Name:
Class:
Date:
Indicate whether the statement is true or false.
1. If cash dividends of $135,000 were paid during the year and the company sold 1,000 shares of common stock at $30 per
share, the statement of cash flows would report net cash flows from financing activities as $165,000.
a.
True
b.
False
2. Cash paid to acquire treasury stock should be shown on the statement of cash flows under investing activities.
a.
True
b.
False
3. There is no difference in the investing and financing sections of the statement of cash flows using the indirect and direct
methods.
a.
True
b.
False
4. Purchasing equipment by issuing a 6-month note should be shown on the statement of cash flows under the investing
activities section.
a.
True
b.
False
5. Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the sale of
land.
a.
True
b.
False
6. The declaration and issuance of a stock dividend would be reported on the statement of cash flows.
a.
True
b.
False
7. If 800 shares of $40 par common stock are sold for $43,000, the $43,000 would be reported in the financing activities
section of the statement of cash flows.
a.
True
b.
False
8. Free cash flow is net cash flows from investing activities less cash used to purchase fixed assets needed to maintain
current productive capacity.
a.
True
b.
False
9. To determine cash paid for operating expenses for the statement of cash flows using the direct method, a decrease in
prepaid expenses is added to operating expenses other than depreciation.
a.
True
b.
False
10. To determine cash paid for income taxes for the statement of cash flows using the direct method, an increase in
income taxes payable is added to the income tax expense.
Name:
Class:
Date:
a.
True
b.
False
11. In preparing the operating activities section of the statement of cash flows by the indirect method, the net decrease in
inventories from the beginning to the end of the period is added to net income for the period.
a.
True
b.
False
12. Cash flows from financing activities, as part of the statement of cash flows, would include any payments for
dividends.
a.
True
b.
False
13. Cash flows from investing activities, as part of the statement of cash flows, include payments for the acquisition of
fixed assets.
a.
True
b.
False
14. A cash flow per share amount should be reported on the statement of cash flows.
a.
True
b.
False
15. Net income for the year was $29,500. Accounts receivable increased $2,500, and accounts payable increased $5,400.
There were no other changes in noncash current assets and liabilities. Under the indirect method, the net cash flows from
operations is $32,400.
a.
True
b.
False
16. Cash flows from investing activities, as part of the statement of cash flows, would include any receipts from the
issuance of bonds payable.
a.
True
b.
False
17. If a business issued bonds payable in exchange for land, the transaction would be reported in a separate section of the
statement of cash flows.
a.
True
b.
False
18. Under the indirect method, expenses that do not affect cash are added to net income in the operating activities section
of the statement of cash flows.
a.
True
b.
False
19. In preparing the operating activities section of the statement of cash flows by the indirect method, the amortization of
bond discount for the period is deducted from the net income for the period.
a.
True
b.
False
Name:
Class:
Date:
20. The statement of cash flows is an optional financial statement.
a.
True
b.
False
21. Cash flows from operating activities, as part of the statement of cash flows, include cash transactions that enter into
the determination of net income.
a.
True
b.
False
22. A building with a cost of $153,000 and accumulated depreciation of $42,000 was sold for an $11,000 gain. When
using the indirect method, the cash generated from this investing activity is $121,000.
a.
True
b.
False
23. The statement of cash flows shows the effects on cash of a company’s operating, investing, and financing activities.
a.
True
b.
False
24. In preparing the operating activities section of the statement of cash flows by the indirect method, the depreciation
expense for the period is added to the net income for the period.
a.
True
b.
False
25. Under the direct method of preparing a statement of cash flows, the gain on the sale of land is not adjusted or reported
as part of cash flows from operating activities.
a.
True
b.
False
26. When using the spreadsheet (work sheet) method to prepare the statement of cash flows, the Balance columns should
total to zero.
a.
True
b.
False
27. If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in the
operating activities section of the statement of cash flows (prepared by the indirect method).
a.
True
b.
False
28. The main disadvantage of the direct method of reporting cash flows from operating activities is that the necessary data
are often costly to accumulate.
a.
True
b.
False
29. Cash outflows from financing activities include the payment of cash dividends, the acquisition of treasury stock, and
the repayment of amounts borrowed.
a.
True
Name:
Class:
Date:
b.
False
30. Cash inflows and outflows are not netted in the investing or financing sections of the statement of cash flows but are
separately disclosed to give the reader full information.
a.
True
b.
False
31. To determine cash paid for operating expenses for the statement of cash flows using the direct method, a decrease in
accrued expenses payable is added to operating expenses other than depreciation.
a.
True
b.
False
32. Sales reported on the income statement were $372,000. The accounts receivable balance declined $4,500 over the
year. The amount of cash received from customers was $367,500.
a.
True
b.
False
33. Cash flows from investing activities, as part of the statement of cash flows, would include any payments for the
purchase of treasury stock.
a.
True
b.
False
34. The manner of reporting cash flows from investing and financing activities will be different under the direct method as
compared to the indirect method.
a.
True
b.
False
35. The statement of cash flows reports a firm’s major sources of cash receipts and major uses of cash for a period of time.
a.
True
b.
False
36. The acquisition of land in exchange for common stock is an example of a noncash investing and financing activity.
a.
True
b.
False
37. Cash, as the term is used for the statement of cash flows, could indicate either cash or cash equivalents.
a.
True
b.
False
38. To determine cash paid for merchandise for the statement of cash flows using the direct method, a decrease in
accounts payable is added to the cost of merchandise sold.
a.
True
b.
False
39. If $475,000 of bonds payable are sold at 101, $475,000 would be reported in the financing activities section of the
statement of cash flows.
a.
True
Name:
Class:
Date:
b.
False
40. Free cash flow measures the operating cash flow available to a company after it purchases the property, plant, and
equipment (PP&E) necessary to maintain its current operations.
a.
True
b.
False
41. Under the direct method of reporting cash flows from operating activities, the primary source of cash is cash received
from customers.
a.
True
b.
False
42. To arrive at net cash flows from operating activities using the indirect method, it is necessary to convert the income
statement from an accrual basis to the cash basis of accounting.
a.
True
b.
False
43. In preparing the statement of cash flows, the correct order of reporting cash activities is financing, operating, and
investing.
a.
True
b.
False
44. The direct method of preparing the operating activities section of the statement of cash flows reports major classes of
cash receipts and cash payments related to the day-to-day operations of the business.
a.
True
b.
False
45. There are two alternatives for reporting cash flows from operating activities on the statement of cash flows: (1) the
direct method and (2) the indirect method.
a.
True
b.
False
46. Using the indirect method, if land costing $85,000 was sold for $145,000, the amount reported in the financing
activities section of the statement of cash flows would be $85,000.
a.
True
b.
False
47. When using the spreadsheet (work sheet) method to prepare the statement of cash flows, no order of analysis is
required, but it is more efficient to start with Retained Earnings and proceed upward in the account listing.
a.
True
b.
False
48. Net income was $51,000 for the year. The accumulated depreciation balance increased by $14,000 over the
year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the
net cash flows from operations is $37,000.
a.
True
b.
False
Name:
Class:
Date:
49. The statement of cash flows is not one of the basic financial statements.
a.
True
b.
False
50. Rarely will the cash flows from operating activities, as reported on the statement of cash flows, be the same as the net
income reported on the income statement.
a.
True
b.
False
51. Repayments of bonds would be shown as a cash outflow in the investing section of the statement of cash flows.
a.
True
b.
False
52. A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference
between the net amount of cash flows from operating activities and net income is emphasized.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
53. The statement of cash flows is not useful for
a.
planning future investing and financing activities
b.
determining a company’s ability to pay its debts
c.
determining a company’s ability to pay dividends
d.
computing the net worth of a company
54. Which of the following types of transactions would be reported as a cash flows from (used for) investing activity on
the statement of cash flows?
a.
issuance of bonds payable
b.
issuance of capital stock
c.
purchase of treasury stock
d.
purchase of noncurrent assets
55. A 10-year bond was issued at face value for $250,000 cash. This transaction should be shown on a statement of cash
flows under
a.
investing activities
b.
financing activities
c.
noncash investing and financing activities
d.
operating activities
56. Preferred stock issued in exchange for land would be reported on the statement of cash flows in
a.
the Cash Flows from (used for) Financing Activities section
b.
the Cash Flows from (used for) Investing Activities section
c.
a separate section of noncash investing and financing activities, usually at the bottom of the statement
Name:
Class:
Date:
d.
the Cash Flows from (used for) Operating Activities section
57. A corporation uses the indirect method of preparing the statement of cash flows. A fixed asset has been sold for
$25,000, representing a gain of $4,500. The value of this transaction appearing in the operating activities section of the
statement of cash flows is
a.
$25,000
b.
$(4,500)
c.
$29,500
d.
$4,500
58. Land costing $71,000 was sold for $50,000 cash. The loss on the sale was reported on the income statement as other
expense. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?
a.
$50,000
b.
$71,000
c.
$121,000
d.
$21,000
59. The beginning and ending balances of Accounts Receivable for the year are $40,000 and $32,000, respectively.
Income reported on the income statement for the year is $110,000. Exclusive of the effect of other adjustments, the net
cash flows from operating activities to be reported on the statement of cash flows using the indirect method is
a.
$118,000
b.
$110,000
c.
$102,000
d.
$150,000
60. On the statement of cash flows, the financing activities section would include
a.
receipts from the sale of investments
b.
payments for the acquisition of investments
c.
receipts from a note receivable
d.
receipts from the issuance of capital stock
61. Free cash flow is a measure of the operating cash flow available to a company after it
a.
purchases the PP&E needed to maintain current production
b.
pays dividends and redeems bonds payable
c.
invests in the PP&E needed to achieve desired future productive capacity
d.
invests in needed fixed assets and redeems bonds payable
62. Depreciation on factory equipment would be reported on the statement of cash flows prepared by the indirect method
in
a.
the Cash Flows from (used for) Financing Activities section
b.
the Cash Flows from (used for) Investing Activities section
c.
a separate section of noncash investing and financing activities
d.
the Cash Flows from (used for) Operating Activities section
63. On the statement of cash flows, the operating activities section would include
Name:
Class:
Date:
a.
cash received from the issuance of common stock
b.
cash paid for interest on short-term notes payable
c.
cash paid for the purchase of investments
d.
cash paid for cash dividends
64. Income tax expense was $175,000 for the year. Income taxes payable was $30,000 and $40,000 at the beginning and
end of the year, respectively. Cash paid for income taxes reported on the statement of cash flows using the direct method
is
a.
$175,000
b.
$165,000
c.
$205,000
d.
$215,000
65. The order of presentation of activities on the statement of cash flows is
a.
operating, investing, and financing
b.
operating, financing, and investing
c.
financing, operating, and investing
d.
financing, investing, and operating
66. Which of the following can be found on the statement of cash flows?
a.
cash flows from operating activities
b.
total assets
c.
total changes in stockholders’ equity
d.
changes in retained earnings
67. Cash dividends of $50,000 were declared during the year. Cash dividends payable were $10,000 and $5,000 at the
beginning and end of the year, respectively. The amount of cash paid for dividends during the year is
a.
$55,000
b.
$50,000
c.
$65,000
d.
$60,000
68. Firefly Inc. sold land for $225,000 cash. The land had been purchased 5 years earlier for $275,000. The loss on the
sale was reported on the income statement. On the statement of cash flows, what amount should Firefly report as an
investing activity from the sale of the land?
a.
$225,000
b.
$275,000
c.
$50,000
d.
$500,000
69. Which of the following would not be on the statement of cash flows?
a.
cash flows from investing activities
b.
cash flows from financing activities
c.
cash flows from operating activities
d.
cash flows from contingent activities
Name:
Class:
Date:
70. Cash paid for preferred stock dividends should be shown on the statement of cash flows under
a.
investing activities
b.
financing activities
c.
noncash investing and financing activities
d.
operating activities
71. Which of the following should be deducted from net income in computing the net cash flows from operating activities
using the indirect method?
a.
depreciation expense
b.
gain on sale of land
c.
a loss on the sale of equipment
d.
dividends declared and paid
72. The cost of merchandise sold during the year was $50,000. Merchandise inventories were $12,500 and $10,500 at the
beginning and end of the year, respectively. Accounts payable were $6,000 and $5,000 at the beginning and end of the
year, respectively. Using the direct method of reporting cash flows from operating activities, cash paid for merchandise
during the year is
a.
$49,000
b.
$47,000
c.
$51,000
d.
$53,000
Use the information provided for Washington Company to answer the questions that follow.
The following selected account balances appear on the financial statements of Washington Company:
Accounts Receivable, January 1
$13,000
Accounts Receivable, December 31
9,000
Accounts Payable, January 1
4,000
Accounts Payable, December 31
7,000
Merchandise Inventory, January 1
10,000
Merchandise Inventory, December 31
15,000
Sales
56,000
Cost of Merchandise Sold
31,000
Washington Company uses the direct method to determine net cash flows from operating activities.
73. Cash received from customers during the year is
a.
$56,000
b.
$52,000
c.
$60,000
d.
$45,000
74. 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
Name:
Class:
Date:
c.
expenses on an accrual basis are the same as expenses on a cash basis
d.
expenses on an accrual basis are greater than expenses on a cash basis
75. Which of the following represents an inflow of cash and therefore would be reported on the statement of cash flows?
a.
retirement of bond payable
b.
acquisition of treasury stock
c.
declaration of stock dividends
d.
issuance of long-term debt
76. When using the spreadsheet (work sheet) method to prepare the statement of cash flows using the indirect method,
entries made on the spreadsheet are
a.
not recorded in the journal or posted to the ledger
b.
recorded in the journal and posted to the ledger
c.
recorded in the journal but not posted to the ledger
d.
not recorded in the journal but are posted to the ledger
77. A business issues 20-year bonds payable in exchange for preferred stock. This transaction would be reported on the
statement of cash flows in
a.
a separate section of noncash investing and financing activities at the bottom of the statement
b.
the Cash Flows from (used for) Financing Activities section
c.
the Cash Flows from (used for) Investing Activities section
d.
the Cash Flows from (used for) Operating Activities section
78. The beginning and ending balances of Accounts Receivable for the year are $40,000 and $31,000, respectively.
Income reported on the income statement for the year is $120,000. Exclusive of the effect of other adjustments, the net
cash flows from operating activities to be reported on the statement of cash flows using the indirect method is
a.
$120,000
b.
$129,000
c.
$151,000
d.
$111,000
79. Norris Company declared cash dividends of $60,000 during the year. Cash dividends payable were $20,000 at the
beginning of the year and $25,000 at the end of the year. The amount of cash paid for dividends during the year is
a.
$55,000
b.
$80,000
c.
$105,000
d.
$65,000
80. Financing activities include
a.
lending money
b.
acquiring investments
c.
issuing debt
d.
acquiring long-lived assets
81. Which of the following should be added to net income in computing net cash flows from operating activities using the
Name:
Class:
Date:
indirect method?
a.
depreciation expense
b.
an increase in inventory
c.
a gain on the sale of equipment
d.
dividends declared and paid
82. The following information is available from the current period financial statements:
Net income
$175,000
Depreciation expense
28,000
Increase in accounts receivable
16,000
Decrease in accounts payable
(21,000)
The net cash flows from operating activities using the indirect method is
a.
$166,000
b.
$184,000
c.
$110,000
d.
$240,000
83. Zenith Corporation sells some of its used store fixtures for $5,300. The acquisition cost of the fixtures is $12,500, and
the accumulated depreciation on these fixtures is $9,750. The value of this transaction appearing in the investing section
of the statement of cash flows is
a.
$12,500
b.
$5,300
c.
$2,750
d.
$2,550
84. Sales for the year were $600,000. Accounts receivable were $100,000 and $80,000 at the beginning and end of the
year, respectively. Cash received from customers to be reported on the statement of cash flows using the direct method is
a.
$700,000
b.
$600,000
c.
$580,000
d.
$620,000
85. The last item on the statement of cash flows prior to the schedule of noncash investing and financing activities reports
a.
the net increase or decrease in cash
b.
cash at the end of the period
c.
net cash flows from investing activities
d.
net cash flows from financing activities
86. The current period statement of cash flows includes the following:
Cash balance at the beginning of the period
$310,000
Net cash flows from operating activities
185,000
Net cash flows used for investing activities
(43,000)
Net cash flows used for financing activities
(97,000)
The cash balance at the end of the period is
Name:
Class:
Date:
a.
$45,000
b.
$635,000
c.
$355,000
d.
$125,000
87. Which of the following should be added to net income in computing net cash flows from operating activities using the
indirect method?
a.
a gain on the sale of land
b.
a decrease in accounts payable
c.
an increase in accrued liabilities
d.
dividends paid on common stock
88. Which of the following increases cash?
a.
depreciation expense
b.
acquisition of treasury stock
c.
borrowing money by issuing a 6-month note
d.
the declaration of a cash dividend
89. The following information is available from the current period financial statements:
Net income
$165,000
Depreciation expense
28,000
Increase in accounts receivable
16,000
Decrease in accounts payable
21,000
The net cash flows from operating activities using the indirect method is
a.
$230,000
b.
$188,000
c.
$198,000
d.
$156,000
90. If a gain of $11,000 is realized in selling (for cash) office equipment having a book value of $55,000, the total amount
reported in the investing activities section of the statement of cash flows is
a.
$44,000
b.
$11,000
c.
$55,000
d.
$66,000
Use the information provided for Washington Company to answer the questions that follow.
The following selected account balances appear on the financial statements of Washington Company:
Accounts Receivable, January 1
$13,000
Accounts Receivable, December 31
9,000
Accounts Payable, January 1
4,000
Accounts Payable, December 31
7,000
Merchandise Inventory, January 1
10,000
Merchandise Inventory, December 31
15,000
Name:
Class:
Date:
Sales
56,000
Cost of Merchandise Sold
31,000
Washington Company uses the direct method to determine net cash flows from operating activities.
91. Cash paid for merchandise during the year is
a.
$39,000
b.
$33,000
c.
$29,000
d.
$23,000
92. Cash flow per share is
a.
required to be reported on the balance sheet
b.
required to be reported on the income statement
c.
required to be reported on the statement of cash flows
d.
not required to be reported on any statement
93. Which of the following does not represent an outflow of cash and therefore would not be reported on the statement of
cash flows as a use of cash?
a.
purchase of noncurrent assets
b.
purchase of treasury stock
c.
discarding an asset that had been fully depreciated
d.
payment of cash dividends
94. Which of the following is not one of the four basic financial statements?
a.
balance sheet
b.
statement of cash flows
c.
statement of changes in financial position
d.
income statement
95. The net income reported on the income statement for the current year was $250,000. Depreciation recorded on fixed
assets and amortization of patents for the year were $40,000, and $9,000, respectively. Balances of current asset and
current liability accounts at the end and at the beginning of the year are as follows:
End
Beginning
Cash
$ 50,000
$ 60,000
Accounts Receivable
112,000
108,000
Inventories
105,000
93,000
Prepaid Expenses
4,500
6,500
Accounts Payable (merchandise creditors)
75,000
89,000
What is the amount of net cash flows from operating activities reported on the statement of cash flows prepared by the
indirect method?
a.
$271,000
b.
$279,000
c.
$327,000
d.
$256,000
Name:
Class:
Date:
96. The operating cash flow available for a company to use after purchasing the fixed assets that are necessary to maintain
current productive capacity is called the
a.
free cash flow
b.
modified cash flow
c.
PPE cash flow
d.
restricted cash flow
97. Which of the following would not be classified as an operating activity?
a.
interest expense
b.
income taxes
c.
payment of dividends
d.
selling expenses
98. A company had net income of $252,000. Depreciation expense was $26,000. During the year, accounts receivable and
merchandise inventory increased by $15,000 and $40,000, respectively. Prepaid expenses and accounts payable decreased
by $2,000 and $4,000, respectively. There was also a loss on the sale of equipment of $3,000. How much was the net cash
flows from operating activities on the statement of cash flows using the indirect method?
a.
$217,000
b.
$224,000
c.
$284,000
d.
$305,000
99. Which of the following should be shown on a statement of cash flows under the financing activities section?
a.
the purchase of a long-term investment in the common stock of another company
b.
the payment of cash to retire a long-term note
c.
the proceeds from the sale of a building
d.
the issuance of a long-term note to acquire land
100. Free cash flow is
a.
all cash in the bank
b.
cash from operations
c.
the net cash flows from financing activities less the cash used to purchase fixed assets and pay dividends
d.
the net cash flows from operating activities less the cash used to purchase the fixed assets necessary to
maintain current operations
101. A company purchases equipment for $32,000 cash. This transaction should be shown on the statement of cash flows
under
a.
investing activities
b.
financing activities
c.
noncash investing and financing activities
d.
operating activities
102. Equipment with an original cost of $75,000 and accumulated depreciation of $20,000 was sold at a loss of $7,000. As
a result of this transaction, cash would
Name:
Class:
Date:
a.
increase by $48,000
b.
decrease by $7,000
c.
increase by $55,000
d.
decrease by $27,000
103. Cash dividends paid on common stock would be reported on the statement of cash flows in
a.
the Cash Flows from (used for) Financing Activities section
b.
the Cash Flows from (used for) Investing Activities section
c.
a separate section of noncash investing and financing activities
d.
the Cash Flows from (used for) Operating Activities section
104. In computing net 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.
reported supplementally as a noncash investing and financing activity
105. Changes in current assets and current liabilities are reported on the statement of cash flows, using the indirect
method, in the
a.
operating activities section
b.
financing activities section
c.
investing activities section
d.
separate section of noncash investing and financing activities
106. Accounts receivable from sales transactions were $51,000 at the beginning of the year and $64,000 at the end of the
year. Net income reported on the income statement for the year was $105,000. Exclusive of the effect of other
adjustments, the net cash flows from operating activities to be reported on the statement of cash flows prepared by the
indirect method would be
a.
$105,000
b.
$118,000
c.
$92,000
d.
$169,000
107. On the statement of cash flows, the investing activities section would include
a.
cash received from the issuance of capital stock
b.
cash paid for dividends
c.
cash paid for retirement of bonds payable
d.
cash received from the sale of investments
108. Which of the following should be deducted from net income in computing net cash flows from operating activities
using the indirect method?
a.
a decrease in inventory
b.
a decrease in accounts payable
c.
preferred dividends declared and paid
d.
a decrease in accounts receivable
Name:
Class:
Date:
109. Which of the following would not be found in a schedule of noncash investing and financing activities reported at
the bottom of a statement of cash flows?
a.
equipment acquired in exchange for a note payable
b.
bonds payable exchanged for capital stock
c.
purchase of treasury stock for cash
d.
capital stock issued to acquire fixed assets
110. The cost of merchandise sold during the year was $45,000. Merchandise inventories were $13,500 and $10,500 at the
beginning and end of the year, respectively. Accounts payable were $7,000 and $5,000 at the beginning and end of the
year, respectively. Using the direct method of reporting cash flows from operating activities, cash paid for merchandise
during the year is
a.
$46,000
b.
$44,000
c.
$50,000
d.
$40,000
111. Which of the following is a noncash investing and financing activity?
a.
payment of a cash dividend
b.
payment of a 6-month note payable
c.
purchase of merchandise inventory on account
d.
issuance of common stock to acquire land
112. A building with a book value of $54,000 is sold for $63,000 cash. Using the indirect method, this transaction should
be shown on the statement of cash flows as an increase of
a.
$54,000 from investing activities
b.
$63,000 from investing activities and a deduction from net income of $9,000
c.
$9,000 from investing activities
d.
$54,000 from investing activities and an addition to net income of $9,000
113. Rogers Company reported net income of $35,000 for the year. During the year, accounts receivable increased by
$7,000, accounts payable decreased by $3,000, and depreciation expense of $8,000 was recorded. Net cash flows from
operating activities under the indirect method for the year is
a.
$53,000
b.
$47,000
c.
$33,000
d.
$37,000
114. Cash paid for equipment would be reported on the statement of cash flows in
a.
the Cash Flows from (used for) Operating Activities section
b.
the Cash Flows from (used for) Financing Activities section
c.
the Cash Flows from (used for) Investing Activities section
d.
a separate section of noncash investing and financing activities
115. On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be
Name:
Class:
Date:
a.
deducted from net income in converting the net income reported on the income statement to net cash flows
from operating activities
b.
added to net income in converting the net income reported on the income statement to net cash flows from
operating activities
c.
added to dividends declared in converting the dividends declared to the net cash flows from financing
activities related to dividends
d.
deducted from dividends declared in converting the dividends declared to the net cash flows from financing
activities related to dividends
116. On the statement of cash flows, the financing activities section would include all of the following except
a.
cash received from the sale of bonds payable
b.
cash paid for dividends
c.
cash paid for the purchase of treasury stock
d.
cash paid for the interest on bonds payable
117. The net income reported on the income statement for the current year was $275,000. Depreciation recorded on fixed
assets and amortization of patents for the year were $40,000 and $9,000, respectively. Balances of current asset and
current liability accounts at the end and at the beginning of the year are as follows:
End
Beginning
Cash
$ 50,000
$ 60,000
Accounts Receivable
112,000
108,000
Inventories
105,000
93,000
Prepaid Expenses
4,500
6,500
Accounts Payable (merchandise creditors)
75,000
89,000
What is the amount of the net cash flows from operating activities reported on the statement of cash flows prepared by the
indirect method?
a.
$198,000
b.
$324,000
c.
$352,000
d.
$296,000
118. Cash paid to purchase long-term investments would be reported on the statement of cash flows in
a.
the Cash Flows from (used for) Operating Activities section
b.
the Cash Flows from (used for) Financing Activities section
c.
the Cash Flows from (used for) Investing Activities section
d.
a separate section of noncash investing and financing activities
119. Net income for the year was $45,500. Accounts receivable increased by $5,500, and accounts payable increased by
$11,200. Under the indirect method, the net cash flows from operating activities is
a.
$51,200
b.
$45,500
c.
$62,200
d.
$28,800
120. On the statement of cash flows prepared by the indirect method, the operating activities section would include
Name:
Class:
Date:
a.
receipts from the sale of investments
b.
gains or losses on fixed assets
c.
payments for cash dividends
d.
receipts from the issuance of capital stock
121. Baxter Company reported a net loss of $13,000 for the year ended December 31. During the year, accounts
receivable decreased by $5,000, merchandise inventory increased by $8,000, accounts payable increased by $10,000, and
depreciation expense of $4,000 was recorded. During the year, operating activities under the indirect method
a.
provided net cash of $8,000
b.
provided net cash of $2,000
c.
used net cash of $8,000
d.
used net cash of $2,000
122. When using the spreadsheet (work sheet) method to analyze noncash accounts, it is best to start with
a.
Cash
b.
Accounts Receivable
c.
Retained Earnings
d.
Sales
123. Which of the following should be added to net income in computing net cash flows from operating activities using
the indirect method?
a.
an increase in inventory
b.
a decrease in accounts payable
c.
preferred dividends declared and paid
d.
a decrease in accounts receivable
124. When using the spreadsheet (work sheet) method to prepare the statement of cash flows using the indirect method,
the first step is to
a.
list the title of each income statement account in the Accounts column
b.
list the titles of the noncash current asset and current liability accounts in the Accounts column
c.
list the title of each balance sheet account in the Accounts column
d.
analyze the changes in all noncash accounts to determine which ones should be listed in the Accounts column
125. Cash dividends of $45,000 were declared during the year. Cash dividends payable were $10,000 at the beginning of
the year and $15,000 at the end of the year. The amount of cash paid for dividends during the year is
a.
$50,000
b.
$40,000
c.
$55,000
d.
$35,000
126. On the statement of cash flows, the Cash Flows from (used for) Operating Activities section would include
a.
cash received from the issuance of capital stock
b.
cash received from the sale of investments
c.
cash paid for the acquisition of investments
d.
cash received from customers
Name:
Class:
Date:
127. On the statement of cash flows prepared using the indirect method, a $7,500 gain on the sale of fixed assets would be
a.
added to net income in converting the net income reported on the income statement to cash flows from
operating activities
b.
deducted from net income in converting the net income reported on the income statement to cash flows from
operating activities
c.
added to dividends declared in converting the dividends declared to the cash flows from financing activities
related to dividends
d.
deducted from dividends declared in converting the dividends declared to the cash flows from financing
activities related to dividends
128. Land costing $140,000 was sold for $173,000 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.
$173,000
b.
$140,000
c.
$313,000
d.
$33,000
129. Cash received from the issuance of a mortgage note payable would be classified as a(n)
a.
investing activity
b.
operating activity
c.
noncash investing and financing activity
d.
financing activity
Match each of the following items to its treatment (a–c) on the statement of cash flows when determining net cash flows
from operating activities by the indirect method.
a.
Added to net income
b.
Deducted from net income
c.
Not included in the operating activities section
130. Increase in prepaid expenses
131. Amortization of patents
132. Increase in salaries payable
133. Gain on sale of fixed assets
134. Decrease in accounts receivable
135. Increase in notes receivable due in 60 days
136. Amortization of discount on bonds payable
137. Decrease in merchandise inventory
Name:
Class:
Date:
138. Depreciation of fixed assets
139. Loss on retirement of long-term debt
140. Decrease in accounts payable
141. Increase in notes payable due in 30 days
142. Increase in income taxes payable
Match each of the following items to the section (a–d) of the statement of cash flows (indirect method) where it would be
reported. Each section may be used more than once.
a.
Operating activities section
b.
Investing activities section
c.
Financing activities section
d.
Schedule of noncash financing and investing activities
143. Gain on sale of land
144. Payment of dividends
145. Purchase of equipment
146. Net income
147. Issuance of preferred stock
148. Amortization expense
149. Purchase of patents
150. Acquisition of treasury stock
151. Retirement of long-term debt
152. Distribution of stock dividend
153. Sale of fixed assets at book value
154. Increase in inventory
Match each of the following transactions to its effect (a–g) on the statement of cash flows prepared using the indirect
method. Each effect may be used more than once, or not at all.
a.
Increase cash from operating activities
b.
Decrease cash from operating activities
c.
Increase cash from investing activities
d.
Decrease cash from investing activities
e.
Increase cash from financing activities
Name:
Class:
Date:
f.
Decrease cash from financing activities
g.
Disclosed as a noncash investing and financing activity
155. Purchase of equipment
156. Repayment of long-term note payable
157. Amortization of intangible assets
158. Exchange of land for common stock
159. Payment of dividends
160. Sale of land
161. Gain on sale of investments (treatment of the gain only)
162. Acquisition of treasury stock
163. Increase in accounts receivable balance
164. Decrease in accounts payable balance
Match each of the following items to the section (a–d) of the statement of cash flows (indirect method) where it would be
reported. Each section may be used more than once.
a.
Operating activities section
b.
Financing activities section
c.
Investing activities section
d.
Schedule of noncash financing and investing activities
165. Increase in income taxes payable
166. Amortization of patent
167. Sale of machinery held for use by the company
168. Issuance of bond payable
169. Purchase of the stock of another company as an investment
170. Decrease in inventory
171. Exchange of land for note payable
172. Payment of dividends to stockholders
173. Increase in accounts receivable
174. Loss on sale of equipment
Name:
Class:
Date:
Match each of the following transactions to the section and effect (a–g) on the statement of cash flows. Each option may
be used more than once, or not at all.
a.
Investing activities, cash inflow
b.
Investing activities, cash outflow
c.
Financing activities, cash inflow
d.
Financing activities, cash outflow
e.
Operating activities, cash inflow
f.
Operating activities, cash outflow
g.
Schedule of noncash investing and financing activities, NA
175. Paid the weekly payroll
176. Paid an account payable
177. Issued bonds payable for cash
178. Declared and paid a cash dividend
179. Paid cash for a new piece of equipment
180. Purchased treasury stock for cash
181. Paid cash for stock in another company
182. Recorded depreciation
183. Received cash for sales
184. Sold a long-term stock investment for cash at book value
Match each of the following items to the section (a–d) of the statement of cash flows (indirect method) where it would be
reported. Each section may be used more than once, or not at all.
a.
Operating activities section
b.
Investing activities section
c.
Financing activities section
d.
Schedule of noncash financing and investing activities
185. Purchased buildings
186. Sold patent
187. Net income
188. Issued common stock for cash
189. Paid cash dividends
190. Depreciation expense
Name:
Class:
Date:
191. Redeemed bonds
192. Purchased treasury stock
193. Sold long-term investment
194. Sold equipment at book value
195. The board of directors of Kendall Co. declared cash dividends totaling $390,000 during the current year. The
comparative balance sheet indicates dividends payable of $58,000 at the beginning of the year and $73,000 at the end of
the year. What was the amount of cash dividends paid during the year?
196. Selected data for the current year ended December 31 are as follows:
Balance
Balance
December 31
January 1
Accrued expenses (operating expenses)
$29,500
$ 22,000
Accounts payable (merchandise creditors)
90,000
135,000
Inventories
42,500
68,000
Prepaid expenses
23,000
20,000
During the current year, the cost of merchandise sold was $620,000 and the operating expenses other than depreciation
were $142,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash
flows.
Determine the amount reported on the statement of cash flows for (a) cash paid for merchandise and (b) cash paid for
operating expenses.
197. Selected data taken from the accounting records of Laser Inc. for the current year ended December 31 are as follows:
Balance,
December 31
Balance,
January 1
Accrued expenses payable
$ 5,590
$ 6,110
Accounts payable (merchandise creditors)
41,730
46,020
Inventories
77,350
84,110
Prepaid expenses
3,250
3,900
During the current year, the cost of merchandise sold was $448,500, and the operating expenses other than depreciation
were $78,000. The direct method is used for presenting the cash flows from operating activities on the statement of cash
flows.
Determine the amount reported on the statement of cash flows for:
a. Cash paid for merchandise
b. Cash paid for operating expenses
198. Dickinson Company reported net income of $155,000 for the current year. Depreciation recorded on buildings and
equipment amounted to $65,000 for the year. In addition, a building with an original cost of $250,000 and accumulated
depreciation of $190,000 on the date of the sale was sold for $75,000. Balances of the current asset and current liability
accounts at the beginning and end of the year are as follows:
Name:
Class:
Date:
End of Year
Beginning of Year
Cash
$20,000
$15,000
Accounts Receivable
19,000
32,000
Inventories
50,000
65,000
Accounts Payable
12,000
18,000
Prepare the operating activities section of the statement of cash flows, using the indirect method.
199. Condensed comparative balance sheets of Posner Company at December 31, Years 1 and 2, appear as follows:
Year 2
Year 1
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)
Total assets
$ 629,700
$ 542,000
Accounts payable
$ 62,500
$ 43,800
Bonds payable, due Year 2
—
100,000
Common stock, $10 par
335,000
285,000
Paid-in capital in excess of par
70,000
55,000
Retained earnings
162,200
58,200
Total liabilities and stockholders’ equity
$ 629,700
$ 542,000
The income statement for the current year is as follows:
Sales
$625,700
Cost of merchandise sold
340,000
Gross profit
$285,700
Operating expenses:
Depreciation expense
$26,000
Other operating expenses
68,000
94,000
Income from operations
$191,700
Other revenue and expense:
Gain on sale of investment
$ 4,000
Interest expense
(6,000)
(2,000)
Income before income tax
$189,700
Income tax expense
60,700
Net income
$129,000
Additional data for the current year are as follows:
• Fully depreciated equipment costing $60,000 was scrapped, no salvage, and new equipment was purchased for
$183,200.
• Bonds payable for $100,000 were retired by payment at their face amount.
• 5,000 shares of common stock were issued at $13 for cash.
• Cash dividends declared and paid, $25,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
Name:
Class:
Date:
200. Condensed comparative balance sheets for Larson Co. at December 31, Years 1 and 2, appear as follows:
Year 2
Year 1
Cash
$ 100,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
101,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)
Total assets
$ 539,500
$ 465,000
Accounts payable (merchandise creditors)
$ 58,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par
62,000
60,000
Retained earnings
214,000
176,000
Total liabilities and stockholders’ equity
$539,500
$465,000
In addition to the balance sheet data, assume that:
• Equipment costing $125,000 was purchased for cash.
• Equipment costing $85,000 with accumulated depreciation of $65,000 was sold for $15,000.
• The stock was issued for cash.
• The only entries in the retained earnings account were net income of $51,000 and cash dividends declared of
$13,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
201. Condensed comparative balance sheets of Garrett Company at December 31, Years 1 and 2, are as follows:
Year 2
Year 1
Cash
$ 90,000
$ 78,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Equipment
410,000
370,000
Accumulated depreciation
(150,000)
(158,000)
Total assets
$ 534,500
$ 465,000
Accounts payable (merchandise creditors)
$ 53,500
$ 55,000
Cash dividends payable
5,000
4,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par
62,000
60,000
Retained earnings
214,000
176,000
Total liabilities and stockholders’ equity
$534,500
$465,000
In addition, assume that equipment costing $125,000 was purchased for cash, and equipment costing $85,000 with
accumulated depreciation of $65,000 was sold for $15,000; that the stock was issued for cash; and that the only entries in
the retained earnings account were for net income of $56,000 and cash dividends declared of $18,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
202. The board of directors declared cash dividends totaling $168,000 during the year. The comparative balance sheet
indicated dividends payable of $46,000 at the beginning of the year and $42,000 at the end of the year. What was the
Name:
Class:
Date:
amount of cash paid for dividends during the year?
203. Cost of merchandise sold reported on the income statement was $155,000. The accounts payable balance increased
$8,000, and the inventory balance increased by $21,000 over the year. Determine the amount of cash paid for
merchandise.
204. Balances of the current asset and current liability accounts at the end and beginning of the year are as follows:
End
Beginning
Cash
$ 62,000
$73,000
Accounts Receivable (net)
75,000
60,000
Inventories
54,000
47,000
Accounts Payable
(merchandise creditors)
43,000
37,000
Salaries Payable
2,800
3,800
Sales (on account)
210,000
Cost of Merchandise Sold
70,000
Operating Expenses Other Than Depreciation
67,000
Use the direct method to prepare the operating activities section of a statement of cash flows.
205. Condensed comparative balance sheets of ConnieJo Company at December 31, Years 1 and 2, are as follows:
Year 2
Year 1
Cash
$ 45,000
$ 53,500
Accounts receivable (net)
51,300
58,000
Inventories
147,200
135,000
Investments
0
60,000
Equipment
493,000
375,000
Accumulated depreciation—equipment
(113,700)
(128,000)
Total assets
$622,800
$ 553,500
Accounts payable
$ 61,500
$ 42,600
Bonds payable, due Year 4
0
100,000
Common stock, $10 par
250,000
200,000
Paid-in capital in excess of par
75,000
50,000
Retained earnings
236,300
160,900
Total liabilities and stockholders’ equity
$ 622,800
$553,500
The income statement for Year 2 is as follows:
Sales
$623,000
Cost of merchandise sold
348,500
Gross profit
$274,500
Operating expenses:
Depreciation expense
$ 24,700
Other operating expenses
75,300
100,000
Income from operations
$174,500
Other revenue and expense:
Gain on sale of investment
$ 5,000
Interest expense
(12,000)
(7,000)
Income before income tax
$167,500
Income tax expense
64,100
Name:
Class:
Date:
Net income
$103,400
Additional data for the current year are as follows:
• Fully depreciated equipment costing $39,000 was scrapped, no salvage value, and equipment was purchased for
$157,000.
• Bonds payable for $100,000 were retired by payment at their face amount.
• 5,000 shares of common stock were issued at $15 for cash.
• Cash dividends declared and paid, $28,000.
• All sales are on account.
Prepare a statement of cash flows for the year ending December 31, Year 2, using the direct method of reporting cash
flows from operating activities.
206. Sales reported on the income statement were $690,000. The accounts receivable balance declined $39,000 over the
year. Determine the amount of cash received from customers.
207. Kennedy, Inc., reported the following data:
Net income
$118,000
Depreciation expense
15,000
Loss on disposal of equipment
(10,000)
Gain on sale of building
20,000
Increase in accounts receivable
7,000
Decrease in accounts payable
(2,000)
Prepare the operating activities section of the statement of cash flows using the indirect method.
208. Samuel Company’s accumulated depreciation—equipment account increased by $6,000, while patents decreased by
$2,200 between balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year.
In addition, the income statement showed a loss of $3,200 from the sale of investments. Assume no changes in noncash
current assets and liabilities. Samuel Company reported a net income of $92,000. Determine the net cash flows from (used
for) operating activities, using the indirect method.
209. Condensed comparative balance sheets of Branch Company at December 31, Years 1 and 2, are as follows:
Year 2
Year 1
Cash
$ 65,000
$ 54,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Land
—
20,000
Equipment
495,000
370,000
Accumulated depreciation
(215,000)
(158,000)
Total assets
$529,500
$461,000
Accounts payable (merchandise creditors)
$ 53,500
$ 55,000
Common stock, $10 par
200,000
170,000
Paid-in capital in excess of par
62,000
60,000
Retained earnings
214,000
176,000
Total liabilities and stockholders’ equity
$529,500
$461,000
In addition, assume that equipment costing $125,000 was purchased for cash, and the land was sold for $15,000. The
stock was issued for cash, and the only entries in the retained earnings account were for net income of $56,000 and cash
Name:
Class:
Date:
dividends declared and paid of $18,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
210. Durrand Corporation’s accumulated depreciation increased by $12,000, while patents decreased by $2,200 between
consecutive balance sheet dates. There were no purchases or sales of depreciable or intangible assets during the year. In
addition, the income statement showed a gain of $4,300 from sale of land. The company earned a net income of $65,000.
Assuming there were no changes in noncash current assets and liabilities, determine the net cash flows from operating
activities under the indirect method.
211. The net income reported on the income statement for the current year is $210,000. Depreciation recorded on
equipment and a building amount to $62,500 for the year. Balances of the current asset and current liability accounts at
the beginning and end of the year are as follows:
End of Year
Beginning of Year
Cash
$ 56,000
$ 59,500
Accounts Receivable (net)
71,000
73,400
Inventories
140,000
126,500
Prepaid Expenses
7,800
8,400
Accounts Payable (merchandise creditors)
62,600
66,400
Salaries Payable
9,000
8,250
a.
Prepare the operating activities section of the statement of cash flows, using the
indirect method.
b.
If the direct method had been used, would the net cash flows from operating
activities have been the same? Explain.
212. The following two scenarios are independent of one another.
a.
An analysis of the general ledger accounts indicates that office equipment was
sold for $39,600 during the year. The equipment originally cost $68,000 and
had accumulated depreciation of $22,500 on the date of sale. Indicate how the
elements of this transaction would be reported on the statement of cash flows
using the indirect method.
b.
An analysis of the general ledger accounts indicates that delivery equipment,
which cost $97,000 and on which accumulated depreciation totaled $42,100 on
the date of sale, was sold for $57,500 during the year. Using this information,
indicate the items to be reported on the statement of cash flows.
213. Complete each of the columns in the following table, indicating in which section each item would be reported on the
statement of cash flows (operating, investing, or financing), the amount that would be reported, and whether the item
would create an increase or decrease in cash. For items that affect more than one section of the statement, indicate all
affected. Assume that the indirect method of reporting cash flows from operating activities is used.
The first item has been completed as an example.
Item
Statement
Section
Amount
to Report
+/– Effect
on Cash
Depreciation of $15,000 for the period
Operating
$15,000
Increase
Issuance of common stock for $35,000
Increase in accounts payable of $7,000
Retirement of $100,000 bonds payable at 97
Name:
Class:
Date:
Purchase of long-term investments for
$94,500
Dividends declared and paid of $8,300
Increase in prepaid rent of $4,500
Decrease in inventory of $5,300
Purchase of equipment for $17,600 cash
Sale of land originally costing $134,000 for
$130,000
Decrease in taxes payable of $2,100
214. Condensed comparative balance sheets of Breach Company at December 31, Years 1 and 2, are as follows:
Year 2
Year 1
Cash
$ 170,000
$ 74,000
Accounts receivable (net)
78,000
85,000
Inventories
106,500
90,000
Equipment
395,000
370,000
Accumulated depreciation
(195,000)
(158,000)
Total assets
$ 554,500
$ 461,000
Accounts payable (merchandise creditors)
$ 51,000
$ 50,000
Taxes payable
2,500
5,000
Common stock, $10 par
262,000
230,000
Retained earnings
239,000
176,000
Total liabilities and stockholders’ equity
$ 554,500
$ 461,000
In addition, assume:
• Equipment costing $25,000 was purchased for cash and no long-term assets were sold during the period.
• Stock was issued for cash—3,200 shares at par.
• Net income for the current year was $76,000.
• Cash dividends declared and paid were $13,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
215. On the basis of the details of the following common stock account, determine line item(s) for the financing section of
the statement of cash flows.
Common Stock, $10 Par
Balance
Date
Item
Debit
Credit
Debit
Credit
Jan. 1
Balance, 50,000 shares
—
—
—
500,000
Mar. 7
5,000 shares issued at
par for cash
—
50,000
—
550,000
Sept. 20
2,500-share stock
dividend
—
25,000
—
575,000
Dec. 10
2,000 shares issued at
$20 for cash
—
20,000
—
595,000
216. Lamar Corporation purchased land for $150,000. Later in the year, the company sold land with a book value of
$190,000 for $200,000. Show how the effects of these transactions are reported on the statement of cash flows using the
indirect method.
Name:
Class:
Date:
217. The net income reported on the income statement for the current year was $58,000. Depreciation recorded on fixed
assets for the year was $24,000. In addition, equipment with an original cost of $130,000 and accumulated depreciation of
$115,000 on the date of the sale was sold for $20,000. Balances of the current asset and current liability accounts at the
end and beginning of the year are as follows:
End
Beginning
Cash
$65,000
$ 70,000
Accounts Receivable (net)
70,000
63,000
Inventories
85,000
102,000
Prepaid Expenses
4,000
4,500
Accounts Payable (merchandise creditors)
50,000
58,000
Cash Dividends Payable
4,500
6,500
Salaries Payable
6,000
7,500
Prepare the operating activities section of the statement of cash flows, using the indirect method.
218. The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine
the following:
a.
If sales for the current year were $695,000 and accounts receivable decreased
by $43,500 during the year, what was the amount of cash received from
customers?
b.
If income tax expense for the current year was $56,000 and income taxes
payable decreased by $5,200 during the year, what was the amount of cash paid
for income taxes?
219. Based on the following, what is the free cash flow?
Net cash flows from operating activities
$318,000
Net cash flows used for investing activities
(30,000)
Net cash flows used for financing activities
30,000
Cash flows from operations include $2,000 for depreciation. Cash flows from investing include the purchase of a
replacement asset for $100,000 and the sale of the one used in production, which is now obsolete, for $70,000. Cash flows
from financing include $70,000 of borrowing.
220. The net income reported for the current year was $63,000. Depreciation recorded on fixed assets for the year was
$24,000. Balances of the current asset and current liability accounts at the end and beginning of the year are as follows:
End
Beginning
Cash
$65,000
$ 70,000
Accounts Receivable (net)
70,000
57,000
Inventories
86,000
102,000
Prepaid Expenses
4,000
4,500
Accounts Payable (merchandise creditors)
51,000
58,000
Cash Dividends Payable
4,500
6,500
Salaries Payable
6,000
7,500
Prepare the operating activities section of the statement of cash flows, using the indirect method.
221. Connor Designs Company has net cash flows from operating activities of $425,000. Cash flows used for investments
Name:
Class:
Date:
in property, plant, and equipment totaled $65,000, of which 70% was used to replace machinery to maintain existing
capacity.
What is the free cash flow for Connor Designs?
222. Balances of the current asset and current liability accounts at the end and beginning of the year are as follows:
End
Beginning
Cash
$ 67,000
$73,000
Accounts Receivable (net)
73,000
60,000
Inventories
54,000
37,000
Accounts Payable
(merchandise creditors)
43,000
37,000
Salaries Payable
1,800
3,800
Sales (on account)
210,000
―
Cost of Merchandise Sold
70,000
―
Operating Expenses Other Than
Depreciation
67,000
―
Use the direct method to prepare the operating activities section of a statement of cash flows.
223. Condensed comparative balance sheets of Barry Company at December 31, Years 1 and 2, are as follows:
Year 2
Year 1
Cash
$ 72,000
$ 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)
Total assets
$616,000
$567,700
Accounts payable
$ 59,750
$ 47,250
Bonds payable
—
75,000
Common stock, $20 par
375,000
325,000
Paid-in capital in excess of par
50,000
25,000
Retained earnings
131,250
95,450
Total liabilities and stockholders’ equity
$616,000
$567,700
Additional data for Year 2 are as follows:
• Net income, $75,800.
• Depreciation reported on income statement, $38,000.
• Fully depreciated equipment costing $60,000 was scrapped, no salvage value, and new equipment was purchased
for $150,000.
• Bonds payable of $75,000 were retired by payment at their face amount.
• 2,500 shares of common stock were issued at $30 for cash.
• Cash dividends declared and paid, $40,000.
• Investments of $100,000 were sold for $125,000.
Prepare a statement of cash flows for the year ended December 31, Year 2, using the indirect method.
224. Fortune Corporation’s comparative balance sheet showed noncash current assets and liabilities as follows:
Name:
Class:
Date:
Dec. 31, Year 2
Dec. 31, Year 1
Accounts receivable
$ 7,500
$ 5,200
Merchandise inventory
11,500
16,000
Accounts payable
4,300
5,200
Dividends payable
4,000
3,000
Adjust Year 2 net income of $65,000 for changes in current operating assets and liabilities to arrive at net cash flows from
operating activities using the indirect method.
225. State the section(s) of the statement of cash flows prepared by the indirect method (operating activities, investing
activities, financing activities, or not reported) and the amount that would be reported for each of the following
transactions:
a.
Received $120,000 from the sale of land costing $70,000.
b.
Purchased investments for $75,000.
c.
Declared $35,000 cash dividends on stock. Dividends of $5,000 were payable
at the beginning of the year, and $6,000 were payable at the end of the year.
d.
Acquired equipment for $64,000 cash.
e.
Declared and issued 100 shares of $20 par common stock as a stock dividend,
when the market price of the stock was $32 a share.
f.
Recognized depreciation for the year, $37,000.
g.
Issued 85,000 shares of $10 par common stock for $25 a share, receiving
cash.
h.
Issued $500,000 of 20-year, 10% bonds payable at 99.
i.
Borrowed $43,000 from Regional Bank, issuing a 5-year, 8% note for that
amount.
226. Dorman Company reported the following data:
Net income
$225,000
Depreciation expense
25,000
Gain on disposal of equipment
20,500
Decrease in accounts receivable
14,000
Decrease in accounts payable
3,600
Prepare the operating activities section of the statement of cash flows, using the indirect method.
227. The cash flows from operating activities are reported by the direct method on the statement of cash flows. Determine
the following:
a.
If sales for the current year were $375,000 and accounts receivable increased by $29,000
during the year, what was the amount of cash received from customers?
b.
If income taxes for the current year were $39,000 and income taxes payable decreased by
$21,000 during the year, what was the amount of cash paid for income taxes?
228. An analysis of the general ledger accounts indicates that equipment, with an original cost of $200,000 and
accumulated depreciation of $170,000 on the date of sale, was sold for $20,000 during the year. Using this information,
indicate the items to be reported on the statement of cash flows using the indirect method.
229. The income statement disclosed the following items for the current year:
Depreciation expense
$ 36,000
Name:
Class:
Date:
Gain on disposal of equipment
21,000
Net income
317,500
Balances of the noncash current asset and current liability accounts changed between December 31, last year, and
December 31, this year, as follows:
Increase in accounts receivable
$5,600
Decrease in inventory
3,200
Decrease in prepaid insurance
1,200
Decrease in accounts payable
3,800
Increase in income taxes payable
1,200
Increase in dividends payable
850
Prepare the operating activities section of the statement of cash flows using the indirect method.
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