Chapter 13 – Statement of Cash Flows
72. Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method
in
a.
the cash flows from financing activities section
b.
the cash flows from investing activities section
c.
a separate schedule
d.
the cash flows from operating activities section
73. Which of the following should be added to net income in calculating net cash flow 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
74. Which of the following should be deducted from net income in calculating net cash flow from operating activities
using the indirect method?
a.
b.
c.
d.
Chapter 13 – Statement of Cash Flows
75. Which of the following increases cash?
a.
depreciation expense
b.
acquisition of treasury stock
c.
borrowing money by issuing a six-month note
d.
the declaration of a cash dividend
76. 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
77. Which of the following should be added to net income in calculating net cash flow 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
Chapter 13 – Statement of Cash Flows
78. On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be
a.
deducted from net income in converting the net income reported on the income statement to cash flows from
operating activities
b.
added to 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
79. 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 cash flows from operating activities to be reported on the statement of cash flows prepared by the indirect
method is
a.
$105,000
b.
$118,000
c.
$92,000
d.
$169,000
Cash flows from operating activities = Net income – Increase in accounts receivable =
$105,000 – ($64,000 – $51,000) = $92,000
Chapter 13 – Statement of Cash Flows
80. 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 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
Chapter 13 – Statement of Cash Flows
81. 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 flow from operating activities using the indirect method is
a.
$166,000
b.
$184,000
c.
$110,000
d.
$240,000
82. On the statement of cash flows, the cash flows from investing activities section would include
a.
receipts from the issuance of capital stock
b.
payments for dividends
c.
payments for retirement of bonds payable
d.
receipts from the sale of investments
Chapter 13 – Statement of Cash Flows
83. 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 follows:
a.
an increase of $54,000 from investing activities
b.
an increase of $63,000 from investing activities and a deduction from net income of $9,000
c.
an increase of $9,000 from investing activities
d.
an increase of $54,000 from investing activities and an addition to net income of $9,000
Gain on sale of building = $63,000 – $54,000 = $9,000
84. Cash paid for equipment would be reported on the statement of cash flows in
a.
the cash flows from operating activities section
b.
the cash flows from financing activities section
c.
the cash flows from investing activities section
d.
a separate schedule
85. 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 cash flows from investing activities section of the statement of cash flows is
a.
$44,000
b.
$11,000
c.
$55,000
d.
$66,000
$66,000
Chapter 13 – Statement of Cash Flows
86. Which of the following types of transactions would be reported as a cash flow from 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
87. 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
88. 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
a.
increase by $48,000
b.
decrease by $7,000
c.
increase by $55,000
d.
decrease by $27,000
Chapter 13 – Statement of Cash Flows
89. On the statement of cash flows, the cash flows from 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
90. Cash dividends paid on capital stock would be reported in the statement of cash flows in
a.
the cash flows from financing activities section
b.
the cash flows from investing activities section
c.
a separate schedule
d.
the cash flows from operating activities section
91. 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 for the payment of dividends during the year is
a.
$50,000
b.
$40,000
c.
$55,000
d.
$35,000
$10,000 + $45,000 – $15,000 = $40,000
Chapter 13 – Statement of Cash Flows
92. On the statement of cash flows, 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
93. 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 schedule
b.
the cash flows from financing activities section
c.
the cash flows from investing activities section
d.
the cash flows from operating activities section
94. 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
Chapter 13 – Statement of Cash Flows
95. The current period statement of cash flows includes the following:
Cash balance at the beginning of the period
$310,000
Net cash flow from operating activities
185,000
Net cash flow used for investing activities
43,000
Net cash flow used for financing activities
97,000
The cash balance at the end of the period is
a.
$45,000
b.
$635,000
c.
$355,000
d.
$125,000
$355,000
96. Which of the following should be deducted from net income in calculating net cash flow 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
Chapter 13 – Statement of Cash Flows
97. Which of the following should be added to net income in calculating net cash flow from operating activities using the
indirect method?
a.
depreciation expense
b.
an increase in inventory
c.
a gain on the sale of equipment
d.
dividends declared and paid
98. 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 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
Chapter 13 – Statement of Cash Flows
99. 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 flow from operating activities using the indirect method is
a.
$230,000
b.
$188,000
c.
$198,000
d.
$156,000
100. 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 for the payment of dividends during the year is
a.
$55,000
b.
$50,000
c.
$65,000
d.
$60,000
Chapter 13 – Statement of Cash Flows
101. Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year,
respectively. Income reported on the income statement for the year was $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
102. Baxter Company reported a net loss of $13,000 for the year ended December 31. During the year, accounts
receivable decreased by $5,000, inventory increased by $8,000, accounts payable increased by $10,000, and depreciation
expense of $4,000 was recorded. During the year, operating activities
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
Chapter 13 – Statement of Cash Flows
103. A company had net income of $252,000. Depreciation expense is $26,000. During the year, accounts receivable and
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 flow
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
104. Zenith Corporation sells some of its used store fixtures. The acquisition cost of the fixtures is $12,500, and the
accumulated depreciation on these fixtures is $9,750 at the time of sale. The fixtures are sold for $5,300. The value of this
transaction in the investing section of the statement of cash flows is
a.
$12,500
b.
$5,300
c.
$2,750
d.
$2,550
Chapter 13 – Statement of Cash Flows
105. 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 Norris Co. used for payment of dividends
during the year was
a.
$55,000
b.
$80,000
c.
$105,000
d.
$65,000
106. A corporation uses the indirect method for preparing the statement of cash flows. A fixed asset has been sold for
$25,000 representing a gain of $4,500. The value in the operating activities section regarding this event would be
a.
$25,000
b.
$(4,500)
c.
$29,500
d.
$4,500
107. Accounts receivable resulting from sales to customers amounted to $40,000 and $31,000 at the beginning and end of
the year, respectively. Income reported on the income statement for the year was $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
Chapter 13 – Statement of Cash Flows
108. If accounts payable have increased during a period,
a.
revenues on an accrual basis are less than revenues on a cash basis
b.
expenses on an accrual basis are less than expenses on a cash basis
c.
expenses on an accrual basis are the same as expenses on a cash basis
d.
expenses on an accrual basis are greater than expenses on a cash basis
109. Changes in current assets and current liabilities are reported on the statement of cash flows, indirect method, in the
a.
operating activities
b.
financing activities
c.
investing activities
d.
separate schedule of noncash activities
110. In calculating cash flows from operating activities using the indirect method, a gain on the sale of equipment is
a.
added to net income
b.
deducted from net income
c.
ignored because it does not affect cash
d.
reported supplementally as a noncash investing and financing activity
Chapter 13 – Statement of Cash Flows
111. Net income for the year was $45,500. Accounts receivable increased $5,500, and accounts payable increased by
$11,200. Under the indirect method, the cash flow from operations is
a.
$51,200
b.
$45,500
c.
$62,200
d.
$28,800
112. 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 provided by
operating activities for the year is
a.
$53,000
b.
$47,000
c.
$33,000
d.
$37,000
Chapter 13 – Statement of Cash Flows
113. On the statement of cash flows, the cash flows from financing activities section would include all of the following
except
a.
receipts from the sale of bonds payable
b.
payments for dividends
c.
payments for purchase of treasury stock
d.
payments of interest on bonds payable
114. Under GAAP, cash receipts from interest and dividends are classified as
a.
financing activities
b.
operating activities
c.
investing activities
d.
either financing or investing activities
115. On the statement of cash flows, the cash flows from operating activities section would include
a.
receipts from the issuance of capital stock
b.
payment for interest on short-term notes payable
c.
payments for the purchase of investments
d.
payments for cash dividends
Chapter 13 – Statement of Cash Flows
116. Firefly Inc. sold land for $225,000 cash. The land had been purchased five 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
117. The cost of goods 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 (all owed to merchandise suppliers) 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 payments for merchandise total
a.
$49,000
b.
$47,000
c.
$51,000
d.
$53,000
118. 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
Chapter 13 – Statement of Cash Flows
The following selected account balances appeared on the financial statements of the Washington Company. Use these
balances to answer the questions that follow.
Accounts receivable, Jan. 1
$13,000
Accounts receivable, Dec. 31
9,000
Accounts payable, Jan. 1
4,000
Accounts payable, Dec. 31
7,000
Inventory, Jan. 1
10,000
Inventory, Dec. 31
15,000
Sales
56,000
Cost of goods sold
31,000
The Washington Company uses the direct method to calculate net cash flow from operating activities. Assume that all
accounts payable are owed to merchandise suppliers.
119. Cash collections from customers were
a.
$56,000
b.
$52,000
c.
$60,000
d.
$45,000
120. Cash payments for merchandise were
a.
$39,000
b.
$33,000
c.
$29,000
d.
$23,000
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