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Statement of Cash Flows
23 - 21
77. Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015
Included in net income were depreciation expense of $8,400 and a gain on sale of
equipment of $1,700. Each of the following accounts increased during 2015:
Accounts receivable $2,200
Inventory $4,500
Prepaid rent $6,800
Available-for-sale securities $1,000
Accounts payable $5,000
What is the amount of cash provided by operating activities for Jarvis, Inc. for the year
ended December 31, 2015?
a. $41,200
b. $43,900
c. $32,200
d. $42,200
78. Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015
Included in net income were depreciation expense of $8,400 and a gain on sale of
equipment of $1,700. The equipment had an historical cost of $40,000 and accumulated
depreciation of $24,000. Each of the following accounts increased during 2015:
Patents $5,500
Prepaid rent $6,800
Available-for-sale securities $1,000
Bonds payable $5,000
What is the amount of cash provided by or used by investing activities for Jarvis, Inc. for
the year ended December 31, 2015?
a. ( $ 4,800)
b. $16,700
c. $11,200
d. $12,200
79. Jarvis, Inc. reported net income of $44,000 for the year ended December 31, 2015.
Included in net income was a gain on early extinguishment of debt of $60,000 related to
bonds payable with a book value of $1,200,000. Each of the following accounts increased
during 2015:
Notes receivable $45,000
Deferred tax liability $10,000
Treasury stock $120,000
What is the amount of cash used by financing activities for Jarvis, Inc. for the year ended
December 31, 2015?
a. $1,260,000
b. $1,270,000
c. $1,900,000
d. $ 225,000
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 22
80. During 2015, Greta Company earned net income of $212,000 which included depreciation
expense of $39,000. In addition, the company experienced the following changes in the
account balances listed below:
Decreases Increases
Accounts receivable ...... $ 6,000 Accounts payable…... $22,500
Prepaid expenses .......... 16,500 Inventory……………. ..18,000
Accrued liabilities ............ 12,000
Based upon this information what amount will be shown for net cash provided by
operating activities for 2015?
a. $266,000.
b. $252,500.
c. $162,500.
d. $153,500.
81. Cashman Company reported net income of $265,000 for the year ended 12/31/15.
Included in the computation of net income were: depreciation expense, $45,000;
amortization of a patent, $24,000; income from an investment in common stock of Linda
Inc., accounted for under the equity method, $36,000; and amortization of a bond
premium, $9,000. Cashman also paid a $60,000 dividend during the year. The net cash
provided by operating activities would be reported at
a. $289,000.
b. $241,000.
c. $229,000.
d. $181,000.
82. Net cash flow from operating activities for 2015 for Graham Corporation was $330,000.
The following items are reported on the financial statements for 2015:
Depreciation and amortization $ 20,000
Cash dividends paid on common stock 12,000
Increase in accounts receivable 24,000
Based only on the information above, Graham’s net income for 2015 was:
a. $286,000.
b. $294,000.
c. $326,000.
d. $334,000.
Use the following information for questions 83 and 84.
Napier Co. provided the following information on selected transactions during 2015:
Purchase of land by issuing bonds $500,000
Proceeds from issuing bonds 1,500,000
Purchases of inventory 1,900,000
Purchases of treasury stock 300,000
Loans made to affiliated corporations 700,000
Dividends paid to preferred stockholders 200,000
Proceeds from issuing preferred stock 800,000
Proceeds from sale of equipment 150,000
Statement of Cash Flows
23 - 23
83. The net cash provided (used) by investing activities during 2015 is
a. $150,000.
b. $(550,000).
c. $(1,050,000).
d. $(2,250,000).
84. The net cash provided by financing activities during 2015 is
a. $1,600,000.
b. $1,800,000.
c. $2,100,000.
d. $2,300,000.
Use the following information for questions 85 through 87.
The balance sheet data of Kohler Company at the end of 2015 and 2014 follow:
2015 2014
Cash $ 100,000 $ 140,000
Accounts receivable (net) 240,000 180,000
Inventory 280,000 180,000
Prepaid expenses 40,000 100,000
Buildings and equipment 360,000 300,000
Accumulated depreciation—buildings and equipment (72,000) (32,000)
Land 360,000 160,000
Totals $1,308,000 $1,028,000
Accounts payable $272,000 $220,000
Accrued expenses 48,000 72,000
Notes payable—bank, long-term 160,000
Mortgage payable 120,000
Common stock, $10 par 836,000 636,000
Retained earnings (deficit) 32,000 (60,000)
$1,308,000 $1,028,000
Land was acquired for $200,000 in exchange for common stock, par $200,000, during the year;
all equipment purchased was for cash. Equipment costing $20,000 was sold for $8,000; book
value of the equipment was $16,000 and the loss was reported as an ordinary item in net income.
Cash dividends of $40,000 were charged to retained earnings and paid during the year; the
transfer of net income to retained earnings was the only other entry in the Retained Earnings
account. In the statement of cash flows for the year ended December 31, 2015, for Naley
Company:
85. The net cash provided by operating activities was
a. $104,000.
b. $132,000.
c. $112,000.
d. $96,000.
86. The net cash provided (used) by investing activities was
a. $52,000.
b. $(80,000).
c. $(272,000).
d. $(72,000).
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 24
87. The net cash provided (used) by financing activities was
a. $ -0-.
b. $(40,000).
c. $(80,000).
d. $120,000.
88. The following information on selected cash transactions for 2015 has been provided by
Mancuso Company:
Proceeds from sale of land $210,000
Proceeds from long-term borrowings 400,000
Purchases of plant assets 144,000
Purchases of inventories 680,000
Proceeds from sale of Mancuso common stock 240,000
What is the cash provided (used) by investing activities for the year ended December 31,
2015, as a result of the above information?
a. $66,000
b. $256,000.
c. $210,000.
d. $850,000.
89. Selected information from Dinkel Company's 2015 accounting records is as follows:
Proceeds from issuance of common stock $ 600,000
Proceeds from issuance of bonds 1,800,000
Cash dividends on common stock paid 220,000
Cash dividends on preferred stock paid 90,000
Purchases of treasury stock 180,000
Sale of stock to officers and employees not included above 150,000
Dinkel's statement of cash flows for the year ended December 31, 2015, would show net
cash provided (used) by financing activities of
a. $90,000.
b. $(310,000).
c. $220,000.
d. $2,020,000.
90. Donnegan Company reported operating expenses of $325,000 for 2015. The following
data were extracted from the company’s financial records:
12/31/14 12/31/15
Prepaid Expenses $ 60,000 $69,000
Accrued Expenses 210,000 255,000
On a statement of cash flows for 2015, using the direct method, cash payments for
operating expenses should be
a. $379,000.
b. $361,000.
c. $289,000.
d. $271,000.
Statement of Cash Flows
23 - 25
91. The following information was taken from the 2015 financial statements of Jenny Gardner
Corporation:
Inventory, January 1, 2015 $ 90,000
Inventory, December 31, 2015 120,000
Accounts payable, January 1, 2015 75,000
Accounts payable, December 31, 2015 120,000
Sales revenue 600,000
Cost of goods sold 400,000
If the direct method is used in the 2015 statement of cash flows, what amount should
Jenny Gardner report as cash payments to suppliers?
a. $395,000
b. $415,000
c. $445,000
d. $475,000
92. Alex Company prepares its statement of cash flows using the direct method for operating
activities. For the year ended December 31, 2015, Alex Company reports the following
activity:
Sales on account $1,400,000
Cash sales 740,000
Decrease in accounts receivable 610,000
Increase in accounts payable 72,000
Increase in inventory 48,000
Cost of good sold 1,050,000
What is the amount of cash collections from customers reported by Alex Company for the
year ended December 31, 2015?
a. $2,140,000
b. $2,010,000
c. $2,750,000
d. $1,530,000
93. Alex Company prepares its statement of cash flows using the direct method for operating
activities. For the year ended December 31, 2015, Alex Company reports the following
activity:
Sales on account $1,400,000
Cash sales 740,000
Decrease in accounts receivable 610,000
Increase in accounts payable 72,000
Increase in inventory 48,000
Cost of goods sold 1,050,000
What is the amount of cash payments to suppliers reported by Alex Company for the year
ended December 31, 2015?
a. $1,026,000
b. $1,074,000
c. $1,170,000
d. $ 930,000
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 26
Questions 94 through 97 are based on the data shown below related to the statement of cash
flows for Putnam, Inc.:
Putnam, Inc.
Comparative Balance Sheets
December 31,
2015 2014
Assets:
Current Assets:
Cash $ 1,380,000 $1,080,000
Accounts Receivable (net) 3,120,000 2,160,000
Inventory 3,900,000 2,520,000
Prepaid Expenses 702,000 630,000
Total Current Assets 9,102,000 6,390,000
Long-Term Investments 450,000
Plant Assets:
Property, Plant & Equipment 4,380,000 2,880,000
Accumulated Depreciation (900,000) (540,000)
Total Plant Assets 3,480,000 2,340,000
Total Assets $13,032,000 $8,730,000
Equities:
Current Liabilities:
Accounts Payable $ 2,550,000 $2,190,000
Accrued Expenses 618,000 564,000
Dividends Payable 402,000
Total Current Liabilities 3,570,000 2,754,000
Long-Term Notes Payable 1,650,000
Stockholders' Equity:
Common Stock 6,000,000 4,800,000
Retained Earnings 1,812,000 1,176,000
Total Equities $13,032,000 $8,730,000
Putnam, Inc.
Comparative Income Statements
December 31,
2015 2014
Net Credit Sales $14,040,000 $7,506,000
Cost of Goods Sold 7,830,000 3,762,000
Gross Profit 6,210,000 3,744,000
Operating Expenses (including Income Tax) 5,172,000 2,748,000
Net Income $1,038,000 $ 996,000
Additional Information:
a. Accounts receivable and accounts payable relate to merchandise held for sale in the
normal course of business. The allowance for bad debts was the same at the end of
2015 and 2014, and no receivables were charged against the allowance. Accounts
payable are recorded net of any discount and are always paid within the discount
period.
b. The proceeds from the note payable were used to finance the acquisition of property,
plant, and equipment. Capital stock was sold to provide additional working capital.
Statement of Cash Flows
23 - 27
94. What amount of cash was collected from 2015 accounts receivable?
a. $15,000,000.
b. $14,040,000.
c. $13,080,000.
d. $6,540,000.
95. What amount of cash was paid on accounts payable to suppliers during 2015?
a. $9,210,000.
b. $8,850,000.
c. $8,190,000.
d. $7,470,000.
96. The amount to be shown on the cash flow statement as net cash provided by investing
activities would total what amount?
a. $450,000.
b. $1,500,000.
c. $1,590,000.
d. $1,950,000.
97. The amount to be shown on the cash flow statement as net cash provided by financing
activities would total what amount?
a. $2,850,000.
b. $1,650,000.
c. $1,200,000.
d. $816,000.
Use the following information for questions 98 and 99.
Fleming Company provided the following information on selected transactions during 2015:
Dividends paid to preferred stockholders $ 250,000
Loans made to affiliated corporations 700,000
Proceeds from issuing bonds 800,000
Proceeds from issuing preferred stock 1,050,000
Proceeds from sale of equipment 400,000
Purchases of inventories 1,200,000
Purchase of land by issuing bonds 300,000
Purchases of treasury stock 600,000
98. The net cash provided (used) by investing activities during 2015 is
a. $(600,000).
b. $(300,000).
c. $100,000.
d. $400,000.
99. The net cash provided (used) by financing activities during 2015 is
a. $(1,650,000).
b. $550,000.
c. $1,300,000.
d. $1,000,000.
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 28
100. The net cash provided by operating activities in Sosa Company's statement of cash flows
for 2015 was $155,000. For 2015, depreciation on plant assets was $45,000, amortization
of patent was $8,000, and cash dividends paid on common stock was $54,000. Based
only on the information given above, Sosa’s net income for 2015 was
a. $155,000.
b. $102,000.
c. $8,000.
d. $156,000.
101. During 2015, Oldham Corporation, which uses the allowance method of accounting for
doubtful accounts, recorded a provision for bad debt expense of $35,000 and in addition it
wrote off, as uncollectible, accounts receivable of $10,000. As a result of these
transactions, net cash flows from operating activities would be calculated (indirect
method) by adjusting net income with a
a. $35,000 increase.
b. $10,000 increase.
c. $25,000 increase.
d. $25,000 decrease.
Use the following information for questions 102 and 103.
A flood damaged a building and contents. Floods are unusual and infrequent in this area. The
receipts from insurance companies totaled $500,000, which was $150,000 less than the book
values. The tax rate is 30%.
102. On the statement of cash flows (indirect method), the receipts from insurance companies
should
a. be shown as an addition to net income of $350,000.
b. be shown as an inflow from investing activities of $350,000.
c. be shown as an inflow from investing activities of $500,000.
d. not be shown.
103. On the statement of cash flows (indirect method), the flood loss should
a. be shown as an addition to net income of $105,000.
b. be shown as an addition to net income of $150,000.
c. be shown as an inflow from investing activities of $105,000.
d. not be shown.
104. Zook Incorporated, had net income for 2015 of $4,500,000. Additional information is as
follows:
Amortization of patents $ 45,000
Depreciation on plant assets 1,650,000
Long-term debt:
Bond premium amortization 65,000
Interest paid 900,000
Provision for doubtful accounts:
Current receivables 80,000
Long-term nontrade receivables 30,000
Statement of Cash Flows
23 - 29
What should be the net cash provided by operating activities in the statement of cash
flows for the year ended December 31, 2015, based solely on the above information?
a. $6,320,000.
b. $6,370,000.
c. $6,240,000.
d. $6,340,000.
105. The net income for the year ended December 31, 2015, for Oliva Company was
$1,900,000. Additional information is as follows:
Depreciation on plant assets $600,000
Amortization of leasehold improvements 340,000
Provision for doubtful accounts on short-term receivables 120,000
Provision for doubtful accounts on long-term receivables 100,000
Interest paid on short-term borrowings 80,000
Interest paid on long-term borrowings 60,000
Based solely on the information given above, what should be the net cash provided by
operating activities in the statement of cash flows for the year ended December 31, 2015?
a. $2,960,000.
b. $3,060,000.
c. $3,040,000.
d. $3,200,000.
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 30
MULTIPLE CHOICE—CPA Adapted
Use the following information for questions 106 through 108.
Jamison Corp.'s balance sheet accounts as of December 31, 2015 and 2014 and information
relating to 2015 activities are presented below.
December 31,
2015 2014
Assets
Cash $ 440,000 $ 200,000
Short-term investments 600,000 —
Accounts receivable (net) 1,020,000 1,020,000
Inventory 1,380,000 1,200,000
Long-term investments 400,000 600,000
Plant assets 3,400,000 2,000,000
Accumulated depreciation (900,000) (900,000)
Patent 180,000 200,000
Total assets $6,520,000 $4,320,000
Liabilities and Stockholders' Equity
Accounts payable and accrued liabilities $1,660,000 $1,440,000
Notes payable (nontrade) 580,000 —
Common stock, $10 par 1,600,000 1,400,000
Additional paid-in capital 800,000 500,000
Retained earnings 1,880,000 980,000
Total liabilities and stockholders' equity $6,520,000 $4,320,000
Information relating to 2015 activities:
• Net income for 2015 was $1,300,000.
• Cash dividends of $400,000 were declared and paid in 2015.
• Equipment costing $1,000,000 and having a carrying amount of $320,000 was sold in 2015
for $360,000.
• A long-term investment was sold in 2015 for $320,000. There were no other transactions
affecting long-term investments in 2015.
• 20,000 shares of common stock were issued in 2015 for $25 a share.
• Short-term investments consist of treasury bills maturing on 6/30/16.
106. Net cash provided by Jamison’s 2015 operating activities was
a. $1,300,000.
b. $1,920,000.
c. $1,880,000.
d. $1,960,000.
107. Net cash used in Jamison’s 2015 investing activities was
a. $2,320,000.
b. $1,820,000.
c. $1,680,000.
d. $1,720,000.
Statement of Cash Flows
23 - 31
108. Net cash provided by Jamison’s 2015 financing activities was
a. $680,000.
b. $320,000.
c. $1,080,000.
d. $1,480,000.
109. Foxx Corp.'s comparative balance sheet at December 31, 2015 and 2014 reported
accumulated depreciation balances of $830,000 and $600,000, respectively. Property with
a cost of $50,000 and a carrying amount of $38,000 was the only property sold in 2015.
Depreciation charged to operations in 2015 was
a. $218,000.
b. $230,000.
c. $242,000.
d. $268,000.
110. Nagel Co.'s prepaid insurance was $95,000 at December 31, 2015 and $45,000 at
December 31, 2014. Insurance expense was $31,000 for 2015 and $27,000 for 2014.
What amount of cash disbursements for insurance would be reported in Nagel's 2015 net
cash provided by operating activities presented on a direct basis?
a. $99,000.
b. $81,000.
c. $64,000.
d. $31,000.
Use the following information for questions 111 and 112.
A company acquired a building, paying a portion of the purchase price in cash and issuing a
mortgage note payable to the seller for the balance.
111. In a statement of cash flows, what amount is included in investing activities for the above
transaction?
a. Cash payment
b. Acquisition price
c. Zero
d. Mortgage amount
112. In a statement of cash flows, what amount is included in financing activities for the above
transaction?
a. Cash payment
b. Acquisition price
c. Zero
d. Mortgage amount
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 32
Use the following information for questions 113 and 114.
Smiley Corp.'s transactions for the year ended December 31, 2015 included the following:
• Purchased real estate for $625,000 cash which was borrowed from a bank.
• Sold available-for-sale securities for $500,000.
• Paid dividends of $600,000.
• Issued 500 shares of common stock for $250,000.
• Purchased machinery and equipment for $125,000 cash.
• Paid $450,000 toward a bank loan.
• Reduced accounts receivable by $100,000.
• Increased accounts payable $200,000.
113. Smiley's net cash used in investing activities for 2015 was
a. $750,000.
b. $375,000.
c. $250,000.
d. $125,000.
114. Smiley's net cash used in financing activities for 2015 was
a. $225,000.
b. $175,000.
c. $450,000.
d. $425,000.
Use the following information for questions 115 and 116.
Peavy Corp.'s transactions for the year ended December 31, 2015 included the following:
• Acquired 50% of Gant Corp.'s common stock for $200,000 cash which was borrowed from a
bank.
• Issued 5,000 shares of its preferred stock for land having a fair value of $320,000.
• Issued 500 of its 11% debenture bonds, due 2020, for $392,000 cash.
• Purchased a patent for $220,000 cash.
• Paid $120,000 toward a bank loan.
• Sold available-for-sale securities for $796,000.
• Had a net increase in returnable customer deposits (long-term) of $88,000.
115. Peavy’s net cash provided by investing activities for 2015 was
a. $276,000.
b. $376,000.
c. $576,000.
d. $596,000.
116. Peavy’s net cash provided by financing activities for 2015 was
a. $472,000.
b. $560,000.
c. $592,000.
d. $680,000.
Statement of Cash Flows
23 - 33
DERIVATIONS — Computational
No. Answer Derivation
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 34
DERIVATIONS — Computational (cont.)
No. Answer Derivation
Statement of Cash Flows
23 - 35
DERIVATIONS — Computational (cont.)
No. Answer Derivation
DERIVATIONS — CPA Adapted
No. Answer Derivation
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 36
DERIVATIONS — CPA Adapted (cont.)
No. Answer Derivation
BRIEF EXERCISES
BE. 23-117—Direct and indirect methods.
Compare the direct method and the indirect method by explaining each method.
Solution 23-117
EXERCISES
Ex. 23-118—Effects of transactions on statement of cash flows.
Indicate for each of the following what should be disclosed on a statement of cash flows (indirect
method). If not disclosed, write "Not shown." There may be more than one answer for some
items. For an item that is added to net income, write "Add," and for an item that is deducted from
net income, write "Deduct." Show financing and investing outflows in parentheses. For example,
an answer might be: Deduct $4,700 or Investing ($31,000). If the item is a noncash transaction
that should be disclosed separately, write "Noncash."
(a) The deferred tax liability increased $10,000.
(b) The balance in Investment in Hoyt Co. Stock increased $12,000 as a result of using the
equity method.
Statement of Cash Flows
23 - 37
(c) Issuance of a stock dividend increased common stock $40,000 and paid-in capital $16,000.
(d) Amortization of bond discount, $1,600.
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 38
Ex. 23-118 (cont.)
(e) Machinery that cost $100,000 and had accumulated depreciation of $48,000 was sold for
$54,000.
(f) Issued 9,000 shares of common stock ($10 par) with a market price of $15 per share for
machinery. (Show the amount, too.)
(g) Amortization of patents, $3,000.
(h) Cash dividends paid, $60,000.
Solution 23-118
Ex. 23-119—Effects of transactions on statement of cash flows.
Indicate for each of the following what should be disclosed on a statement of cash flows (SCF)
(indirect method). If not disclosed, write "Not shown." If an item is a noncash transaction that
should be shown separately, write "noncash." If an item is added to net income, write "Add," and
if an item is deducted from net income, write "Deduct." Show financing and investing outflows in
parentheses. For example, an answer might be: Deduct $4,700 or Investing ($31,000). There is
more than one answer for some items.
(a) For 2015, income before an extraordinary loss was $460,000. A tornado damaged a building
and its contents. The proceeds from insurance companies totaled $120,000, which was
$50,000 less than the book values. The tax rate was 30%. (Show the calculation of the net
income shown on the SCF, and indicate how other items should be shown on the SCF.)
(b) Amortization of bond premium, $1,100.
(c) The balance in Retained Earnings was $875,000 on December 31, 2014 and $1,310,000 on
December 31, 2015. Net income was $1,170,000. A stock dividend was declared and
distributed which increased common stock $325,000 and paid-in capital $170,000. (Show
calculation of the cash dividend and indicate how it and the stock dividend would be shown
on the SCF.)
(d) Equipment, that cost $115,000 and had accumulated depreciation of $53,000, was sold for
$66,000.
(e) The deferred tax liability increased $18,000.
(f) Issued 3,000 shares of preferred stock, $50 par, with a market value of $110 per share for
land. (Show the amount also.)
Statement of Cash Flows
23 - 39
Solution 23-119
Ex. 23-120—Calculations for statement of cash flows.
During 2015 equipment was sold for $73,000. This equipment cost $120,000 and had a book
value of $72,000. Accumulated depreciation for equipment was $325,000 at 12/31/14 and
$310,000 at 12/31/15.
Instructions
What three items would be shown on a statement of cash flows (indirect method) from this
information? Show your calculations.
Solution 23-120
Test Bank for Intermediate Accounting, Fifteenth Edition
23 - 40
Ex. 23-121—Calculations for statement of cash flows.
Milner Co. sold a machine that cost $74,000 and had a book value of $44,000 for $48,000. Data
from Milner's comparative balance sheets are:
12/31/15 12/31/14
Machinery $800,000 $670,000
Accumulated depreciation 190,000 136,000
Instructions
What four items should be shown on a statement of cash flows (indirect method) from this
information? Show your calculations.
Solution 23-121
Ex. 23-122—Cash flows from operating activities (indirect and direct methods).
Presented below is the income statement of Cowan, Inc.:
Sales revenue $380,000
Cost of goods sold 225,000
Gross profit $155,000
Operating expenses 85,000
Income before income taxes 70,000
Income taxes 28,000
Net income $ 42,000
In addition, the following information related to net changes in working capital is presented:
Debit Credit
Cash $12,000
Accounts receivable 20,000
Inventories $19,400
Salaries payable (operating expenses) 8,000
Accounts payable 14,000
Income taxes payable 3,000
