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110. The accountant for Robinson Company is preparing the company's statement of cash
flows for the fiscal year just ended. The following information is available:
Retained earnings balance at the beginning of the year $156,000
Cash dividends declared for the year $ 46,000
Proceeds from the sale of equipment $ 81,000
Gain on the sale of equipment $ 7,000
Cash dividends payable at the beginning of the year $ 18,000
Cash dividends payable at the end of the year $ 40,000
Net income for the year $ 92,000
The amount of cash dividends paid during the year would be:
A. $70,000.
B. $46,000.
C. $22,000.
D. $39,000.
E. $24,000.
111. In preparing a company's statement of cash flows for the most recent year, the following
information is available:
Loss on the sale of equipment $ 14,000
Purchase of equipment $145,000
Proceeds from the sale of equipment $126,000
Repayment of outstanding bonds $ 87,000
Purchase of treasury stock $ 62,000
Issuance of common stock $ 96,000
Purchase of land $115,000
Increase in accounts receivable during the year $ 43,000
Decrease in accounts payable during the year $ 75,000
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Payment of cash dividends $ 35,000
Net cash flows from investing activities for the year were:
A. $134,000 of net cash used by investing activities.
B. $134,000 of net cash provided by investing activities.
C. $120,000 of net cash used by investing activities.
D. $252,000 of net cash used by investing activities.
E. $221,000 of net cash provided by investing activities.
112. In preparing a company's statement of cash flows for the year just ended, the following
information is available:
Loss on the sale of equipment $ 14,000
Purchase of equipment $145,000
Proceeds from the sale of equipment $126,000
Repayment of outstanding bonds $ 87,000
Purchase of treasury stock $ 62,000
Issuance of common stock $ 96,000
Purchase of land $115,000
Increase in accounts receivable during the year $ 43,000
Decrease in accounts payable during the year $ 75,000
Payment of cash dividends $ 35,000
Net cash flows from financing activities for the year were:
A. $130,000 of net cash used by financing activities.
B. $165,000 of net cash used by financing activities.
C. $222,000 of net cash used by financing activities.
D. $88,000 of net cash used by financing activities.
E. $206,000 of net cash used by financing activities.
113. When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,
the cash flows from operating activities generally affect:
A. Net income, current assets, and current liabilities.
B. Noncurrent assets.
C. Noncurrent liability and equity accounts.
D. Both noncurrent assets and noncurrent liabilities.
E. Equity accounts only.
114. When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,
the cash flows from investing activities generally affect:
A. Net income, current assets, and current liabilities.
B. Noncurrent assets.
C. Noncurrent liability and equity accounts.
D. Both noncurrent assets and noncurrent liabilities.
E. Equity accounts only.
115. When analyzing the changes on a spreadsheet used to prepare a statement of cash flows,
the cash flows from financing activities generally affect
A. Net income, current assets, and current liabilities.
B. Noncurrent assets.
C. Noncurrent liability and equity accounts.
D. Both noncurrent assets and noncurrent liabilities.
E. Equity accounts only.
116. Which of the following transactions or events should be reported as a source of cash
from operating activities when using the direct method?
A. Credit sales.
B. Cash collections from customers.
C. Depreciation expense.
D. Cash received from the sale of a building.
E. Cash received from the sale of treasury stock.
117. When the operating activities section of the statement of cash flows is reported using the
direct method, the FASB requires:
A. The preparation of the statement of cash flows under the indirect method be completed and
reported with the statement of cash flows prepared using the direct method.
B. A reconciliation of net income to net cash provided or used by operating activities.
C. Footnotes to the financial statements disclosing the difference between net income and the
cash provided or used by financing activities.
D. The income statement to be prepared under the cash basis of accounting.
E. Noncash investing and financing activities be included in the statement of cash flows.
118. All of the following statements related to reporting cash flows from operating activities
under U.S. GAAP and IFRS are true except:
A. The definition of cash and cash equivalents is similar for U.S. GAAP and IFRS.
B. U.S. GAAP requires cash flows from interest revenue and dividend revenue be classified
as operating activities.
C. IFRS permits classification of interest revenue and dividend revenue under operating or
investing activities.
D. U. S. GAAP requires cash outflows for interest expense to be classified as financing
activities.
E. IFRS permits classification of interest expense under operating or financing activities.
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119. All of the following statements related to preparation of the statement of cash flows
under U.S. GAAP and IFRS are true except:
A. Both U.S. GAAP and IFRS permit the reporting of cash flows from operating activities
using either the direct or indirect method.
B. IFRS permits classification of cash outflows for interest expense under operating or
financing depending on which one results in better cash flows from operating activities.
C. U. S. GAAP requires cash outflows for income tax be classified as operating activities.
D. IFRS permits the splitting of income tax cash flows among operating, investing, and
financing depending on the sources of that tax.
E. IFRS permits classification of interest expense under operating or financing activities
provided it is consistently applied across periods.
120. Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment
costing $140,000 was sold for its book value in Year 2. The following selected information is
available for Sebring Company from its comparative balance sheet. Compute the cash
received from the sale of the equipment.
At December 31 Year 2 Year 1
Equipment $610,000 $750,000
Accumulated Depreciation-Equipment 428,000 500,000
A. $72,000.
B. $68,000.
C. $28,000.
D. $40,000.
E. $36,000.
121. Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment
costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is
available for Sebring Company from its comparative balance sheet. Compute the cash
received from the sale of the equipment.
At December 31 Year 2 Year 1
Equipment $610,000 $750,000
Accumulated Depreciation-Equipment 428,000 500,000
A. $23,000.
B. $33,000.
C. $28,000.
D. $40,000.
E. $68,000.
122. Sebring Company reports depreciation expense of $40,000 for Year 2. Also, equipment
costing $140,000 was sold for a $10,000 loss in Year 2. The following selected information is
available for Sebring Company from its comparative balance sheet. Compute the cash
received from the sale of the equipment.
At December 31 Year 2 Year 1
Equipment $610,000 $750,000
Accumulated Depreciation-Equipment 428,000 500,000
A. $62,000.
B. $38,000.
C. $28,000.
D. $18,000.
E. $58,000.
123. Beewell’s net income for the year ended December 31, Year 2 was $185,000.
Information from Beewell’s comparative balance sheets is given below. Compute the cash
received from the sale of its common stock during Year 2.
At December 31 Year 2 Year 1
Common Stock, $5 par value $500,000 $450,000
Paid-in capital in excess of par 948,000 853,000
Retained earnings 688,000 582,000
A. $185,000.
B. $106,000.
C. $95,000.
D. $50,000.
E. $145,000.
124. Beewell’s net income for the year ended December 31, Year 2 was $185,000.
Information from Beewell’s comparative balance sheets is given below. Compute the cash
paid for dividends during Year 2.
At December 31 Year 2 Year 1
Common Stock, $5 par value $500,000 $450,000
Paid-in capital in excess of par 948,000 853,000
Retained earnings 688,000 582,000
A. $79,000.
B. $106,000.
C. $95,000.
D. $50,000.
E. $145,000.
125. Trenton reports net income of $230,000 for the year ended December 31, Year 2. It also
reports $87,700 depreciation expense and a $5,000 gain on the sale of equipment. Its
comparative balance sheet reveals a $35,500 decrease in accounts receivable, a $15,750
increase in accounts payable, and a $12,500 decrease in wages payable. Calculate the new
cash provided (used) in operating activities using the indirect method.
A. $376,450.
B. $351,450.
C. $356,450.
D. $319,950.
E. $263,750.
126. Castine reports net income of $305,000 for the year ended December 31, Year 2. It also
reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its
comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200
decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in
wages payable, and a $100,000 decrease in notes payable. Calculate the new cash provided
(used) in operating activities using the indirect method.
A. $461,800.
B. $371,400.
C. $381,400.
D. $351,000.
E. $361,000.
127. Castine reports net income of $305,000 for the year ended December 31, Year 2. It also
reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its
comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200
decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in
wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable.
Calculate the increase in cash for Year 2.
A. $216,400.
B. $281,400.
C. $381,400.
D. $206,400.
E. $406,400.
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128. Woodlawn Company is preparing the company's statement of cash flows for the fiscal
year just ended. The following information is available:
Retained earnings balance at the beginning of the year $233,000
Cash dividends declared for the year $ 50,000
Proceeds from the sale of equipment $ 85,000
Gain on the sale of equipment $ 4,500
Cash dividends payable at the beginning of the year $ 22,000
Cash dividends payable at the end of the year $ 30,000
Net income for the year $110,000
The ending balance in retained earnings is:
A. $343,000.
B. $213,000.
C. $293,000.
D. $297,500.
E. $301,000.
129. Woodlawn Company is preparing the company's statement of cash flows for the fiscal
year just ended. The following information is available:
Retained earnings balance at the beginning of the year $233,000
Cash dividends declared for the year $ 50,000
Proceeds from the sale of equipment $ 85,000
Gain on the sale of equipment $ 4,500
Cash dividends payable at the beginning of the year $ 22,000
Cash dividends payable at the end of the year $ 30,000
Net income for the year $110,000
The amount of cash paid for dividends was:
A. $52,000.
B. $60,000.
C. $58,000.
D. $50,000.
E. $42,000.
130. Weston is preparing the company's statement of cash flows for the fiscal year just ended.
Using the following information, determine the amount of cash flows from operating
activities using the indirect method:
Net income $182,000
Gain on the sale of equipment 12,300
Proceeds from the sale of equipment 92,300
Depreciation expense - equipment 50,000
Payment of bonds at maturity 100,000
Purchase of land 200,000
Issuance of common stock 300,000
Increase in merchandise inventory 35,400
Decrease in accounts receivable 28,800
Increase in accounts payable 23,700
Payment of cash dividends 32,000
A. $332,200.
B. $236,800.
C. $261,400.
D. $186,800.
E. $189,400.
1. Weston is preparing the company's statement of cash flows for the fiscal year just ended.
Using the following information, determine the amount of cash flows from investing
activities:
Net income $182,000
Gain on the sale of equipment 12,300
Proceeds from the sale of equipment 92,300
Depreciation expense - equipment 50,000
Payment of bonds at maturity 100,000
Purchase of land 200,000
Issuance of common stock 300,000
Increase in merchandise inventory 35,400
Decrease in accounts receivable 28,800
Increase in accounts payable 23,700
Payment of cash dividends 32,000
A. $(107,700).
B. $107,700.
C. $(200,000).
D. $(139,700).
E. $(207,700).
132. Weston is preparing the company's statement of cash flows for the fiscal year just ended.
Using the following information, determine the amount of cash flows from financing
activities:
Net income $182,000
Gain on the sale of equipment 12,300
Proceeds from the sale of equipment 92,300
Depreciation expense - equipment 50,000
Payment of bonds at maturity 100,000
Purchase of land 200,000
Issuance of common stock 300,000
Increase in merchandise inventory 35,400
Decrease in accounts receivable 28,800
Increase in accounts payable 23,700
Payment of cash dividends 32,000
A. $(168,000).
B. $200,000.
C. $168,000.
D. $(191,700).
E. $191,700.
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133. A company had average total assets of $2,316,000, total cash flows of $1,320,000, cash
flows from operations of $455,000, and cash flows for plant assets of $850,000. The cash
flow on total assets ratio equals:
A. 17.33%.
B. 20.97%.
C. 53.53%.
D. 34.47%.
E. 19.65%.
134. Match each of the following items with the appropriate definitions.
(A) Indirect method
(B) Operating activities
(C) Statement of cash flows
(D) Financing activities
(E) Direct method
(F) Investing activities
__________ (1) A calculation that reports net income and then adjusts the net income amount
by adding and subtracting items that are necessary to yield net cash provided (used) by
operating activities.
__________ (2) A financial statement that reports the cash inflows and cash outflows for an
accounting period, and classifies those cash flows as operating, investing, or financing
activities.
__________ (3) A calculation of the net cash provided (used) by operating activities that lists
the major items of operating cash receipts, and then subtracts the major items of operating
cash payments.
__________ (4) Transactions that include making and collecting notes receivable or
purchasing and selling plant assets, or investments in other than cash equivalents and trading
securities.
__________ (5) Transactions with a company's owners and creditors that include obtaining
cash from issuing debt and repaying the amounts borrowed, and obtaining cash from or
distributing cash to owners.
__________ (6) Activities that involve the production or purchase of merchandise and the
sale of goods or services to customers, including expenditures related to administering the
business.
135. For each of the following items, indicate whether it would be classified as an (O)
operating activity, an (I) investing activity, a (F) financing activity, or a significant (N)
noncash financing and investing activity.
__________ (1) Received cash dividends from investments in trading securities.
__________ (2) Collected accounts receivable from customers.
__________ (3) Issued bonds payable for cash.
__________ (4) Paid wages to employees.
__________ (5) Issued stock for cash.
__________ (6) Sold equipment for cash.
__________ (7) Purchased land in exchange for a note payable.
__________ (8) Paid cash dividends.
__________ (9) Received interest from investments in trading securities.
_________ (10) Purchases of land for cash.
136. For each of the following items, indicate whether it would be classified as either an (O)
operating activity, an (I) investing activity, a (F) financial activity, or a significant (N)
noncash financing and investing activity.
__________ (1) Cash sales of merchandise.
__________ (2) Sale of land for cash.
__________ (3) Signed a note payable in exchange for cash.
__________ (4) Purchased supplies for cash.
__________ (5) Paid cash to settle an account payable.
__________ (6) Purchased a warehouse in exchange for shares of its stock.
__________ (7) Paid interest on a note payable.
__________ (8) Reissued treasury stock.
__________ (9) Purchased equipment for cash.
_________ (10) Purchased equipment in exchange for a 6-month note payable.
137. Explain the purpose and format of the statement of cash flows. Also describe its
relevance to decision makers.
138. Define and discuss the differences between operating, investing, and financing
activities.
139. Define and explain significant noncash investing and financing activities and the method
of reporting them on the statement of cash flows.
