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Chapter 12: The Statement of Cash Flows
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
78. A mortgage incurred in exchange for an office building 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
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-03 - LO: 12-03
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Understanding
79. Which method of preparing the operating activities section of a 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 the direct and indirect methods
d.
Neither the direct method nor the indirect method
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
80. Which method of preparing the operating activities section of a statement of cash flows reports major classes of gross
cash receipts and cash payments for revenues and expenses?
a.
The direct method
b.
The indirect method
c.
Both the direct method and the indirect method
d.
Neither the direct method nor the indirect method
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
81. Which of the following statements is true?
a.
The method of preparing the operating activities section of a statement of cash flows which adjusts net income
to remove the effects of deferrals and accruals for revenues and expenses is the direct method.
b.
The method of preparing the operating activities section of a statement of cash flows which reports major
classes of gross cash receipts and cash payments for revenues and expenses is the indirect method.
c.
The FASB prefers the indirect method of preparing the operating activities section of the statement of cash
flows.
d.
Most companies use the indirect method of preparing the operating activities section of the statement of cash
flows.
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
82. Which of the following statements is false?
a.
The method of preparing the operating activities section of a statement of cash flows which adjusts net income
to remove the effects of deferrals and accruals for revenues and expenses is the indirect method.
b.
The method of preparing the operating activities section of a statement of cash flows which reports major
classes of gross cash receipts and cash payments for revenues and expenses is the direct method.
c.
The FASB prefers the direct method of preparing the operating activities section of the statement of cash
flows.
d.
Most companies use the direct method of preparing the operating activities section of the statement of cash
flows.
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
83. Presented below is the operating activities section of the statement of cash flows for Golden Consulting for 2016:
Operating activities:
Net income
$ 92,000
Add: Depreciation
20,000
Decrease in accounts receivable
8,000
$120,000
Deduct: Decrease in accounts payable
(6,000)
Net cash inflow from operating activities
$114,000
Which method of preparing the operating activities section has Golden Consulting used?
a.
The direct method.
b.
The indirect method.
c.
Either method.
d.
Cannot be determined without further information.
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
84. Presented below is the operating activities section of the statement of cash flows for Feline Friends Corp. for 2016:
Operating activities:
Cash collected from customers
$165,000
Cash payments for merchandise
(83,000)
Cash payments for operating expenses
(58,000)
Net cash inflow from operating activities
$ 24,000
Which method of preparing the operating activities section has Feline used?
a.
The direct method
b.
The indirect method
c.
Either method
d.
Cannot be determined without further information
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
85. The following items were reported on the balance sheets and income statement for Carlton Co.:
Accounts receivable, December 31, 2016
$185,000
Accounts receivable, December 31, 2017
178,000
Sales—2017
850,000
What amount would be reported in the operating activities section of the statement of cash flows for collections from
customers under the direct method assuming that all sales are on credit?
a.
$850,000
b.
$857,000
c.
$843,000
d.
Cannot be determined without further information.
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
86. The following items were reported on the balance sheets and income statement for Centerton Inc., a service company:
Accounts payable, December 31, 2016
$ 64,000
Accounts payable, December 31, 2017
48,000
Operating expenses—2017
170,000
What amount would be reported in the operating activities section of the statement of cash flows for payments for
operating expenses under the direct method?
a.
$186,000
b.
$154,000
c.
$180,000
d.
$170,000
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
87. The following items were reported on the balance sheets and income statement for the Flying Mullet Company:
Accounts receivable, December 31, 2016
$ 85,000
Accounts receivable, December 31, 2017
98,000
Sales—2017
750,000
How would the change in accounts receivable be reported in the operating activities section of the statement of cash flows
under 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
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
88. The following items were reported on the balance sheets and income statement for Bezos Corp.:
Accounts payable, December 31, 2016
$ 42,000
Accounts payable, December 31, 2017
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
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
89. During 2016, the accounts receivable balance of Dickerson Corp. increased. Which of the following statements is
true?
a.
This indicates that Dickerson sold more than it collected in cash during the period.
b.
This increase is added to net income in the operating activities section of a statement of cash flows prepared
under the indirect method.
c.
This increase is added to sales recognized on the income statement to determine the cash collections from
customers during the period.
d.
This increase is considered only when the operating activities section of a statement of cash flows is prepared
under the indirect method.
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Applying
90. During 2016, the accounts payable balance of Andreas Corp. decreased. Which of the following statements is true?
a.
This decrease indicates that Andreas paid less during the period than it recognized as expenses on the income
statement.
b.
This decrease is added to net income in the operating activities section of a statement of cash flows prepared
under the indirect method.
c.
This decrease is deducted from net income in the operating activities section of a statement of cash flows
prepared under the indirect method.
d.
This decrease is considered only when the operating activities section of a statement of cash flows is prepared
under the direct method.
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Applying
91. Occasionally, companies engage in important investing and financing activities which do not affect cash. If the
amount of the transaction is significant, how should it be disclosed when financial statements are prepared?
a.
In the investing section if the amount of investing activities are greater than the financing activities amount.
b.
In the financing section if the amount of financing activities are greater than the investing activities amount.
c.
In a note to the financial statements or in a supplemental schedule.
d.
The transaction does not need to be disclosed.
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
92. Klein Corp. acquired land by issuing its common stock. How should this transaction be disclosed when a statement of
cash flows is prepared?
a.
In a supplemental schedule of noncash investing and financing activities or in a note.
b.
The acquisition of land should be reported as an investing activity and the issuance of the stock as a financing
activity.
c.
Using the master T-account approach.
d.
The transaction does not need to be disclosed.
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
93. Which of the following transactions is a significant noncash investing and financing activity?
a.
Land is purchased for cash.
b.
Bonds are issued for cash.
c.
Cash equivalents are purchased.
d.
Equipment is acquired by issuing a long-term note.
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
94. Each of the following transactions would be classified as either an investing or a financing activity except
a.
investments in stock are purchased.
b.
a bank loan is obtained.
c.
stock is issued to acquire land.
d.
dividends are paid.
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
95. When using the direct method, how is depreciation expense recorded on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Not reported on the statement of cash flows
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
96. When using the direct method, how is the purchase of equipment for cash shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
97. When using the direct method, how is the collection of cash from customers shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
98. When using the direct method, how is the issuance of stock for cash shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
99. When using the direct method, how is the retirement of bonds payable at their maturity date shown on the statement of
cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
100. When using the direct method, how is the payment of a cash dividend shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
101. When using the direct method, how are salaries paid to employees reported on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
102. When using the direct method, how is the sale of long-term investments for cash reported on the statement of cash
flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
103. When using the indirect method, how is depreciation expense recorded on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
104. When using the indirect method, how is the purchase of equipment for cash shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
105. When using the indirect method, how is the issuing of stock for cash shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Non cash investing and financing activity
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
106. When using the indirect method, how is the receipt of cash from the sale of long-term investments treated on the
statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing or financing activity
ANSWER:
b
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
107. When using the indirect method, how is an increase in accounts receivable during the year shown on the statement of
cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
108. When using the indirect method, how would the retirement of bonds payable at their maturity date be shown on the
statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
109. When using the indirect method, how would the declaration and payment of cash dividends be shown on the
statement of cash flows?
a.
Operating activities
b.
Investing activities
c.
Financing activities
d.
Noncash investing and financing activity
ANSWER:
c
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
110. When using the indirect method, how is the decrease in accounts payable shown on the statement of cash flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing and financing activity
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
111. When using the indirect method, the gain from selling a long-term investment is recognized in which of the
following?
a.
In the operating activity section and the investing activity section of the statement of cash flows.
b.
In the financing activity section of the statement of cash flows.
c.
In the noncash investing or financing activity supplemental section of the statement of cash flows.
d.
Gains are not recognized in the statement of cash flows under the indirect method.
ANSWER:
a
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
112. When using the indirect method, how is the issuance of stock to retire a long-term debt shown on a statement of cash
flows?
a.
Operating activity
b.
Investing activity
c.
Financing activity
d.
Noncash investing or financing activity
ANSWER:
d
DIFFICULTY:
Easy
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Understanding
113. Pound Co. reported the following information at the end of 2016 and 2017:
2016
2017
Land
$ 35,000
$100,000
Common stock
200,000
265,000
An analysis of Pound’s records indicated that there were no cash flow effects resulting from the changes in the two
accounts presented above. How should Pound report the changes in these accounts on a statement of cash flows?
a.
Pound should report $65,000 for the acquisition of land as an investing activity and $65,000 for the issuance of
stock as a financing activity.
b.
Pound should report $65,000 as a noncash investing and financing activity for the acquisition of land by
issuing common stock.
c.
Pound should report the issuance of common stock to acquire land in the financing activity section with a net
cash flow effect of zero.
d.
Pound should report the acquisition of land by issuing common stock in the investing activity section with a
net cash flow effect of zero
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
114. Gaulle Company began the year with a balance of $6,000 in Accounts Receivable and ended the year with $9,000 in
the account. Revenues for the period amounted to $38,000. Under the direct method, Gaulle will report cash collected
from customers of:
a.
$44,000
b.
$35,000
c.
$41,000
d.
$47,000
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
115. Parks Company reported an increase of $370,000 in its accounts receivable during the year 2016. The company's
statement of cash flows for 2016 reported $1 million of cash received from customers. What amount of net sales must
Parks have recorded in 2016?
a.
$370,000
b.
$1,000,000
c.
$1,370,000
d.
$630,000
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
116. Rent expense in Volusia Company's 2017 income statement is $420,000. If Prepaid Rent was $70,000 at December
31, 2016, and is $95,000 at December 31, 2017, the cash paid for rent during 2017 is:
a.
$480,000
b.
$445,000
c.
$395,000
d.
$420,000
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
117. At the end of the first year of operations, the balance sheet of Huntington Beach Co. Industries had the following
balances: Accounts Receivable, $5,000; Accounts Payable, $6,000; Inventory, $3,000; and Unexpired Insurance, $2,000.
The corporation reported net income of $79,000 for the year, including depreciation expense of $5,000, and uses the
indirect method of computing net cash flow from operating activities. Based on this information, net cash flow from
operating activities is:
a.
$82,000
b.
$78,000
c.
$80,000
d.
$77,000
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-04 - LO: 12-04
FACC.PONO.13.12-06 - LO: 12-06
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
118. O’Bryan Company began the year with a balance of $18,000 in Salaries and Wages Payable and ended the year with
$11,000 in the account. Salaries and Wages Expense for the period amounted to $91,000. Under the direct method,
O’Bryan will report cash payments for salaries and wages of:
a.
$84,000
b.
$102,000
c.
$109,000
d.
$98,000
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
119. Use the equation presented below to answer the question that follows:
Cash = CL + LTL + CS + RE – NCCA – LTA
where:
CL = Current liabilities
LTL = Long-term liabilities
CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets
LTA = Long-term assets
Which of the following activities results in a cash outflow?
a.
Decreases in noncash current assets (NCCA)
b.
Decreases in long-term assets (LTA)
c.
Increases in long-term liabilities (LTL)
d.
Decreases in retained earnings (RE)
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
120. Use the equation presented below to answer the question that follows:
Cash = CL + LTL + CS + RE – NCCA – LTA
where:
CL = Current liabilities
LTL = Long-term liabilities
CS = Common stock
RE = Retained earnings
NCCA = Noncash current assets
LTA = Long-term assets
Which of the following activities results in a cash inflow?
a.
Increases in noncash current assets (NCCA)
b.
Decreases in current liabilities (CL)
c.
Increases in common stock (CS)
d.
Decreases in retained earnings (RE)
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
121. Which of the following financing activities results in a cash inflow?
a.
Buying treasury stock
b.
Issuing bonds
c.
Repaying a bank loan
d.
Paying cash dividends
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Understanding
122. Which of the following operating activities results in a cash outflow?
a.
Paying creditors for merchandise
b.
Collecting accounts receivable
c.
Making cash sales
d.
Receiving deposits recorded as unearned revenue
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Understanding
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
123. Which of the following activities is most likely to have a cash flow effect?
a.
Investing in money market funds
b.
Declaring cash dividends
c.
Reissuing treasury stock
d.
Issuing stock to acquire a patent
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Understanding
124. Caler Corp. reported the following information for 2016 and 2017.
Accounts receivable, December 31, 2016
$ 67,000
Accounts receivable, December 31, 2017
63,000
Sales (all on credit)—2017
745,000
How much cash was collected from customers during 2017?
a.
$741,000
b.
$745,000
c.
$749,000
d.
$753,000
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
125. Goldman Corp. reported the following information for 2016 and 2017.
Accounts payable, December 31, 2016
$ 51,000
Accounts payable, December 31, 2017
46,000
Purchases—2017
467,000
How much cash was paid for merchandise purchases during 2017?
a.
$421,000
b.
$462,000
c.
$467,000
d.
$472,000
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
126. Pilot Company reported the following information for 2016 and 2017.
Prepaid insurance, December 31, 2016
$ 2,400
Prepaid insurance, December 31, 2017
1,500
Insurance expense—2017
14,200
How much cash was paid for insurance during 2017?
a.
$13,300
b.
$14,200
c.
$15,100
d.
$15,700
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
127. Kelly Corp. reported the following information for 2016 and 2017.
Salaries payable, December 31, 2016
$ 3,700
Salaries payable, December 31, 2017
1,800
Salaries expense—2017
57,000
How much cash was paid for salaries during 2017?
a.
$55,100
b.
$55,200
c.
$57,000
d.
$58,900
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
128. Tulsa Corp. reported the following information for 2016 and 2017.
Interest payable, December 31, 2016
$5,700
Interest payable, December 31, 2017
6,200
Interest expense—2017
12,250
How much cash was paid for interest during 2017?
a.
$11,750
b.
$12,250
c.
$12,500
d.
$12,750
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
129. Dallas Corp. reported the following information for 2016 and 2017.
Interest receivable, December 31, 2016
$1,100
Interest receivable, December 31, 2017
1,400
Interest income—2017
3,200
How much cash was received for interest during 2017?
a.
$2,900
b.
$3,200
c.
$3,500
d.
$3,800
ANSWER:
a
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
130. Use the information below for Soho Inc. for 2016 and 2017 to answer the following question.
Equipment, December 31, 2016
$65,000
Equipment, December 31, 2017
72,000
Accumulated depreciation, December 31, 2016
39,000
Accumulated depreciation, December 31, 2017
30,000
During 2016, Soho Inc. sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000
was recognized on the sale of the equipment This was the only equipment sale during the year.
What amount would be reported as the cash proceeds from the sale of equipment?
a.
$2,000
b.
$3,000
c.
$5,000
d.
$8,000
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
131. Use the information below for Shorter Inc. for 2016 and 2017 to answer the following question.
Equipment, December 31, 2016
$65,000
Equipment, December 31, 2017
72,000
Accumulated depreciation, December 31, 2016
39,000
Accumulated depreciation, December 31, 2017
30,000
During 2017, Shorter Inc. sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of
$3,000 was recognized on the sale of the equipment This was the only equipment sale during the year.
Assume that all purchases of equipment were paid with cash. How much cash was paid by Shorter for the purchase of
equipment during 2017?
a.
$7,000
b.
$30,000
c.
$37,000
d.
$72,000
ANSWER:
c
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
132. Use the information below for Flora Inc. for 2016 and 2017 to answer the following question.
Equipment, December 31, 2016
$65,000
Equipment, December 31, 2017
72,000
Accumulated depreciation, December 31, 2016
39,000
Accumulated depreciation, December 31, 2017
30,000
During 2017, Flora Inc. sold equipment with a cost of $30,000 and accumulated depreciation of $25,000. A gain of $3,000
was recognized on the sale of the equipment This was the only equipment sale during the year.
What was depreciation expense for 2017?
a.
$9,000
b.
$16,000
c.
$21,000
d.
$30,000
ANSWER:
b
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Analyzing
133. Which of the following statements is false regarding how the cash flow effects of the changes in the equipment and
accumulated depreciation accounts would be reported on a statement of cash flows if the indirect method is used to
prepare the operating activities section?
a.
Cash proceeds from the sale of the equipment would be reported as a cash inflow in the investing activities
section.
b.
The cash paid to purchase equipment would be reported as a cash outflow in the investing activities section
c.
Depreciation expense would be added to net income in the operating activities section.
d.
A loss on the sale of the equipment would be subtracted from net income in the operating activities section
ANSWER:
d
DIFFICULTY:
Moderate
LEARNING OBJECTIVES:
FACC.PONO.13.12-05 - LO: 12-05
KEYWORDS:
Bloom's: Understanding
