Professional Documents
Culture Documents
Chapter 15
Chapter 15
Chapter 15
True/False Questions
2. In the statement of cash flows, dividend payments to the company's stockholders are
treated as a “use” rather than as a “source” of cash.
3. Under the indirect method of determining the net cash flow from operating activities
on the statement of cash flows, a gain on the sale of equipment would be added to net
income.
4. Under the indirect method of determining the net cash provided by operating activities
on the statement of cash flows, increases in current liabilities such as accounts payable
are added to net income.
5. Under the indirect method of determining the net cash provided by operating activities
on the statement of cash flows, dividends are added to net income.
7. The net cash provided by operating activities on the statement of cash flows would
include interest paid to creditors and dividends paid to the company's own
shareholders.
10. The direct method of preparing the statement of cash flows will usually show a greater
total increase in cash than the indirect method.
11. Under the direct method of determining the net cash provided by operations on the
statement of cash flows, the cost of goods sold is converted to a cash basis by
adjusting it for changes in inventories and changes in accounts payable during the
period.
12. Under the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in inventory would be added to cost of
goods sold to convert cost of goods sold to a cash basis.
13. Under the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in prepaid expenses would be added to
selling and administrative expenses to convert selling and administrative expenses to a
cash basis.
15. The Financial Accounting Standards Board (FASB) recommends that companies use
the direct method rather than the indirect method in preparing their statement of cash
flows.
16. Which of the following would be considered a “use” of cash for purposes of
constructing a statement of cash flows?
A) a decrease in accounts receivable.
B) an increase in accounts payable.
C) an increase in common stock.
D) a decrease in bonds payable.
17. Which of the following would be considered a “source” of cash for purposes of
constructing a statement of cash flows?
A) an increase in accounts payable.
B) dividends paid to the company's own shareholders.
C) a decrease in accrued liabilities.
D) an increase in accounts receivable.
18. Evita Corporation prepares its statement of cash flows using the indirect method.
Evita's statement showed “Net cash provided by operating activities” to be $46,000.
Under the direct method, this number would have been:
A) $0.
B) $46,000.
C) greater than $46,000.
D) less than $46,000 but greater than $0.
19. Under the indirect method, which item would be deducted from net income as part of
the process of arriving at cash provided by operating activities on the statement of
cash flows?
A) Patent amortization expense
B) Increase in accounts payable
C) Increase in prepaid expenses
D) Decrease in accounts receivable
20. A decrease in the prepaid expenses account of $1,000 over the course of a year would
be shown on the company's statement of cash flows prepared under the indirect
method as:
A) an addition to net income of $1,000 in order to arrive at net cash provided by
operating activities.
B) a deduction from net income of $1,000 in order to arrive at net cash provided by
operating activities.
C) an addition of $1,000 under financing activities.
D) a deduction of $1,000 under financing activities.
21. An increase in the taxes payable account of $1,000 over the course of a year would be
shown on the company's statement of cash flows prepared under the indirect method
as:
A) an addition to net income of $1,000 in order to arrive at net cash provided by
operating activities.
B) a deduction from net income of $1,000 in order to arrive at net cash provided by
operating activities.
C) an addition of $1,000 under financing activities.
D) a deduction of $1,000 under financing activities.
22. Luella Corporation prepares its statement of cash flows using the indirect method.
Which of the following would be added to net income in the operating activities
section of the statement?
23. Gioja Corporation prepares its statement of cash flows using the indirect method.
Which of the following would be deducted from net income in the operating activities
section of the statement?
24. Olaf Corporation prepares its statement of cash flows using the direct method. The
following items were listed on Olaf's income statement. Which of these items would
also be listed in the operating activities section of Olaf's statement of cash flows?
25. During the year the balance in the prepaid expenses account increased by $6,000. In
order to adjust the company's net income to a cash basis using the direct method on the
statement of cash flows, it would be necessary to:
A) deduct the $6,000 from the operating expenses reported on the income
statement.
B) add the $6,000 to the operating expenses reported on the income statement.
C) deduct the $6,000 from the cost of goods sold reported on the income statement.
D) add the $6,000 to the cost of goods sold reported on the income statement.
26. In a statement of cash flows, all of the following would be classified as operating
activities except:
A) interest paid to creditors.
B) dividends received on stock in another company held as an investment.
C) dividends paid to the company's own common stockholders.
D) interest received on a long-term note receivable.
27. In a statement of cash flows, a change in accounts payable account would be classified
as:
A) an operating activity.
B) a financing activity.
C) an investing activity.
D) a noncash item that need not appear on the statement of cash flows.
28. A decrease in the plant and equipment account of $100,000 over the course of a year
would be shown on the company's statement of cash flows prepared under the indirect
method as:
A) an addition to net income of $100,000 in order to arrive at net cash provided by
operating activities.
B) a deduction from net income of $100,000 in order to arrive at net cash provided
by operating activities.
C) an addition of $100,000 under investing activities.
D) a deduction of $100,000 under investing activities.
31. A company declared and paid a cash dividend. The dividend would appear on the
company's statement of cash flows as:
A) an addition to net income in order to arrive at net cash provided by operating
activities under the indirect method.
B) a deduction from net income in order to arrive at net cash provided by operating
activities under the indirect method.
C) a deduction under investing activities.
D) a deduction under financing activities.
32. Dividends paid to a company's own stockholders of $80,000 would be shown on the
company's statement of cash flows prepared under the indirect method as:
A) an addition of $80,000 under investing activities.
B) a deduction of $80,000 under investing activities.
C) an addition of $80,000 under financing activities.
D) a deduction of $80,000 under financing activities.
34. Which of the following sections of the statement of cash flows will be prepared
differently if the direct method is used instead of the indirect method?
A) operating activities section
B) investing activities section
C) financing activities section
D) all of the above
35. In the statement of cash flows, the sum total of the net cash provided by operating
activities, investing activities, and financing activities would be equal to:
A) zero.
B) the beginning balance of cash and cash equivalents.
C) the ending balance of cash and cash equivalents.
D) the increase or decrease in cash and cash equivalents.
36. Excerpts from Neuwirth Corporation's comparative balance sheet appear below:
37. Excerpts from Deblois Corporation's comparative balance sheet appear below:
38. Excerpts from Aultman Corporation's comparative balance sheet appear below:
Ending Beginning
Balance Balance
Assets:
Current assets:
Cash and cash equivalents......................... $ 47,000 $ 31,000
Accounts receivable................................... 23,000 22,000
Inventory.................................................... 66,000 64,000
Total current assets....................................... 136,000 117,000
Property, plant, and equipment..................... 356,000 338,000
Less accumulated depreciation.................. 184,000 161,000
Net property, plant, and equipment............... 172,000 177,000
Total assets.................................................... $308,000 $294,000
The company's net income (loss) for the year was $10,000 and its cash dividends were
$4,000. The total dollar amount of all of the items that would be classified as sources
when compiling a simplified statement of cash flows is:
A) $29,000
B) $16,000
C) $45,000
D) $25,000
Solution:
Sources
Net income............................................................. $10,000
Increases in liabilities (and contra asset accounts):
Increase in accumulated depreciation................. 23,000
Increase in accounts payable............................... 1,000
Increase in accrued wages and salaries payable.. 1,000
Increase in long-term debt................................... 3,000
Increase in deferred income taxes....................... 4,000
Increases in capital stock accounts:
Increase in common stock................................... 3,000
Total sources.......................................................... $45,000
Ending Beginning
Balance Balance
Assets:
Current assets:
Cash and cash equivalents......................... $ 40,000 $ 33,000
Accounts receivable................................... 19,000 21,000
Inventory.................................................... 67,000 69,000
Total current assets........................................ 126,000 123,000
Property, plant, and equipment..................... 358,000 339,000
Less accumulated depreciation.................. 156,000 132,000
Net property, plant, and equipment............... 202,000 207,000
Total assets.................................................... $328,000 $330,000
The company's net income (loss) for the year was $5,000 and its cash dividends were
$4,000. The total dollar amount of all of the items that would be classified as uses
when compiling a simplified statement of cash flows is:
A) $7,000
B) $40,000
C) $29,000
D) $33,000
Solution:
Uses
Increases in noncash assets:
Increase in property, plant, and equipment........... $19,000
Decreases in liabilities:
Decrease in accounts payable............................... 1,000
Decrease in accrued wages and salaries payable.. 2,000
Decrease in notes payable.................................... 3,000
Decrease in long-term debt................................... 4,000
Dividends paid......................................................... 4,000
Total uses................................................................. $33,000
41. The following information relates to Penha, Inc. for last year:
What is Penha's net cash provided by operating activities for last year on the statement
of cash flows? (Assume that current liabilities do not contain any notes payable.)
A) $108,000
B) $116,000
C) $136,000
D) $139,000
Solution:
42. Morey Company's net income last year was $27,000 and cash dividends declared and
paid to the company's stockholders totaled $13,000. Changes in selected balance sheet
accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable................. $8,000
Inventory.................................. $(3,000)
Prepaid expenses...................... $4,000
Credit balances:
Accumulated depreciation....... $18,000
Accounts payable..................... $6,000
Taxes payable........................... $(4,000)
Bonds payable.......................... $10,000
Based solely on this information, the net cash provided by operations under the
indirect method on the statement of cash flows would be:
A) $16,000
B) $45,000
C) $38,000
D) $25,000
Solution:
43. Norlund Company's net income last year was $21,000. Changes in selected balance
sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable................. $8,000
Inventory.................................. $9,000
Prepaid expenses...................... $(3,000)
Credit balances:
Accumulated depreciation....... $15,000
Accounts payable..................... $(5,000)
Accrued liabilities.................... $11,000
Taxes payable........................... $7,000
Deferred taxes.......................... $0
Based solely on this information, the net cash provided by operations under the
indirect method on the statement of cash flows would be:
A) $63,000
B) $36,000
C) $7,000
D) $35,000
Solution:
44. Alaric Corporation recently sold equipment for $16,000. The equipment was
purchased five years ago for $100,000. The accumulated depreciation on the
equipment on the date of sale was $75,000. Alaric uses the indirect method to prepare
its statement of cash flows. What net effect will this sale have on the investing
activities section of Alaric's statement of cash flows for the current year?
A) no effect
B) $7,000 increase
C) $9,000 decrease
D) $16,000 increase
45. Roble Corporation's balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Beginning
Balance Balance
Assets:
Cash and cash equivalents......................... $ 28 $ 22
Accounts receivable................................... 65 61
Inventory.................................................... 45 47
Plant and equipment................................... 658 520
Accumulated depreciation......................... ( 296) ( 288)
Total assets................................................. $500 $362
Income Statement
Sales........................................................... $1,485
Cost of goods sold...................................... 989
Gross margin.............................................. 496
Selling and administrative expense............ 172
Net operating income................................. 324
Gain on sale of plant and equipment.......... 19
Income before taxes................................... 343
Income taxes.............................................. 103
Net income................................................. $ 240
Cash dividends were $62. The company sold equipment for $19 that was originally
purchased for $5 and that had accumulated depreciation of $5. The net cash provided
by (used by) operations for the year was:
A) $255
B) $236
C) $324
D) $298
Solution:
46. Ivory Corporation's balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Beginning
Balance Balance
Assets:
Cash and cash equivalents......................... $ 37 $ 40
Accounts receivable................................... 44 42
Inventory.................................................... 63 53
Plant and equipment................................... 443 440
Accumulated depreciation......................... ( 268) ( 230)
Total assets................................................. $319 $345
Income Statement
Sales........................................................... $386
Cost of goods sold...................................... 239
Gross margin.............................................. 147
Selling and administrative expense............ 185
Net operating income................................. ( 38)
Gain on sale of plant and equipment.......... 8
Income before taxes................................... (30)
Income taxes.............................................. 0
Net income................................................. ($ 30)
Cash dividends were $1. The company sold equipment for $19 that was originally
purchased for $15 and that had accumulated depreciation of $4. The net cash provided
by (used by) investing activities for the year was:
A) ($18)
B) ($1)
C) $1
D) $19
Solution:
47. Daubenspeck Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $1,093
Cost of goods sold...................................... 671
Gross margin.............................................. 422
Selling and administrative expense............ 145
Net operating income................................. 277
Gain on sale of plant and equipment.......... 20
Income before taxes................................... 297
Income taxes.............................................. 89
Net income................................................. $ 208
Cash dividends were $45. The company sold equipment for $20 that was originally
purchased for $12 and that had accumulated depreciation of $12. The net cash
provided by (used by) financing activities for the year was:
A) ($74)
B) ($33)
C) ($45)
D) $4
Solution:
Financing Activities
Decrease in bonds payable......................... ($33)
Increase in common stock.......................... 4
Cash dividends paid................................... ( 45)
Net cash used in financing activities.......... ($74)
48. The most recent balance sheet and income statement of Helle Corporation appear
below:
Comparative Balance Sheet
Ending Beginning
Balance Balance
Assets:
Cash and cash equivalents......................... $ 21 $ 22
Accounts receivable................................... 56 54
Inventory.................................................... 66 58
Plant and equipment................................... 459 420
Accumulated depreciation......................... ( 225) ( 202)
Total assets................................................. $377 $352
Income Statement
Sales........................................................... $532
Cost of goods sold...................................... 324
Gross margin.............................................. 208
Selling and administrative expense............ 137
Net operating income................................. 71
Income taxes.............................................. 21
Net income................................................. $ 50
Cash dividends were $9. The net cash provided by (used by) operations for the year
was:
A) $46
B) $71
C) $54
D) $4
Solution:
Net income for the year was $129. Cash dividends were $27. The net cash provided by
(used by) operations for the year was:
A) $184
B) $147
C) $111
D) $18
Solution:
The net income for the year was $159. Cash dividends were $34. The net cash
provided by (used by) investing activities for the year was:
A) ($159)
B) ($113)
C) $159
D) $113
Solution:
Investing Activities
Additions to plant and equipment.............. ($159) *
Net cash used by investing activities......... ($159)
*$689 − $530
The net income for the year was $26. Cash dividends were $6. The net cash provided
by (used by) financing activities for the year was:
A) $2
B) $8
C) $12
D) ($6)
Solution:
Financing Activities
Increase in bonds payable.......................... $12
Increase in common stock.......................... 2
Cash dividends paid................................... ( 6)
Net cash used in financing activities.......... $ 8
The net income for the year was $121. Cash dividends were $30. The net cash
provided by (used by) operations for the year was:
A) $173
B) $138
C) $17
D) $104
Solution:
The net income for the year was $91. Cash dividends were $24. The net cash provided
by (used by) investing activities for the year was:
A) $26
B) $62
C) ($26)
D) ($62)
Solution:
Investing Activities
Additions to plant and equipment.............. ($62) *
Net cash used by investing activities......... ($62)
*$552 − $490
The net income for the year was $84. Cash dividends were $21. The net cash provided
by (used by) financing activities for the year was:
A) ($9)
B) $1
C) ($21)
D) $11
Solution:
Financing Activities
Increase in long-term debt......................... $11
Increase in common stock.......................... 1
Cash dividends paid................................... ( 21)
Net cash used by financing activities......... ($ 9)
55. Last year Cummins Company reported a cost of goods sold of $50,000. Inventories
increased by $10,000 during the year, and accounts payable increased by $2,000. The
company uses the direct method to determine the net cash provided by operating
activities on the statement of cash flows. The cost of goods sold adjusted to a cash
basis would be:
A) $42,000
B) $58,000
C) $48,000
D) $60,000
Solution:
56. Last year Lawmond Company reported sales of $120,000 on its income statement.
During the year, accounts receivable increased by $20,000 and accounts payable
decreased by $10,000. The company uses the direct method to determine the net cash
provided by operating activities on the statement of cash flows. The sales revenue
adjusted to a cash basis for the year would be:
A) $100,000
B) $90,000
C) $130,000
D) $150,000
Solution:
57. Cridge Company's selling and administrative expenses for last year totaled $170,000.
During the year the company's prepaid expense account balance increased by $9,000
and accrued liabilities decreased by $13,000. Depreciation charges for the year were
$15,000. Based on this information, selling and administrative expenses adjusted to a
cash basis under the direct method on the statement of cash flows would be:
A) $177,000
B) $207,000
C) $133,000
D) $163,000
Solution:
58. Pietras Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $1,264
Cost of goods sold...................................... 828
Gross margin.............................................. 436
Selling and administrative expense............ 152
Net operating income................................. 284
Gain on sale of plant and equipment.......... 13
Income before taxes................................... 297
Income taxes.............................................. 89
Net income................................................. $ 208
Cash dividends were $57. The company sold equipment for $18 that was originally
purchased for $11 and that had accumulated depreciation of $6. The net cash provided
by (used by) operations for the year was:
A) $213
B) $257
C) $284
D) $200
Solution:
59. The most recent balance sheet and income statement of Ganim Corporation appear
below:
Income Statement
Sales........................................................... $920
Cost of goods sold...................................... 606
Gross margin.............................................. 314
Selling and administrative expense............ 157
Net operating income................................. 157
Income taxes.............................................. 47
Net income................................................. $110
Cash dividends were $20. The net cash provided by (used by) operations for the year
was:
A) $125
B) $95
C) $15
D) $157
Solution:
60. Ostiguy Corporation's most recent comparative balance sheet and income statement
appear below:
Income Statement
Sales........................................................... $883
Cost of goods sold...................................... 580
Gross margin.............................................. 303
Selling and administrative expense............ 164
Net operating income................................. 139
Income taxes.............................................. 42
Net income................................................. $ 97
Cash dividends were $21. The net cash provided by (used by) operations for the year
was:
A) $139
B) $153
C) $41
D) $56
Solution:
61. Last year Martson Company sold equipment with a net book value of $110,000 for
$130,000 in cash. This equipment was originally purchased for $200,000. What will
be the net effect of this transaction on the net cash provided by investing activities on
the statement of cash flows?
A) A net deduction of $70,000 from cash.
B) A net addition of $70,000 to cash.
C) A net deduction of $20,000 from cash.
D) A net addition of $20,000 to cash.
Solution:
Investing Activities
Disposal of equipment............................... ($200,000)
Proceeds from sale of equipment............... 130,000
Net cash used in investing activities.......... ($ 70,000)
Based solely on the above information, the net cash provided by financing activities
for the year on the statement of cash flows would be:
A) $3,000
B) $(131,000)
C) $(22,000)
D) $353,000
Solution:
Financing Activities
Increase in common stock.......................... $100,000
Cash dividends paid................................... ( 7,000)
Decrease in bonds payable......................... ( 90,000)
Net cash provided by financing activities. . $ 3,000
63. Last year Burdic Company's cash account decreased by $4,000. Net cash provided by
investing activities was $31,000. Net cash used in financing activities was $38,000.
On the statement of cash flows, the net cash flow provided by (used in) operating
activities was:
A) $(4,000)
B) $(11,000)
C) $(7,000)
D) $3,000
Solution:
Ending Beginning
Balance Balance
Assets:
Current assets:
Cash and cash equivalents........................ $ 31,000 $ 28,000
Accounts receivable................................. 18,000 20,000
Inventory.................................................. 70,000 66,000
Total current assets...................................... 119,000 114,000
Property, plant, and equipment.................... 374,000 354,000
Less accumulated depreciation................. 190,000 165,000
Net property, plant, and equipment............. 184,000 189,000
Total assets................................................... $303,000 $303,000
The company's net income (loss) for the year was ($3,000) and its cash dividends were
$3,000.
64. Which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
A) The change in Accounts Receivable is a source; The change in Inventory is a
source
B) The change in Accounts Receivable is a source; The change in Inventory is a use
C) The change in Accounts Receivable is a use; The change in Inventory is a use
D) The change in Accounts Receivable is a use; The change in Inventory is a source
65. Which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
A) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a source
B) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a use
C) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a source
D) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a use
66. Which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
A) The change in Property, Plant, and Equipment is a source; The change in Long-
Term Debt is a source
B) The change in Property, Plant, and Equipment is a use; The change in Long-
Term Debt is a use
C) The change in Property, Plant, and Equipment is a source; The change in Long-
Term Debt is a use
D) The change in Property, Plant, and Equipment is a use; The change in Long-
Term Debt is a source
67. The total dollar amount of all of the items that would be classified as sources when
compiling a simplified statement of cash flows is:
A) $34,000
B) $3,000
C) $28,000
D) $37,000
Solution:
Sources
Decreases in noncash assets:
Decrease in accounts receivable............................ $ 2,000
Increases in liabilities (and contra asset accounts):
Increase in accumulated depreciation.................... 25,000
Increase in accounts payable................................. 4,000
Increase in notes payable....................................... 1,000
Increase in long-term debt..................................... 3,000
Increases in capital stock accounts:
Increase in common stock..................................... 2,000
Total sources............................................................. $37,000
68. The total dollar amount of all of the items that would be classified as uses when
compiling a simplified statement of cash flows is:
A) $34,000
B) $3,000
C) $37,000
D) $28,000
Solution:
Uses
Net loss $ 3,000
Increases in noncash assets:
Increase in inventory.............................................. 4,000
Increase in property, plant, and equipment............ 20,000
Decreases in liabilities:
Decrease in accrued wages and salaries payable... 2,000
Decrease in accrued income taxes payable............ 1,000
Decrease in deferred income taxes........................ 1,000
Dividends.................................................................. 3,000
Total uses................................................................... $34,000
The most recent comparative balance sheet of Giacomelli Corporation appears below:
Ending Beginning
Balance Balance
Assets:
Current assets:
Cash and cash equivalents..........................................................................
$ 37,000 $ 29,000
Accounts receivable................................... 20,000 24,000
Inventory.................................................... 70,000 68,000
Total current assets........................................ 127,000 121,000
Property, plant, and equipment..................... 424,000 399,000
Less accumulated depreciation.................. 231,000 200,000
Net property, plant, and equipment............... 193,000 199,000
Total assets.................................................... $320,000 $320,000
69. Which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
A) The change in Accounts Receivable is a source; The change in Inventory is a
source
B) The change in Accounts Receivable is a source; The change in Inventory is a use
C) The change in Accounts Receivable is a use; The change in Inventory is a source
D) The change in Accounts Receivable is a use; The change in Inventory is a use
70. Which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
A) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a use
B) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a use
C) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a source
D) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a source
71. Which of the following classifications of changes in balance sheet accounts as sources
and uses is correct?
A) The change in Property, Plant, and Equipment is a use; The change in Long-
Term Debt is a source
B) The change in Property, Plant, and Equipment is a source; The change in Long-
Term Debt is a source
C) The change in Property, Plant, and Equipment is a use; The change in Long-
Term Debt is a use
D) The change in Property, Plant, and Equipment is a source; The change in Long-
Term Debt is a use
Ending Beginning
Balance Balance
Assets:
Current assets:
Cash and cash equivalents..........................................................................
$ 42,000 $ 31,000
Accounts receivable................................... 22,000 18,000
Inventory.................................................... 66,000 70,000
Total current assets........................................ 130,000 119,000
Property, plant, and equipment..................... 401,000 377,000
Less accumulated depreciation.................. 207,000 177,000
Net property, plant, and equipment............... 194,000 200,000
Total assets.................................................... $324,000 $319,000
The company's net income (loss) for the year was $11,000 and its cash dividends were $4,000.
72. The total dollar amount of all of the items that would be classified as sources when
compiling a simplified statement of cash flows is:
A) $11,000
B) $39,000
C) $43,000
D) $54,000
Solution:
Sources
Net income $11,000
Decreases in noncash assets:
Decrease in inventory............................................ 4,000
Increases in liabilities (and contra asset accounts):
Increase in accumulated depreciation.................... 30,000
Increase in wages and salaries payable.................. 4,000
Increase in notes payable....................................... 3,000
Increase in long-term debt..................................... 2,000
Total sources................................................................ $54,000
73. The total dollar amount of all of the items that would be classified as uses when
compiling a simplified statement of cash flows is:
A) $11,000
B) $39,000
C) $54,000
D) $43,000
Solution:
Uses
Increases in noncash assets:
Increase in accounts receivable................................. $ 4,000
Increase in property, plant, and equipment............... 24,000
Decreases in liabilities:
Decrease in accounts payable................................... 2,000
Decrease in accrued income taxes payable............... 4,000
Decrease in deferred income taxes........................... 4,000
Decrease in capital stock accounts:
Decrease in common stock....................................... 1,000
Dividends..................................................................... 4,000
Total uses...................................................................... $43,000
Waite Company's comparative balance sheet and income statement for last year appear below:
Ending Beginning
Balance Balance
Cash...................................................... $ 27,000 $ 22,000
Accounts receivable............................. 56,000 60,000
Inventory.............................................. 48,000 36,000
Prepaid expenses.................................. 14,000 11,000
Long-term investments........................ 270,000 230,000
Plant and equipment............................. 440,000 440,000
Accumulated depreciation................... ( 306,000) ( 276,000)
Total assets........................................... $549,000 $523,000
Income Statement
Sales........................................................... $510,000
Cost of goods sold...................................... 280,000
Gross margin.............................................. 230,000
Selling and administrative expense............ 150,000
Net operating income................................. 80,000
Income taxes.............................................. 24,000
Net income................................................. $ 56,000
The company declared and paid $24,000 in cash dividends during the year. The following
questions pertain to the company's statement of cash flows.
74. The net cash provided by (used in) operating activities last year was:
A) $56,000
B) $79,000
C) $86,000
D) $33,000
Solution:
Operating Activities
Net income................................................................ $56,000
Adjustments to convert net income to a cash basis:
Depreciation charges............................................. $30,000
Decrease in accounts receivable............................ 4,000
Increase in inventory............................................. ( 12,000)
Increase in prepaid expenses................................. ( 3,000)
Increase in accounts payable................................. 10,000
Decrease in accrued liabilities............................... ( 5,000)
Decrease in taxes payable...................................... ( 3,000)
Increase in deferred taxes...................................... 2,000 23,000
Net cash provided by operating activities................. $79,000
75. The net cash provided by (used in) investing activities last year was:
A) $(40,000)
B) $40,000
C) $(30,000)
D) $30,000
Solution:
Investing Activities
Increase in long-term investments............. ($40,000)
Net cash used in investing.......................... ($40,000)
76. The net cash provided by (used in) financing activities last year was:
A) $10,000
B) $(10,000)
C) $(34,000)
D) $34,000
Solution:
Financing Activities
Decrease in bonds payable......................... ($20,000)
Increase in common stock.......................... 10,000
Cash dividends paid................................... ( 24,000)
Net cash used in financing activities.......... ($34,000)
Meganas Company's net income last year was $183,000. Changes in the company's balance
sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Cash............................................ $(4,000)
Accounts receivable.................... $(8,000)
Inventory..................................... $13,000
Prepaid expenses......................... $(9,000)
Long-term investments............... $60,000
Plant and equipment.................... $45,000
Credit balances:
Accumulated depreciation.......... $56,000
Accounts payable........................ $3,000
Accrued liabilities....................... $8,000
Taxes payable.............................. $(2,000)
Bonds payable............................. $(60,000)
Deferred taxes............................. $6,000
Common stock............................ $20,000
Retained earnings........................ $66,000
The company declared and paid cash dividends of $117,000 last year. The following questions
pertain to the company's statement of cash flows.
77. The net cash provided by (used in) operating activities last year was:
A) $258,000
B) $183,000
C) $239,000
D) $202,000
Solution:
Operating Activities
Net income............................................................. $183,000
Adjustments to convert net income to a cash basis:
Depreciation charges........................................... $56,000
Decrease in accounts receivable......................... 8,000
Increase in inventory........................................... ( 13,000)
Decrease in prepaid expenses............................. 9,000
Increase in accounts payable............................... 3,000
Increase in accrued liabilities.............................. 8,000
Decrease in taxes payable................................... ( 2,000)
Increase in deferred income taxes....................... 6,000 75,000
Net cash provided by operating activities.............. $258,000
78. The net cash provided by (used in) investing activities last year was:
A) $(105,000)
B) $105,000
C) $(85,000)
D) $85,000
Solution:
Investing Activities
Additions to plant and equipment.............. ($ 45,000)
Additions to long-term investments........... ( 60,000)
Net cash used by investing activities......... ($105,000)
79. The net cash provided by (used in) financing activities last year was:
A) $40,000
B) $(40,000)
C) $157,000
D) $(157,000)
Solution:
Financing Activities
Decrease in bonds payable......................... ($ 60,000)
Increase in common stock.......................... 20,000
Cash dividends paid................................... ( 117,000)
Net cash used in financing activities.......... ($157,000)
On the statement of cash flows, some of these events are classified as operating activities,
some are classified as investing activities, and some are classified as financing activities.
80. Based solely on the information above, the net cash provided by (used in) financing
activities on the statement of cash flows would be:
A) $(39,000)
B) $1,321,000
C) $(233,000)
D) $(238,000)
Solution:
Financing Activities
Issuance of common stock......................... $170,000
Cash dividends paid................................... ( 33,000)
Repayment of bonds.................................. ( 370,000)
Net cash used by financing activities......... ($233,000)
81. Based solely on the information above, the net cash provided by (used in) investing
activities on the statement of cash flows would be:
A) $(310,000)
B) $(1,321,000)
C) $(520,000)
D) $(890,000)
Solution:
Investing Activities
Purchase of bonds...................................... ($ 90,000)
Collection of loan....................................... 210,000
Purchase of equipment............................... ( 430,000)
Net cash used by investing activities......... ($310,000)
Income Statement
Sales........................................................... $1,196
Cost of goods sold...................................... 786
Gross margin.............................................. 410
Selling and administrative expense............ 189
Net operating income................................. 221
Gain on sale of plant and equipment.......... 12
Income before taxes................................... 233
Income taxes.............................................. 70
Net income................................................. $ 163
Cash dividends were $40. The company sold equipment for $14 that was originally purchased
for $9 and that had accumulated depreciation of $7.
82. The net cash provided by (used by) operations for the year was:
A) $180
B) $168
C) $208
D) $221
Solution:
Operating Activities
Net income............................................................. $163
Adjustments to convert net income to a cash basis:
Depreciation charges.......................................... $25
Increase in accounts receivable.......................... ( 8)
Decrease in inventory......................................... 9
Increase in accounts payable.............................. 3
Decrease in wages payable................................. ( 4)
Decrease in taxes payable................................... ( 2)
Decrease in deferred income taxes..................... ( 6)
Gain on sale of plant and equipment.................. ( 12) 5
Net cash provided by operating activities.............. $168
83. The net cash provided by (used by) investing activities for the year was:
A) ($88)
B) $14
C) ($74)
D) $74
Solution:
Investing Activities
Proceeds from sale of equipment............... $14
Purchase of plant and equipment............... ( 88) *
Net cash used by investing activities......... ($74)
84. The net cash provided by (used by) financing activities for the year was:
A) $1
B) ($40)
C) ($50)
D) ($89)
Solution:
Financing Activities
Decrease in bonds payable......................... ($50)
Increase in common stock.......................... 1
Cash dividends paid................................... ( 40)
Net cash used by financing activities......... ($89)
The most recent balance sheet and income statement of Cowger Corporation appear below:
Income Statement
Sales........................................................... $677
Cost of goods sold...................................... 431
Gross margin.............................................. 246
Selling and administrative expense............ 175
Net operating income................................. 71
Income taxes.............................................. 21
Net income................................................. $ 50
85. The net cash provided by (used by) operations for the year was:
A) $71
B) $65
C) $35
D) $15
Solution:
Operating Activities
Net income............................................................... $50
Adjustments to convert net income to a cash basis:
Depreciation charges............................................ $20
Decrease in accounts receivable.......................... 3
Increase in inventory............................................ ( 6)
Decrease in accounts payable.............................. ( 7)
Increase in wages payable.................................... 2
Increase in income taxes payable......................... 1
Increase in deferred income taxes payable.......... 2 15
Net cash provided by operating activities............... $65
86. The net cash provided by (used by) investing activities for the year was:
A) ($8)
B) $8
C) $28
D) ($28)
Solution:
Investing Activities
Additions to plant and equipment.............. ($28)
Net cash used by investing activities......... ($28)
87. The net cash provided by (used by) financing activities for the year was:
A) ($36)
B) ($32)
C) $5
D) ($9)
Solution:
Financing Activities
Decrease in bonds payable......................... ($32)
Increase in common stock.......................... 5
Cash dividends paid................................... ( 9)
Net cash used by financing activities......... ($36)
Net income for the year was $76. Cash dividends were $19.
88. The net cash provided by (used by) operations for the year was:
A) $78
B) $109
C) $2
D) $74
Solution:
Operating Activities
Net income................................................................ $76
Adjustments to convert net income to a cash basis:
Depreciation charges............................................. $32
Increase in accounts receivable............................. ( 10)
Increase in inventory............................................. ( 7)
Decrease in accounts payable............................... ( 7)
Decrease in wages payable................................... ( 1)
Decrease in income taxes payable......................... ( 1)
Decrease in deferred income taxes payable.......... ( 4) 2
Net cash provided by operating activities................. $78
89. The net cash provided by (used by) investing activities for the year was:
A) ($27)
B) $27
C) $59
D) ($59)
Solution:
Investing Activities
Additions to plant and equipment.............. ($59)
Net cash used by investing activities......... ($59)
90. The net cash provided by (used by) financing activities for the year was:
A) ($14)
B) $4
C) ($19)
D) $1
Solution:
Financing Activities
Increase in bonds payable.......................... $ 4
Increase in common stock.......................... 1
Cash dividends paid................................... ( 19)
Net cash used by financing activities......... ($14)
Income Statement
Sales........................................................... $941
Cost of goods sold...................................... 598
Gross margin.............................................. 343
Selling and administrative expense............ 193
Net operating income................................. 150
Income taxes.............................................. 45
Net income................................................. $105
91. The net cash provided by (used by) operations for the year was:
A) $134
B) $29
C) $76
D) $150
Solution:
Operating Activities
Net income................................................................ $105
Adjustments to convert net income to a cash basis:
Depreciation charges............................................. $29
Increase in accounts receivable............................. ( 7)
Decrease in inventory............................................ 2
Increase in accounts payable................................. 5 29
Net cash provided by operating activities................. $134
92. The net cash provided by (used by) investing activities for the year was:
A) $40
B) ($40)
C) ($69)
D) $69
Solution:
Investing Activities
Additions to plant and equipment.............. ($69)
Net cash used by investing activities......... ($69)
93. The net cash provided by (used by) financing activities for the year was:
A) ($63)
B) ($27)
C) ($38)
D) $2
Solution:
Financing Activities
Decrease in long-term debt........................ ($38)
Increase in common stock.......................... 2
Cash dividends paid................................... ( 27)
Net cash used by financing activities......... ($63)
Net income for the year was $31. Cash dividends were $6.
94. The net cash provided by (used by) operations for the year was:
A) $44
B) ($39)
C) $101
D) $70
Solution:
Operating Activities
Net income............................................................. $31
Adjustments to convert net income to a cash basis:
Depreciation charges.......................................... $69
Increase in accounts receivable.......................... ( 8)
Decrease in inventory......................................... 1
Increase in accounts payable.............................. 8 70
Net cash provided by operating activities.............. $101
95. The net cash provided by (used by) investing activities for the year was:
A) $89
B) ($89)
C) $20
D) ($20)
Solution:
Investing Activities
Additions to plant and equipment.............. ($89)
Net cash used by investing activities......... ($89)
96. The net cash provided by (used by) financing activities for the year was:
A) ($2)
B) $1
C) ($6)
D) ($7)
Solution:
Financing Activities
Decrease in long-term debt........................ ($2)
Increase in common stock.......................... 1
Cash dividends paid................................... ( 6)
Net cash used by financing activities......... ($7)
(Appendix) Van Wyck Company's comparative balance sheet and income statement for last
year appear below:
Income Statement
Sales........................................................... $900,000
Cost of goods sold...................................... 490,000
Gross margin.............................................. 410,000
Selling and administrative expense............ 270,000
Net operating income................................. 140,000
Income taxes.............................................. 42,000
Net income................................................. $ 98,000
The company declared and paid $20,000 in cash dividends during the year. The company uses
the direct method to determine the net cash provided by operating activities.
97. On the statement of cash flows, the sales revenue adjusted to a cash basis would be:
A) $900,000
B) $877,000
C) $923,000
D) $859,000
Solution:
98. On the statement of cash flows, the cost of goods sold adjusted to a cash basis would
be:
A) $494,000
B) $490,000
C) $486,000
D) $512,000
Solution:
99. On the statement of cash flows, the operating expenses adjusted to a cash basis would
be:
A) $270,000
B) $218,000
C) $256,000
D) $322,000
Solution:
100. On the statement of cash flows, the income tax expense adjusted to a cash basis would
be:
A) $42,000
B) $36,000
C) $49,000
D) $32,000
Solution:
(Appendix) The changes in Tencate Company's balance sheet account balances for last year
appear below:
Increases
(Decreases)
Debit balances:
Cash............................................ $8,000
Accounts receivable.................... $(6,000)
Inventory..................................... $2,000
Prepaid expenses......................... $(13,000)
Long-term investments............... $70,000
Plant and equipment.................... $55,000
Credit balances:
Accumulated depreciation.......... $67,000
Accounts payable........................ $(14,000)
Accrued liabilities....................... $2,000
Taxes payable.............................. $7,000
Bonds payable............................. $(60,000)
Deferred taxes............................. $(7,000)
Common stock............................ $20,000
Retained earnings........................ $101,000
Sales..................................................... $970,000
Cost of goods sold................................ 530,000
Gross margin........................................ 440,000
Selling and administrative expense...... 290,000
Net operating income........................... 150,000
Income taxes........................................ 45,000
Net income........................................... $105,000
The company declared and paid $4,000 in cash dividends during the year. The company uses
the direct method to determine the net cash provided by operating activities.
101. On the statement of cash flows, the sales revenue adjusted to a cash basis would be:
A) $978,000
B) $976,000
C) $970,000
D) $964,000
Solution:
102. On the statement of cash flows, the cost of goods sold adjusted to a cash basis would
be:
A) $514,000
B) $544,000
C) $546,000
D) $530,000
Solution:
103. On the statement of cash flows, the operating expenses adjusted to a cash basis would
be:
A) $290,000
B) $372,000
C) $275,000
D) $208,000
Solution:
104. On the statement of cash flows, the income tax expense adjusted to a cash basis would
be:
A) $40,000
B) $42,000
C) $45,000
D) $46,000
Solution:
(Appendix) Cliburn Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $690
Cost of goods sold...................................... 456
Gross margin.............................................. 234
Selling and administrative expense............ 150
Net operating income................................. 84
Gain on sale of plant and equipment.......... 9
Income before taxes................................... 93
Income taxes.............................................. 28
Net income................................................. $ 65
Cash dividends were $15. The company sold equipment for $11 that was originally purchased
for $3 and that had accumulated depreciation of $1.
105. The net cash provided by (used by) operations for the year was:
A) $73
B) $84
C) $64
D) $79
Solution:
106. The net cash provided by (used by) investing activities for the year was:
A) ($56)
B) $11
C) ($67)
D) $56
Solution:
Investing Activities
Additions to plant and equipment.............. ($67) *
Proceeds from sale of equipment............... 11
Net cash used by investing activities......... ($56)
107. The net cash provided by (used by) financing activities for the year was:
A) $3
B) $4
C) ($15)
D) ($8)
Solution:
Financing Activities
Increase in bonds payable.......................... $ 4
Increase in common stock.......................... 3
Cash dividends paid................................... ( 15)
Net cash used by financing activities......... ($ 8)
(Appendix) The most recent balance sheet and income statement of Spadafino Corporation
appear below:
Income Statement
Sales........................................................... $722
Cost of goods sold...................................... 465
Gross margin.............................................. 257
Selling and administrative expense............ 146
Net operating income................................. 111
Income taxes.............................................. 33
Net income................................................. $ 78
108. The net cash provided by (used by) operations for the year was:
A) $28
B) $111
C) $106
D) $50
Solution:
109. The net cash provided by (used by) investing activities for the year was:
A) ($34)
B) $48
C) ($48)
D) $34
Solution:
Investing Activities
Additions to plant and equipment.............. ($48)
Net cash used by investing activities......... ($48)
110. The net cash provided by (used by) financing activities for the year was:
A) ($50)
B) ($34)
C) $5
D) ($21)
Solution:
Financing Activities
Decrease in bonds payable......................... ($34)
Increase in common stock.......................... 5
Cash dividends paid................................... ( 21)
Net cash used by financing activities......... ($50)
(Appendix) Karpinski Corporation's most recent comparative balance sheet and income
statement appear below:
Income Statement
Sales........................................................... $1,087
Cost of goods sold...................................... 724
Gross margin.............................................. 363
Selling and administrative expense............ 179
Net operating income................................. 184
Income taxes.............................................. 55
Net income................................................. $ 129
111. The net cash provided by (used by) operations for the year was:
A) $34
B) $184
C) $95
D) $163
Solution:
112. The net cash provided by (used by) investing activities for the year was:
A) $82
B) ($124)
C) ($82)
D) $124
Solution:
Investing Activities
Additions to plant and equipment.............. ($124)
Net cash used by investing activities......... ($124)
113. The net cash provided by (used by) financing activities for the year was:
A) ($32)
B) ($31)
C) $4
D) ($5)
Solution:
Financing Activities
Decrease in bonds payable......................... ($ 5)
Increase in common stock.......................... 4
Cash dividends paid................................... ( 31)
Net cash used by financing activities......... ($32)
Essay Questions
Ending Beginning
Balance Balance
Assets:
Current assets:
Cash and cash equivalents...................... $ 42,000 $ 26,000
Accounts receivable................................ 22,000 26,000
Inventory................................................. 77,000 75,000
Total current assets..................................... 141,000 127,000
Property, plant, and equipment.................. 340,000 315,000
Less accumulated depreciation............... 218,000 187,000
Net property, plant, and equipment............ 122,000 128,000
Total assets................................................. $263,000 $255,000
The company's net income (loss) for the year was $7,000 and its cash dividends were
$2,000.
Required:
Classify the change for the year in each balance sheet account as a source, use, or
neither a source nor a use. (Do this only for the individual accounts-not for totals or
subtotals.)
Ans:
Ending Beginning
Balance Balance Change
Cash and cash equivalents........... 42,000 26,000 +16,000 Neither
Accounts receivable..................... 22,000 26,000 -4,000 Source
Inventory...................................... 77,000 75,000 +2,000 Use
Property, plant, and equipment.... 340,000 315,000 +25,000 Use
Less accumulated depreciation.... 218,000 187,000 +31,000 Source
*The change in retained earnings consists of two elements: net income (loss) and
dividends. The net income of $7,000 is classified as a source and the dividends of
$2,000 are classified as a use.
115. The ending and beginning balances of Diogo Corporation's balance sheet accounts for
the most recent year are listed below:
Ending Beginning
Balance Balance
Assets & Contra-Assets:
Cash and cash equivalents......................... $40,000 $28,000
Accounts receivable................................... $17,000 $14,000
Inventory.................................................... $60,000 $62,000
Property and buildings............................... $406,000 $383,000
Accumulated depreciation......................... $234,000 $205,000
The company's net income (loss) for the year was $1,000 and its cash dividends were
$4,000.
Required:
Classify the change for the year in each balance sheet account as a source, use, or
neither a source nor a use.
Ans:
Ending Beginning
Balance Balance Change
Cash and cash equivalents..... 40,000 28,000 +12,000 Neither
Accounts receivable............... 17,000 14,000 +3,000 Use
Inventory................................ 60,000 62,000 -2,000 Source
Property and buildings........... 406,000 383,000 +23,000 Use
Accumulated depreciation..... 234,000 205,000 +29,000 Source
*The change in retained earnings consists of two elements: net income (loss) and
dividends. The net income of $1,000 is classified as a source and the dividends of
$4,000 are classified as a use.
116. Burch Company's net income last year was $119,000. Changes in the company's
balance sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Cash...................................... $29,000
Accounts receivable.............. $(21,000)
Inventory............................... $12,000
Prepaid expenses................... $(8,000)
Long-term investments......... $80,000
Plant and equipment.............. $10,000
Credit balances:
Accumulated depreciation.... $26,000
Accounts payable.................. $23,000
Accrued liabilities................. $14,000
Taxes payable........................ $(9,000)
Bonds payable....................... $(50,000)
Deferred taxes....................... $4,000
Common stock...................... $20,000
Retained earnings.................. $74,000
The company declared and paid cash dividends of $45,000 last year.
Required:
a. Construct in good form the operating activities section of the company's statement
of cash flows for the year. (Use the indirect method.)
b. Construct in good form the investing activities section of the company's statement
of cash flows for the year.
c. Construct in good form the financing activities section of the company's statement
of cash flows for the year.
Ans:
a. Operating activities
Net income.................................................... $119,000
Adjustments:
Depreciation charges.................................. $26,000
Decrease in accounts receivable................ 21,000
Increase in inventory.................................. (12,000)
Decrease in prepaid expenses.................... 8,000
Increase in accounts payable...................... 23,000
Increase in accrued liabilities..................... 14,000
Decrease in taxes payable.......................... (9,000)
Increase in deferred taxes.......................... 4,000 75,000
Net cash provided by operating activities..... $194,000
b. Investing activities:
Increase in long-term investments................ $(80,000)
Increase in plant & equipment...................... (10,000)
Net cash used for investing activities............ $(90,000)
c. Financing activities:
Decrease in bonds payable............................ $(50,000)
Increase in common stock............................. 20,000
Cash dividends.............................................. (45,000)
Net cash used in financing activities............. $(75,000)
117. Biven Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $620
Cost of goods sold...................................... 381
Gross margin.............................................. 239
Selling and administrative expense............ 103
Net operating income................................. 136
Gain on sale of plant and equipment.......... 20
Income before taxes................................... 156
Income taxes.............................................. 47
Net income................................................. $109
Cash dividends were $31. The company sold equipment for $20 that was originally
purchased for $14 and that had accumulated depreciation of $14.
Required:
Prepare a statement of cash flows for the year using the indirect method.
Ans:
118. Danford Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $546
Cost of goods sold...................................... 363
Gross margin.............................................. 183
Selling and administrative expense............ 134
Net operating income................................. 49
Gain on sale of plant and equipment.......... 8
Income before taxes................................... 57
Income taxes.............................................. 17
Net income................................................. $ 40
Cash dividends were $8. The company sold equipment for $12 that was originally
purchased for $9 and that had accumulated depreciation of $5.
Required:
Determine the net cash provided by (used by) operating activities for the year using
the indirect method.
Ans:
Dano Company's comparative balance sheet and income statement for last year appear
below:
Statement of Financial Position
Ending Beginning
Balance Balance
Cash............................................................ $ 41,000 $ 20,000
Accounts receivable................................... 43,000 57,000
Inventory.................................................... 66,000 53,000
Prepaid expenses........................................ 14,000 11,000
Long-term investments.............................. 310,000 240,000
Plant and equipment................................... 580,000 580,000
Accumulated depreciation......................... ( 369,000) ( 340,000)
Total assets................................................. $685,000 $621,000
Income Statement
Sales........................................................... $540,000
Cost of goods sold...................................... 220,000
Gross margin.............................................. 320,000
Selling and administrative expense............ 200,000
Net operating income................................. 120,000
Income taxes.............................................. 36,000
Net income................................................. $ 84,000
The company declared and paid $34,000 in cash dividends during the year.
Required:
a. Construct in good form the operating activities section of the company's statement
of cash flows for the year.
b. Construct in good form the investing activities section of the company's statement
of cash flows for the year.
c. Construct in good form the financing activities section of the company's statement
of cash flows for the year.
Ans:
a. Operating activities
INDIRECT METHOD
DIRECT METHOD
Sales............................................................... $540,000
Adjustments to a cash basis:
Decrease in accounts receivable................. +14,000 $554,000
b. Investing activities:
Increase in long-term investments............. $(70,000)
Net cash used for investing activities......... $(70,000)
c. Financing activities:
Decrease in bonds payable......................... $(40,000)
Increase in common stock.......................... 20,000
Cash dividends........................................... ( 34,000)
Net cash used in financing activities.......... $(54,000)
120. Sary Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $895
Cost of goods sold...................................... 557
Gross margin.............................................. 338
Selling and administrative expense............ 177
Net operating income................................. 161
Income taxes.............................................. 48
Net income................................................. $113
Required:
Prepare a statement of cash flows in good form using the indirect method.
Ans:
The net income for the year was $108. Cash dividends were $28.
Required:
Prepare a statement of cash flows in good form using the indirect method.
Ans:
122. Fryberger Corporation's balance sheet and income statement appear below:
Income Statement
Sales............................................................... $737
Cost of goods sold.......................................... 454
Gross margin.................................................. 283
Selling and administrative expense................ 173
Net operating income..................................... 110
Income taxes.................................................. 33
Net income..................................................... $ 77
Required:
Prepare a statement of cash flows in good form using the indirect method.
Ans:
Net income for the year was $105. Cash dividends were $21.
Required:
Prepare a statement of cash flows in good form using the indirect method.
Ans:
124. Carman Company's comparative balance sheet and income statement for last year
appear below:
Statement of Financial Position
Ending Beginning
Balance Balance
Cash............................................................ $ 70,000 $ 38,000
Accounts receivable................................... 76,000 52,000
Inventory.................................................... 24,000 42,000
Prepaid expenses........................................ 8,000 16,000
Long-term investments.............................. 260,000 210,000
Plant and equipment................................... 530,000 510,000
Accumulated depreciation......................... ( 398,000) ( 350,000)
Total assets................................................. $570,000 $518,000
Income Statement
Sales........................................................... $610,000
Cost of goods sold...................................... 310,000
Gross margin.............................................. 300,000
Selling and administrative expense............ 190,000
Net operating income................................. 110,000
Income taxes.............................................. 33,000
Net income................................................. $ 77,000
The company declared and paid $8,000 in cash dividends during the year.
Required:
Construct in good form the operating activities section of the company's statement of
cash flows for the year using the direct method.
Ans:
Sales................................................................. $610,000
Adjustments to a cash basis:
Increase in accounts receivable........................ -24,000 $586,000
125. Boehning Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $954
Cost of goods sold...................................... 606
Gross margin.............................................. 348
Selling and administrative expense............ 162
Net operating income................................. 186
Gain on sale of plant and equipment.......... 10
Income before taxes................................... 196
Income taxes.............................................. 59
Net income................................................. $137
Cash dividends were $24. The company sold equipment for $10 that was originally
purchased for $4 and that had accumulated depreciation of $4.
Required:
Using the direct method, determine the net cash provided by (used by) operating
activities.
Ans:
Sales.............................................................. $954
Increase in accounts receivable..................... ( 5) $949
Income taxes................................................. 59
Increase in taxes payable.............................. (1)
Decrease in deferred taxes............................ 4 62
126. May Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $606
Cost of goods sold...................................... 396
Gross margin.............................................. 210
Selling and administrative expense............ 174
Net operating income................................. 36
Income taxes.............................................. 11
Net income................................................. $ 25
Required:
Prepare the operating activities section of the statement of cash flows using the direct
method. In other words, determine the net cash provided by or used by operating
activities using the direct method.
Ans:
Sales................................................................. $606
Decrease in accounts receivable...................... 1 $607
Income taxes.................................................... 11
Increase in taxes payable................................. (2)
Decrease in deferred taxes............................... 1 10
127. Heckler Corporation's balance sheet and income statement appear below:
Income Statement
Sales........................................................... $618
Cost of goods sold...................................... 398
Gross margin.............................................. 220
Selling and administrative expense............ 156
Net operating income................................. 64
Income taxes.............................................. 19
Net income................................................. $ 45
Required:
Prepare the operating activities section of the statement of cash flows in good form
using the direct method.
Ans:
Sales.............................................................. $618
Decrease in accounts receivable................... 3 $621
Income taxes................................................. 19