Selling and administrative expense 310,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
Version 1 45
The company declared and paid $28,000 in cash dividends during the year. It did not dispose of
any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the income tax expense adjusted to a cash basis would be:
A) $47,000
B) $39,000
C) $31,000
D) $49,000
58) Last year, Knox Corporation reported on its income statement sales of $375,000 and cost
of goods sold of $140,000. During the year, the balance in accounts receivable increased
$30,000, the balance in accounts payable decreased $25,000, and the balance in inventory
increased $10,000. The company uses the direct method to determine the net cash provided by
(used in) operating activities on its statement of cash flows.
Under the direct method, sales adjusted to a cash basis would be:
A) $295,000
B) $345,000
C) $405,000
D) $355,000
59) Last year, Knox Corporation reported on its income statement sales of $375,000 and cost
of goods sold of $140,000. During the year, the balance in accounts receivable increased
$30,000, the balance in accounts payable decreased $25,000, and the balance in inventory
increased $10,000. The company uses the direct method to determine the net cash provided by
(used in) operating activities on its statement of cash flows.
Under the direct method, cost of goods sold adjusted to a cash basis would be:
A) $105,000
B) $125,000
C) $175,000
D) $155,000
Version 1 46
60) Van Beeber Corporation’s comparative balance sheet and income statement for last year
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Cash and cash equivalents $ 58,000 $ 34,000
Accounts receivable 48,000 36,000
Inventory 56,000 67,000
Prepaid expenses 24,000 16,000
Long-term investments 280,000 220,000
Property, plant and equipment 580,000 580,000
Less accumulated depreciation 270,000 235,000
Total assets $ 776,000 $ 718,000
Accounts payable $ 32,000 $ 53,000
Accrued liabilities 38,000 21,000
Income taxes payable 61,000 31,000
Bonds payable 90,000 120,000
Common stock 80,000 60,000
Retained earnings 475,000 433,000
Total liabilities and stockholders’ equity$ 776,000 $ 718,000
Income Statement
Sales $ 700,000
Cost of goods sold 360,000
Gross margin 340,000
Selling and administrative expense 210,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
The company declared and paid $49,000 in cash dividends during the year. It did not sell or
retire any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the sales adjusted to a cash basis would be:
A) $700,000
B) $688,000
C) $677,000
D) $712,000
Version 1 47
61) Van Beeber Corporation’s comparative balance sheet and income statement for last year
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Cash and cash equivalents $ 58,000 $ 34,000
Accounts receivable 48,000 36,000
Inventory 56,000 67,000
Prepaid expenses 24,000 16,000
Long-term investments 280,000 220,000
Property, plant and equipment 580,000 580,000
Less accumulated depreciation 270,000 235,000
Total assets $ 776,000 $ 718,000
Accounts payable $ 32,000 $ 53,000
Accrued liabilities 38,000 21,000
Income taxes payable 61,000 31,000
Bonds payable 90,000 120,000
Common stock 80,000 60,000
Retained earnings 475,000 433,000
Total liabilities and stockholders’ equity$ 776,000 $ 718,000
Income Statement
Sales $ 700,000
Cost of goods sold 360,000
Gross margin 340,000
Selling and administrative expense 210,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
The company declared and paid $49,000 in cash dividends during the year. It did not sell or
retire any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the cost of goods sold adjusted to a cash basis would be:
A) $360,000
B) $350,000
C) $370,000
D) $381,000
62) Van Beeber Corporation’s comparative balance sheet and income statement for last year
appear below:
Comparative Balance Sheet
Version 1 48
Ending Balance Beginning Balance
Cash and cash equivalents $ 58,000 $ 34,000
Accounts receivable 48,000 36,000
Inventory 56,000 67,000
Prepaid expenses 24,000 16,000
Long-term investments 280,000 220,000
Property, plant and equipment 580,000 580,000
Less accumulated depreciation 270,000 235,000
Total assets $ 776,000 $ 718,000
Accounts payable $ 32,000 $ 53,000
Accrued liabilities 38,000 21,000
Income taxes payable 61,000 31,000
Bonds payable 90,000 120,000
Common stock 80,000 60,000
Retained earnings 475,000 433,000
Total liabilities and stockholders’ equity$ 776,000 $ 718,000
Income Statement
Sales $ 700,000
Cost of goods sold 360,000
Gross margin 340,000
Selling and administrative expense 210,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
The company declared and paid $49,000 in cash dividends during the year. It did not sell or
retire any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the selling and administrative expense adjusted to a cash basis
would be:
A) $201,000
B) $166,000
C) $254,000
D) $210,000
63) Van Beeber Corporation’s comparative balance sheet and income statement for last year
appear below:
Comparative Balance Sheet
Ending Balance Beginning Balance
Cash and cash equivalents $ 58,000 $ 34,000
Accounts receivable 48,000 36,000
Version 1 49
Inventory 56,000 67,000
Prepaid expenses 24,000 16,000
Long-term investments 280,000 220,000
Property, plant and equipment 580,000 580,000
Less accumulated depreciation 270,000 235,000
Total assets $ 776,000 $ 718,000
Accounts payable $ 32,000 $ 53,000
Accrued liabilities 38,000 21,000
Income taxes payable 61,000 31,000
Bonds payable 90,000 120,000
Common stock 80,000 60,000
Retained earnings 475,000 433,000
Total liabilities and stockholders’ equity$ 776,000 $ 718,000
Income Statement
Sales $ 700,000
Cost of goods sold 360,000
Gross margin 340,000
Selling and administrative expense 210,000
Net operating income 130,000
Income taxes 39,000
Net income $ 91,000
The company declared and paid $49,000 in cash dividends during the year. It did not sell or
retire any property, plant, and equipment during the year. The company uses the direct method to
determine the net cash provided by (used in) operating activities.
On the statement of cash flows, the income tax expense adjusted to a cash basis would be:
A) $39,000
B) $69,000
C) $9,000
D) $25,000
64) Hayward Corporation had net sales of $610,000 and cost of goods sold of $360,000 for
the just completed year. Shown below are the beginning and ending balances for the year of
various accounts:
Ending Beginning
Cash $ 42,000 $ 31,000
Accounts receivable $ 87,000 $ 72,000
Inventory $ 96,000 $ 83,000
Accounts payable $ 23,000 $ 29,000
Version 1 50
The company prepares its statement of cash flows using the direct method.
On its statement of cash flows, what amount should Howard show for its net sales adjusted to a
cash basis (i.e., cash received from sales)?
A) $616,000
B) $623,000
C) $625,000
D) $595,000
65) Hayward Corporation had net sales of $610,000 and cost of goods sold of $360,000 for
the just completed year. Shown below are the beginning and ending balances for the year of
various accounts:
Ending Beginning
Cash $ 42,000 $ 31,000
Accounts receivable $ 87,000 $ 72,000
Inventory $ 96,000 $ 83,000
Accounts payable $ 23,000 $ 29,000
The company prepares its statement of cash flows using the direct method.
On its statement of cash flows, what amount should Howard show for its cost of goods sold
adjusted to a cash basis (i.e., cash paid to suppliers)?
A) $345,000
B) $366,000
C) $379,000
D) $373,000
66) Under the direct method of determining the net cash provided by (used in) operating
activities on the statement of cash flows, a decrease in prepaid expenses would be added to
selling and administrative expenses to convert selling and administrative expenses to a cash
basis.
⊚ true
⊚ false
Version 1 51
67) Under the direct method of determining the net cash provided by (used in) operating
activities on the statement of cash flows, one step in adjusting selling and administrative
expenses from an accrual to a cash basis is to subtract any increase in prepaid expenses.
⊚ true
⊚ false
68) If accounts receivable increase during a period, then the amount of cash collected from
customers will be less than the amount of sales reported on the income statement for the period.
⊚ true
⊚ false
69) Under the direct method of determining the net cash provided by (used in) operating
activities on the statement of cash flows, an increase in accounts receivable would be added to
sales revenue to convert revenue to a cash basis.
⊚ true
⊚ false
Version 1 52
Answer Key
Test name: chapter 15A
Version 1 53
Version 1 54