Chapter 15 – Statement of Cash Flows
1. A statement of cash flows indicates the sources and uses of a firm’s cash during a period.
a.
True
b.
False
True
2. All SEC-registered firms must issue a statement of cash flows, in addition to the income statement and balance sheet.
a.
True
b.
False
True
3. The amount for “net cash from operating activities” will be different depending on if the direct method or the indirect
method is used to construct the statement of cash flows.
a.
True
b.
False
4. Transactions that involve the acquisition or sale of long-term assets are generally classified as investing activities on the
statement of cash flows.
a.
True
b.
False
True
5. Noncash investing and financing transactions, such as the exchange of common stock to purchase assets, represent
significant investing and financing activities and are disclosed in a supplementary schedule that is attached to the
statement of cash flows.
a.
True
b.
False
True
6. Cash received on the sale of equipment would be considered a financing activity on a statement of cash flows.
a.
True
b.
False
7. Companies can use two different methods to report the amount of cash flow from their operating activities on the
statement of cash flows.
a.
True
b.
False
True
8. The indirect method of reporting the cash flows from operating activities on the statement of cash flows is the method
most widely used in practice.
a.
True
Chapter 15 – Statement of Cash Flows
b.
False
True
9. Investments in stock are reported as an investing activity on the statement of cash flows.
a.
True
b.
False
True
10. On the statement of cash flows, the indirect method adjusts net income to determine the net cash flows from operating
activities.
a.
True
b.
False
True
11. For a statement of cash flows, firms are required to classify their cash activities into three categories: operating,
investing, and borrowing.
a.
True
b.
False
12. The sale of land for cash would be classified as a cash inflow from a financing activity.
a.
True
b.
False
False
The sale of land for cash would be classified as a cash inflow from an investing activity.
13. Cash inflows that enter into the determination of net income are classified as financing activities on a statement of
cash flows.
a.
True
b.
False
14. Cash flow activities that include the cash effect of transactions that create revenues and expenses and thus enter into
the determination of net income are classified as operating activities on the statement of cash flows.
a.
True
b.
False
True
15. The issuance of common stock in exchange for a building would appear both as a cash inflow in the financing
activities section of the cash flow statement and also as a cash outflow in the investing activities section.
a.
True
b.
False
Chapter 15 – Statement of Cash Flows
16. The activity from the balance sheet to be presented in the financing activities section of the statement of cash flows is
based on an analysis of stockholders’ equity only.
a.
True
b.
False
17. Under the indirect method of determining the net cash from operating activities on the statement of cash flows,
increases in current assets such as accounts receivable are added to net income.
a.
True
b.
False
18. Under the indirect method of determining the net cash from operating activities on the statement of cash flows,
depreciation is subtracted from the net income for the period.
a.
True
b.
False
19. A decrease in accounts payable is added to net income in the operating activities section of the statement of cash flows
prepared under the indirect method.
a.
True
b.
False
20. Determining the cash flows from operating activities generally requires analyzing each item on the income statement
as well as the current asset and current liability accounts.
a.
True
b.
False
True
21. A loss on the sale of equipment is subtracted from net income in determining net cash from operating activities under
the indirect method.
a.
True
b.
False
Chapter 15 – Statement of Cash Flows
22. Under the indirect method, the net cash flow from operating activities is computed by adjusting net income to remove
the effect of all deferrals of past operating cash receipts and payments, and all accruals of future operating cash receipts or
payments.
a.
True
b.
False
True
23. If a firm uses the direct method for reporting operating activities on the statement of cash flows, it must present a
separate schedule which reconciles net income to net cash from operating activities.
a.
True
b.
False
True
24. The direct method of reporting cash flows from operating activities involves reporting major classes of cash receipts
and cash payments.
a.
True
b.
False
True
25. An advantage to using a worksheet to organize the information of preparation of the statement of cash flows is that it
uses a spreadsheet format allowing the preparer to use a PC and spreadsheet software.
a.
True
b.
False
True
26. All firms that are registered with the ______________________ must issue a statement of cash flows.
SEC
27. Highly liquid investments such as Treasury bills, money market funds, and commercial paper are examples of
___________________.
cash equivalents
28. Activities that increase cash are sources of cash and are referred to as ___________.
cash inflows
29. Activities that decrease cash are uses of cash and are referred to as ___________.
cash outflows
30. The format that should be followed in preparing the statement of cash flows is known as the ______________.
31. The indirect method and the direct method differ only on how the cash flows from ________________ are calculated.
Chapter 15 – Statement of Cash Flows
32. The ______________ computes operating cash flow by adjusting net income for items that do not affect cash flows.
33. The __________________ computes operating cash flows by adjusting each line on the income statement to reflect
cash flows.
34. The _____________________ provides information regarding the sources and uses of a firm’s cash.
35. ________________ are the ongoing, day-to-day, revenue-generating activities of an organization.
36. Acquiring new equipment, selling long-term investments, and purchasing land are all examples of _______________.
37. Issuing shares of common stock, paying dividends and paying off debt are all examples of _______________.
38. When an investing or financing activity takes place without affecting cash it is referred to as
_________________________.
39. The two approaches to calculating operating cash flows are the _______________ and the _____________.
40. Income statements are prepared on a (n) ______________.
41. Preparation of the statement of cash flows relies on the beginning and ending ____________.
42. Using the ________________ of reporting cash flow, each line on the income statement is adjusted to produce a cash
flow income statement.
43. Some individuals prefer to show operating cash flows as the difference between ___________ and ____________.
44. As transactions increase in number and complexity, a ____________ becomes a useful aid in preparing the statement
of cash flows.
45. Worksheets offer increased ____________ in form and the added convenience of spreadsheet software packages.
46. The primary purpose of the statement of cash flows is to
Chapter 15 – Statement of Cash Flows
a.
provide information about the investing and financing activities during the period.
b.
prove that revenues exceed expenses if there is a net income.
c.
provide information about the sources and uses of cash during a period.
d.
facilitate banking relationships.
47. The statement of cash flows does not report the
a.
sources of cash in the current period.
b.
uses of cash in the current period.
c.
amount of checks outstanding at the end of the period.
d.
change in the cash balance for the current period.
48. The acquisition of land by issuing common stock is
a.
only reported if the statement of cash flows is prepared using the direct method.
b.
a cash transaction that is reported in the investing section in the body of the statement of cash flows.
c.
a noncash transaction that is reported in the operating section in the body of the statement of cash flows.
d.
a noncash transaction that is disclosed in a supplementary schedule attached to the statement of cash flows.
49. The order of presentation of activities on the statement of cash flows is
a.
operating, investing, financing.
b.
operating, financing, investing.
c.
financing, operating, investing.
d.
financing, investing, operating.
50. Financing activities involve
a.
purchasing patent.
b.
receipt of dividends.
c.
selling of investments.
d.
issuance of stock.
51. Which of the following transactions does not affect cash during a period?
a.
increase in amortization expense
b.
payment of an accounts payable
c.
issuance of bonds
d.
purchase of a long-term investment
52. Cash flows from operating activities, as reported on the statement of cash flows, would include
a.
depreciation.
b.
gain on sale of equipment
c.
increase in accounts receivable.
Chapter 15 – Statement of Cash Flows
d.
All of these.
53. Which one of the following affects cash during a period?
a.
payment of an account payable
b.
declaration of a cash dividend
c.
write-off of an uncollectible account receivable
d.
recording depreciation expense
54. In developing the cash flows from operating activities, most companies in the United States
a.
use the indirect method.
b.
use the direct method.
c.
present both the indirect and direct methods in their financial reports.
d.
prepare the operating activities section on the accrual basis.
55. The indirect and direct methods of preparing the statement of cash flows are identical except for the
a.
financing activities section.
b.
investing activities section.
c.
operating activities section.
d.
significant noncash activities section.
56. Cash flows from acquiring and selling equipment are classified as
a.
operating activities.
b.
investing activities.
c.
financing activities.
d.
distribution activities.
57. Cash flows from acquiring and retiring long-term debt are classified as
a.
operating activities.
b.
investing activities.
c.
financing activities.
d.
purchasing activities.
58. Which balance sheet accounts are affected by financing activities?
a.
current assets and current liabilities.
b.
long-term assets.
c.
long-term liabilities.
d.
intangible assets.
Chapter 15 – Statement of Cash Flows
59. Which balance sheet accounts are affected by operating activities?
a.
current assets and current liabilities.
b.
current assets and long-term assets.
c.
long-term assets and current liabilities.
d.
long-term liabilities and stockholders’ equity.
60. Which of the following investing activities results in a cash inflow?
a.
selling treasury stock.
b.
retirement of bonds.
c.
disposal of a building.
d.
paying cash dividends.
61. Which of the following financing activities results in a cash outflow?
a.
purchase of long-term investments.
b.
collecting accounts receivable.
c.
payment of dividends.
d.
issuance of bonds.
62. Tracy Company reported the following information at the end of 20X0 and 20X1:
20X0
20X1
Land
$ 35,000
$ 90,000
Common Stock
200,000
255,000
An analysis of the company’s records indicated that there were no cash flow effects resulting from the changes in the two
accounts presented above. How should Tracy report the changes in these accounts on a statement of cash flows?
a.
The company should report $55,000 for the acquisition of land as an investing activity and $55,000 for the
issuance of stock as a financing activity.
b.
The company should report $55,000 as a noncash investing and financing activity for the acquisition of land
by issuing common stock.
c.
The company should report the issuance of common stock to acquire land in the financing activity section with
a net cash flow effect of zero.
d.
The company should report the acquisition of land by issuing common stock in the investing activity section
with a net cash flow effect of zero.
63. The decision whether to use the direct or indirect method on the statement of cash flows is relevant with respect to
a.
operating activities only.
b.
investing activities only.
c.
financial activities only.
d.
All activities.
64. Which one of the following items is not necessary in preparing a statement of cash flows?
a.
Determine the change in cash.
Chapter 15 – Statement of Cash Flows
b.
Determine the cash provided by operating activities.
c.
Determine cash from financing and investing activities.
d.
Determine the cash in all bank accounts.
65. Which one of the following affects cash during a period?
a.
recording amortization expense
b.
declaration of a stock dividend
c.
write-off of an uncollectible account receivable
d.
receipt of an accounts receivable
66. If a company has both an inflow and an outflow of cash related to property, plant, and equipment,
a.
the two cash effects can be netted and presented as one item in the investing activities section of the statement
of cash flows.
b.
the cash inflow and the cash outflow should be reported separately in the investing activities section of the
statement of cash flows.
c.
the two cash effects can be netted and presented as one item in the financing activities section of the statement
of cash flows.
d.
the cash inflow and the cash outflow should be reported in the financing activities section of the statement of
cash flows.
67. In calculating cash flows from operating activities using the indirect method, an increase in accounts payable is
a.
added to net income.
b.
deducted from net income.
c.
ignored because it does not affect cash.
d.
not reported on a statement of cash flows.
68. In calculating cash flows from operating activities using the indirect method, an increase in inventories is
a.
added to net income.
b.
deducted from net income.
c.
ignored because it does not affect cash.
d.
not reported on a statement of cash flows.
69. Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is
called the
a.
direct method.
b.
indirect method.
c.
cost-benefit method.
d.
working capital method.
70. In calculating net cash from operating activities using the indirect method, depreciation expense is
Chapter 15 – Statement of Cash Flows
a.
deducted from net income.
b.
added to net income.
c.
ignored because it does not affect income.
d.
ignored because it is included in the investing section.
71. Using the indirect method, patent amortization expense for the period
a.
is deducted from net income.
b.
has no impact on cash flows.
c.
causes cash to decrease.
d.
is added to net income.
72. Which of the following would be added to net income using the indirect method?
a.
loss on sale of equipment
b.
gain on sale of a long-term investment
c.
an increase in accounts receivable
d.
proceeds from the sale of a patent
73. Which of the following would be subtracted from net income using the indirect method?
a.
an increase in inventories.
b.
loss on sale of investments.
c.
depreciation expense.
d.
a decrease in accounts payable.
74. Which of the following would not be an adjustment to net income using the indirect method?
a.
depreciation expense
b.
an increase in prepaid expenses
c.
amortization expense
d.
an increase in land
75. In calculating cash flows from operating activities using the indirect method, a loss on the sale of equipment will
appear as a(n)
a.
subtraction from net income.
b.
addition to net income.
c.
addition to cash flow from investing activities.
d.
subtraction from cash flow from investing activities.
76. Using the indirect method, if equipment is sold at a gain, the
a.
sale proceeds received are deducted in the operating activities section.
b.
sale proceeds received are added in the operating activities section.
Chapter 15 – Statement of Cash Flows
c.
amount of the gain is added in the operating activities section.
d.
amount of the gain is deducted in the operating activities section.
77. In preparing the statement of cash flows, determining the net increase or decrease to cash requires the use of
a.
the adjusted trial balance.
b.
the current period’s retained earnings statement.
c.
a comparative balance sheet.
d.
a comparative income statement.
78. Which of the following would not be needed to determine net cash provided by operating activities?
a.
depreciation expense
b.
change in accounts receivable
c.
payment of cash dividends
d.
change in prepaid expenses
79. Smith and Company reported net income for the current year. Which of the following business transactions would
cause cash from operating activities to be higher than the amount of net income?
a.
Cash dividends were paid to stockholders during the year.
b.
Depreciation expense was recorded for the year.
c.
A bank loan was repaid during the year.
d.
Equipment was purchased for cash during the year.
80. Which method of preparing the operating activities section of the statement of cash flows adjusts net income to
remove the effects of deferrals and accruals for revenues and expenses?
a.
the direct method
b.
the indirect method
c.
both direct and indirect methods
d.
neither the direct method nor the indirect method
81. The following items were reported on the balance sheets and income statement for Collin Inc.:
Accounts Receivable, December 31, 20X0
$ 85,000
Accounts Receivable, December 31, 20X1
78,000
Sales, 20X1
750,000
How would the change in accounts receivable be reported in the operating activities section of the statement of cash flows
using the indirect method?
a.
as an addition to sales
b.
as a deduction from sales
c.
as an addition to net income
d.
as a deduction from net income
Chapter 15 – Statement of Cash Flows
82. The following items were reported on the balance sheets and income statements of Marshall Company:
Accounts payable, December 31, 20X0
$ 42,000
Accounts payable, December 31, 20X1
48,000
Operating expenses
286,000
How would the change in accounts payable be reported in the operating activities section of the statement of cash flows
under the indirect method?
a.
as an addition to operating expenses
b.
as a deduction from operating expenses
c.
as an addition to net income
d.
as a deduction from net income
83. The Star City reported net loss of $50,000. Cash from operating activities
a.
will be more than $50,000.
b.
will be less than $50,000.
c.
will be equal to $50,000.
d.
cannot be determined without more information.
84. Upon review of Johnson’s Statement of Cash Flows, the following was noted:
Cash flows from operating activities
$15,000
Cash flows from investing activities
80,000
Cash flows from financing activities
(60,000)
From this information, the most likely explanation is that Johnson is
a.
using cash from operations and selling long-term assets to pay back debt.
b.
using cash from operations and borrowing to purchase long-term assets.
c.
using its profits to expand growth.
d.
using cash from investors to provide for operations.
85. Upon review of Susan’s Statement of Cash Flows, the following was noted:
Cash flows from operating activities
$ 75,000
Cash flows from investing activities
(135,000)
Cash flows from financing activities
125,000
From this information, the most likely explanation is that Susan is
a.
using cash from operations and selling long-term assets to pay back debt.
b.
using cash from operations and borrowing to purchase long-term assets.
c.
using its profits to expand growth.
d.
using cash from investors to provide for operations.
86. Moore Company’s net income last year was $56,000 and cash dividends declared and paid to the company
stockholders was $31,000. Changes in selected balance sheet accounts for the year appear below:
Increases
(Decreases)
Chapter 15 – Statement of Cash Flows
Debit balances:
Accounts receivable
$ (8,000)
Inventory
(6,000)
Prepaid expenses
12,000
Credit balances:
Accumulated Depreciation
23,000
Accounts payable
(10,000)
Accrued liabilities
7,000
Taxes payable
5,000
Bonds payable
40,000
Based solely on this information, the net cash flows from operating activities under the indirect method on the statement
of cash flows would be
a.
$79,000.
b.
$102,000.
c.
$29,000.
d.
$83,000.
Accounts receivable
Inventory
Prepaid expenses
Accumulated Depreciation
Accounts payable
Accrued liabilities
Taxes payable
Income
87. Nelson Company’s net income last year was $18,000 and cash dividends declared and paid to the company
stockholders was $12,000. Changes in selected balance sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable
$(6,000)
Inventory
5,000
Long-term investments
20,000
Credit balances:
Accumulated Depreciation
12,000
Accounts payable
8,000
Accrued liabilities
(7,000)
Taxes payable
(3,000)
Based solely on this information, the net cash flows from operating activities under the indirect method on the statement
of cash flows would be
a.
$7,000.
b.
$30,000.
c.
$17,000.
d.
$29,000.
Chapter 15 – Statement of Cash Flows
88. Long Company’s net income last year was $43,000 and cash dividends declared and paid to the company stockholders
was $28,000. Changes in selected balance sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable
$(6,000)
Inventory
2,000
Long-term investments
40,000
Credit balances:
Accumulated Depreciation
19,000
Accounts payable
18,000
Accrued liabilities
(5,000)
Taxes payable
4,000
Based solely on this information, the net cash flows from operating activities under the indirect method on the statement
of cash flows would be
a.
$25,000.
b.
$62,000.
c.
$83,000.
d.
$3,000.
$43,000 + $6,000 − $2,000 + $19,000 + $18,000 − $5,000 + $4,000 = $83,000
89. Stacy Company’s net income last year was $27,000. Changes in selected balance sheet accounts for the year appear
below:
Increases
(Decreases)
Debit balances:
Accounts receivable
$(8,000)
Inventory
5,000
Prepaid expenses
(4,000)
Credit balances:
Accumulated Depreciation
12,000
Accounts payable
11,000
Accrued liabilities
(7,000)
Taxes payable
2,000
Based solely on this information, the net cash flows from operating activities under the indirect method on the statement
of cash flows would be
a.
$38,000.
b.
$2,000.
c.
$39,000.
d.
$52,000.
Chapter 15 – Statement of Cash Flows
90. The data given below are from the accounting records of Kain Company:
Net Income
$40,000
Depreciation expense
8,000
Decrease in accounts payable
1,800
Decrease in merchandise inventory
2,500
Increase in long-term liabilities
10,000
Increase in common stock
25,000
Increase in accounts receivable
4,000
Based on this information, the net cash flows from operating activities on the statement of cash flows using the indirect
method would be
a.
$51,300.
b.
$50,000.
c.
$42,100.
d.
$44,700.
$40,000 + $8,000 − $1,800 + $2,500 − $4,000 = $44,700
91. The following events occurred last year at Taylor Company:
Purchase of plant & equipment
$33,000
Sale of long-term investment
12,000
Stock dividend paid
6,000
Paid off bonds payable
15,000
Depreciation expense
7,000
Based on the above information, the net cash flows from investing activities for the year on the statement of cash flows
would be
a.
($15,000).
b.
($21,000).
c.
($7,000).
d.
($37,000).
$(33,000) + $12,000
92. The following events occurred last year for the Cronin Company:
Purchase of treasury stock
$30,000
Issuance of common stock
50,000
Payment of dividends to common stockholders
15,000
Sale of equipment
10,000
Considering just the above transactions, the net cash flows from financing activities on the statement of cash flows was
a.
$20,000.
b.
$5,000.
c.
$15,000.
d.
$25,000.
93. Last year Kinslow Company’s cash account increased by $16,000. Net cash flows from investing activities were
$(39,000). Net cash flows from financing activities were $17,000. On the statement of cash flows, the net cash flows from
Chapter 15 – Statement of Cash Flows
operating activities were
a.
$(22,000).
b.
$38,000.
c.
$(6,000).
d.
$16,000.
X + $(39,000) + $17,000 = $16,000
94. Last year Frye Company’s cash account increased by $17,000. Net cash flows from investing activities were
$(40,000). Net cash flows from financing activities were $2,000. On the statement of cash flows, the net cash flows from
operating activities were
a.
$17,000.
b.
$(21,000).
c.
$55,000.
d.
$(38,000).
X + $(40,000) + $2,000 = $17,000
95. Last year Sheeder Company’s cash account decreased by $10,000. Net cash flows from investing activities were
$19,000. Net cash flows from financing activities were $(17,000). On the statement of cash flows, the net cash flows from
operating activities were
a.
$(12,000).
b.
$(3,000).
c.
$(10,000).
d.
$7,000.
X + $19,000 – $17,000 = $(10,000)
96. Stillwater Inc. reported the following information for 20X0 and 20X1:
20X0
20X1
Accounts receivable
$51,000
$57,000
Inventories
42,000
39,000
Accounts payable
43,000
48,000
Net income
49,000
Depreciation Expense
8,000
If Stillwater Inc. uses the indirect method to prepare the operating activities section of the statement of cash flows, what
amount will be reported as net cash flows from operating activities for 20X1?
a.
$49,000
b.
$55,000
c.
$57,000
d.
$59,000
Inventories
3,000
Accounts payable
5,000
Net income
49,000
Chapter 15 – Statement of Cash Flows
97. Advance Systems Inc. reported the following information for 20X0 and 20X1:
20X0
20X1
Accounts receivable
$101,000
$93,000
Prepaid expenses
5,000
6,000
Accounts payable
71,000
76,000
Salaries payable
5,000
4,000
Net income
67,000
Loss on sale of equipment
5,000
Depreciation expense
11,000
If Advance Systems uses the indirect method to prepare the operating activities section of the statement of cash flows,
what amount will be reported as net cash flows from operating activities for 20X1?
a.
$72,000
b.
$78,000
c.
$94,000
d.
$98,000
c
98. Jamestown Inc. reported the following information for 20X0 and 20X1:
20X0
20X1
Cash
$ 42,000
$ 49,000
Noncash current assets
162,000
175,000
Cash flows from financing activities
313,000
Cash flows from operating activities
72,000
What was the amount of net cash flows from investing activities for 20X1?
a.
Cash inflow of $378,000.
b.
Cash outflow of $391,000
c.
Cash inflow of 7,000.
d.
Cash outflow of $378,000.
$7,000 = X + $313,000 + $72,000
99. Accounts receivable arising from sales to customers amounted to $62,000 and $40,000 at the beginning and end of the
year, respectively. Income reported on the income statement for the year was $215,000. Exclusive of the effect of other
adjustments, the cash inflows from operating activities to be reported on the statement of cash flows are
a.
$213,000.
b.
$215,000.
c.
$193,000.
d.
$237,000.
$215,000 + $22,000
100. Dance Unlimited Company reported net income of $80,000 for the year. During the year, accounts receivable
decreased by $3,000, accounts payable increased by $4,500 and depreciation expense of $9,000 was recorded and there
was a gain on the sale of long-term investments of $2,000. Using the indirect method, net cash flows from operating
Depreciation Expense
8,000
Net Cash Change
$59,000
Chapter 15 – Statement of Cash Flows
activities for the year are
a.
$94,500.
b.
$88,500.
c.
$79,500.
d.
$89,500.
101. A company had net income of $230,000. Depreciation expense is $26,000. During the year accounts receivable and
inventory increased $15,000 and $40,000, respectively. Prepaid expenses and accounts payable decreased $2,000 and
$4,000, respectively. There was also a loss on the sale of equipment of $3,000. Using the indirect method, what is the
amount of net cash flows from operating activities on the statement of cash flows?
a.
$196,000
b.
$202,000
c.
$276,000
d.
$288,000
102. The net income reported on the income statement for the current year was $200,000. Depreciation recorded on plant
assets was $38,000. Accounts receivable and inventories increased by $2,000 and $8,000, respectively. Prepaid expenses
and accounts payable decreased by $1,000 and $11,000, respectively. Using the indirect method, how much would be
reported for net cash flows from operating activities in the statement of cash flows?
a.
$180,000
b.
$200,000
c.
$218,000
d.
$238,000
103. The net income reported on the income statement for the current year was $100,000. Depreciation recorded on plant
assets was $25,000. Accounts receivable and inventories decreased by $5,000 and $15,000, respectively. Prepaid expenses
and accounts payable increased by $500 and $4,000, respectively. Using the indirect method, how much would be
reported for net cash flows from operating activities in the statement of cash flows?
a.
$130,500
b.
$148,500
c.
$141,500
d.
$98,500
104. If a gain of $25,000 is incurred in selling (for cash) office equipment having a book value of $100,000, the total
amount reported in the cash flows from the investing activities section of the statement of cash flows is
a.
$75,000.
b.
$100,000.
c.
$125,000.
Chapter 15 – Statement of Cash Flows
d.
$25,000.
c
105. If a loss of $12,500 is incurred in selling (for cash) office equipment having a book value of $50,000, the total
amount reported in the cash flows from investing activities section of the statement of cash flows is
a.
$37,500.
b.
$50,000.
c.
$62,500.
d.
$12,500.
a
106. Land costing $78,000 was sold for $93,000 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.
$78,000
b.
$108,000
c.
$93,000
d.
$15,000
c
107. The following transactions occurred last year at Jackson Inc.
Issuance of common stock
$ 80,000
Dividends paid to the company’s stockholders
1,000
Depreciation expense
4,000
Repayment of principal on bonds
60,000
Proceeds from sale of the company’s used equipment
22,000
Purchase of land
140,000
Based solely on the above information, the net cash flows from financing activities for the year on the statement of cash
flows would be
a.
$19,000.
b.
$(120,000).
c.
$(6,000).
d.
$332,000.
$80,000 – $1,000 – $60,000
108. The following transactions occurred last year at Jackson Inc.
Issuance of common stock
$140,000
Dividends paid to the common stockholders
7,000
Depreciation expense
4,000
Repayment of principal on the company’s own bonds
90,000
Sale of equipment
16,000
Purchase of a building
110,000
Based solely on the above information, the net cash flows from financing activities for the year on the statement of cash
flows would be
a.
$31,000.
b.
$(59,000).
c.
$43,000.
Chapter 15 – Statement of Cash Flows
d.
$379,000.
$140,000 – $7,000 – $90,000
109. The following transactions occurred last year at Dempsey Inc.
Issuance of common stock
$ 50,000
Dividends paid to common stockholders
3,000
Depreciation expense
6,000
Repayment of principal on the company’s own bonds
40,000
Sale of equipment
17,000
Purchase of land
120,000
Based solely on the above information, the net cash flows from financing activities for the year on the statement of cash
flows would be
a.
$249,000.
b.
$7,000.
c.
$(103,000).
d.
$(6,000).
$50,000 – $3,000 – $40,000
110. The Laurel Company reported the following data for last year:
Decrease in the Cash account
$25,000
Net cash provided by operating activities
20,000
Net cash provided by investing activities
15,000
Based solely on this information, the net cash flows from financing activities on the statement of cash flows would be
a.
$2,000.
b.
$(30,000).
c.
$(60,000).
d.
$(8,000).
$(25,000) = X + $20,000 + $15,000
Figure 15–1.
Master Company’s net income last year was $88,000 and cash dividends declared and paid to the company stockholders
was $60,000. Changes in selected balance sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Cash
$ (4,000)
Accounts receivable
(11,000)
Inventory
6,000
Prepaid expenses
0
Long-term investments
50,000
Plant and equipment
35,000
Credit balances:
Accumulated depreciation
62,000