Chapter 14

Question 1

350.	All of the following activities are reported on the statement of cash flows except 
A.	Financing activities 
B.	Operating activities
C.	Investing activities
D.	Marketing activities

Answer 1

D

Question 2

351. Activities that create long-term liabilities are usually
     A. Noncash investing and financing activities
     B. Investing activities
     C. Financing activities
     D. Operating activities

Answer 2

C

Question 3

352.	Activities affecting long-term assets are
A.	Marketing activities
B.	Financing activities
C.	Investing activities
D.	Marketing activities

Answer 3

C

Question 4

353.	In 20X6, PMW Corporation borrowed $120,000, paid dividends of $35,000, issued 10,000 shares for $46 per share, purchased land for $250,000, and received dividends of $20,000. Net income was $160,000, and depreciation for the year totaled $8,000. How much should be reported as net cash provided by operating activities by the indirect method? 
A.	$205,000
B.	$168,000
C.	$230,000
D.	$152,000

Answer 4

Answer: B
Chapter: 11
Explanation: $160,000 + $8,000 = $168,000

Question 5

354.	Activities that obtain the cash needed to launch and sustain a company are
A.	Investing activities
B.	Financing activities
C.	Marketing activities
D.	Income activities

Answer 5

B

Question 6

355. The exchange of shares for land
     A. Would be reported as noncash investing and financing activities
     B. Would be reported as financing activities
     C. Would not be reported on the statement of cash flows
     D. Would be reported as investing activities

Answer 6

A

Question 7

360.	Sweet Treat Ice Cream began the year with $80,000 in accounts receivable and ended the year with $60,000 in accounts receivable. If sales for the year were $700,000; the cash collected from customers during the year amounted to
A.	$760,000
B.	$700,000
C.	$720,000
D.	$680,000

Answer 7

Answer: C
Chapter: 11
Explanation: $80,000 + $700,000 - $60,000 = $720,000

Question 8

361.	Nassau Farms, Ltd., made sales of $760,000 and had cost of goods sold of $410,000. Inventory decreased by $10,000 and accounts payable decreased by $12,000. Operating expenses were $180,000. How much was Nassau Farm’s net income for the year? 
A.	$172,000
B.	$170,000
C.	$168,000
D.	$350,000

Answer 8

Answer: B
Chapter: 11
Explanation: $760,000 - $410,000 - $180,000 = $170,000

Question 9

363.	Changes in the current asset and current liability accounts are reported on the statement of cash flows as:
A.	Operating activities
B.	Financing activities
C.	Investing activities
D.	A mix of all of these

Answer 9

A

Question 10

364.	Which of the following would be reported on a statement of cash flows as an investing activity?
A.	Purchase of treasury shares
B.	Sale of equipment for cash
C.	Depreciation expense
D.	All of the above

Answer 10

B

Question 11

365. On a statement of cash flows prepared using the indirect method, an increase in Accounts Receivable during the period is:
     A. Added to net income to determine net cash provided by investing activities
     B. Deducted from net income to determine net cash provided by investing activities
     C. Deducted from net income to determine net cash provided by operating activities
     D. Added to net income to determine net cash provided by operating activities

Answer 11

C

Question 12

366.	Company XYZ had a beginning balance in net PPE of $220,000. During the year, Company XYZ purchased $60,000 of new PPE. Depreciation expense for the year was $30,000, and there was a net gain on the sale of PPE was $3,000. The ending balance in net PPE was $170,000. The book value of the PPE sold was:
A.	$80,000
B.	$140,000
C.	$40,000
D.	None of the above

Answer 12

Answer: A
Chapter: 11
Explanation:
Beginning PPE + Acquisition cost – Depreciation – Book value of assets sold = Ending PPE
$220,000 + $60,000 - $30,000 – Book value of assets sold = $170,000
Book value of assets sold = $80,000

Question 12

366.	Company XYZ had a beginning balance in net PPE of $220,000. During the year, Company XYZ purchased $60,000 of new PPE. Depreciation expense for the year was $30,000, and there was a net gain on the sale of PPE was $3,000. The ending balance in net PPE was $170,000. The book value of the PPE sold was:
A.	$80,000
B.	$140,000
C.	$40,000
D.	None of the above

Answer 12

Answer: A
Chapter: 11
Explanation:
Beginning PPE + Acquisition cost – Depreciation – Book value of assets sold = Ending PPE
$220,000 + $60,000 - $30,000 – Book value of assets sold = $170,000
Book value of assets sold = $80,000

Question 13

367. Under the direct method if preparing the statement of cash flows, which statement is CORRECT regarding the method of computing cash payments to suppliers?
     A. Cost of goods sold plus an increase in inventory plus an increase in accounts payable
     B. Cost of goods sold less a decrease in inventory plus an increase in accounts payable
     C. Cost of goods sold plus a decrease in inventory plus an increase in accounts payable
     D. Cost of goods sold plus an increase in inventory less a decrease in accounts payable

Answer 13

D

Question 14

368.	Cash sales and sales on account were $370,000 and $455,000 respectively. During the year Accounts Receivable decreased by $35,000. Cash received from customers was:
A.	$455,000
B.	$790,000
C.	$860,000
D.	$370,000

Answer 14

Answer: C
Chapter: 11
Explanation:
Cash received from customers = Cash sales + Sales on account + Accounts Receivable
$370,000 + $455,000 + $35,000 = $860,000

Question 15

369.	Company XYZ sold some of its used equipment for $37,000. The indirect method statement of cash flows shows an addition to net income of $5,000. The accumulated depreciation on the equipment to date of sale was $36,000. The original cost of the equipment was:
A.	$41,000
B.	$78,000
C.	$42,000
D.	$68,000

Answer 15

Answer: B
Chapter: 11
Explanation:
Net income + Depreciation + Loss on sale of long term asset = Original cost of the equipment
$37,000 + $36,000 + $5,000 = $78,000

Question 16

370.	In 2014, Company XYZ borrowed $55,000, paid dividends of $17,000, issued 5,000 shares for $45 per share, purchased land for $120,000, and received dividends of $5,000. Net income was $75,000 and depreciation for the year totaled $4,000. How much should be reported as net cash provided by operating activities by the indirect method?
A.	$97,000
B.	$79,000
C.	$117,000
D.	$67,000

Answer 16

Answer: B 
Chapter: 11
Explanation:
Net income + Depreciation + Loss on sale of long-term assets – Gain on sale of long-term assets – Increases in current assets other than cash + Decreases in current assets other than cash + Increases in current liabilities – Decreases in current liabilities
$75,000 + $4,000 = $79,000

Question 17

371.	ABC Company began the year with $46,700 in accounts receivable and ended the year with $31,900 in accounts receivable. If credit sales for the year were $687,000, the cash collected from customers during the year amounts to:
A.	$655,100
B.	$733,700
C.	$701,800
D.	$672,200

Answer 17

Answer: C
Chapter: 11
Explanation: 
$46,700 + $687,000 - cash collected from customers = $31,900
Cash collected from customers = $701,800

Question 18

374.	ABC Company reports beginning equipment, net of depreciation, of $645,000 and an ending amount of $732,500. The income statement shows depreciation of $48,300 and a $5,600 loss on sale of equipment. ABC Company acquired $213,000 of equipment during the year. The proceeds from the sale equipment are:
A.	$71,600
B.	$82,800
C.	$77,200
D.	$121,500

Answer 18

Answer: A
Chapter: 11
Explanation:
Beginning PPE + Acquisition cost – Depreciation – Book value assets sold = Ending PPE
$645,000 + $213,000 - $48,300 – Book value assets sold = $732,500
Book value asset sold = $77,200
Cash received = Book value assets sold – Loss on sale
Cash received = $77,200 - $5,600
Cash received = $71,600

Question 19

375. Equipment that had a book value of $6,000 is sold for $20,000 cash. The statement of cash flows will report a:
     A. $20,000 cash inflow on the investing activities section
     B. $20,000 cash inflow in the financing activities section
     C. $20,000 cash outflow in the investing activities section
     D. $14,000 cash inflow in the operating activities section

Answer 19

A

Question 20

376.	Which of the following might appear on a direct method statement of cash flows?
A.	Payments to suppliers
B.	Gain on sale of equipment
C.	Credit sales
D.	Depreciation expense

Answer 20

A

Question 21

378.	ABC Company reports an increase in Accounts Payable of $9,200 and an increase in inventory of $45,000 for the current year. Accounts Payable relates solely to the purchase of inventory. Sales on account were $532,100 and cost of goods sold was $358,000. The payments to suppliers for inventory during the period were:
A.	$393,800
B.	$303,800
C.	$412,20
D.	$322,200

Answer 21

Answer: A
Chapter: 11
Explanation:
Cost of goods sold + inventory increase – increase payables = payments to suppliers
358,000 + 45,000 – 9,200 = 393,800

Question 22

379.	ABC Company reports beginning equipment, net of depreciation, of $645,000 and an ending amount of $732,500. The income statement shows depreciation of $48,300 and a $5,600 loss on sale of equipment. ABC Company acquired $213,000 of equipment during the year. The proceeds from the sale of equipment are:
A.	$71,600
B.	$82,800
C.	$77,200
D.	$125,500

Answer 22

Answer: A
Chapter: 11
Explanation:
Beginning book value + Investments – Depreciation expense – disposal = Ending Book
value
645,000 + 213,000 – 48,300 – Disposal = 732,500
Disposal = 77,200
Proceeds from sales = Book-value – loss on disposal
77,200 – 5,600 = 71,600

Question 23

380. Which of the following statement is false?
     A. Only one true earnings number exists
     B. Accounting standards are subject to interpretation
     C. The flexibility in accrual basis statements allows managers to manipulate the reported numbers
     D. The flexibility in accrual basis statements allows managers to signal private information to the market

Answer 23

A

Question 24

381. The statement of cash flows is designed to fulfill all of the following purposes EXCEPT to:
     A. Evaluate management decisions
     B. Assess the collectability of accounts receivable
     C. Help predict future cash flows
     D. Show the relationship of net income to changes in the company’s cash

Answer 24

B

Question 25

382. Which of the three types of activities reported on the statement of cash flows is the MOST important for evaluating a company’s ability to generate cash?
     A. Financing activities
     B. Investing activities
     C. Operating activities
     D. All of the above activities are equally important

Answer 25

C

Question 26

383. When preparing the statement of cash flows using the indirect method, which statement is NOT true?
     A. Depreciation expense is added to net income
     B. Gains on the sale of long-term assets are subtracted from net income
     C. Losses on the sale of long-term assets are subtracted from net income
     D. Increases in current liabilities are added to net income

Answer 26

C

Question 27

384.	The following data is provided for the current year. Net income was $210,000. Current receivables and prepaid expenses increased by $10,000 and $2,000, respectively. Current payables decreased by $8,000. Under the indirect method, the cash flows from operating activities are:
A.	$190,000
B.	$206,000
C.	$230,000
D.	$214,000

Answer 27

Answer: A
Chapter: 11
Explanation:
$210,000 - $10,000 - $2,000 -$8,000 = $190,000

Question 28

385.	At the beginning of the year, Prepaid Insurance had a balance of $6,500. At the end of the year the balance in Prepaid Insurance was $7,900. Insurance Expense as reported on the income statement was $49,500. Cash payments for insurance during the year amounted to:
A.	$57,400
B.	$50,900
C.	$49,500
D.	$48,100

Answer 28

Answer: B
Chapter: 11
Explanation:
Cash payments for insurance = $49,500 + ($7,900 - $6,500) = $50,900

Question 29

386.	ABC Company reports an increase in Accounts Payable of $8,700 and an increase in inventory of $51,000 for the current year. Account Payable relates solely to the purchase of inventory. Sales on account were $529,000 and cost of goods sold was $374,000. The total purchases of inventory for the period are:
A.	$374,000
B.	$323,000
C.	$425,000
D.	$416,300

Answer 29

C

Question 30

387. Increases and decreases in the long-term assets available to a company are reported on the statement of cash flows as:
     A. Operating activities
     B. Investing activities
     C. Financing activities
     D. Both operating and investing activities

Answer 30

B

Question 31

388.	The following data is provided for last year. Net income was $30,000. Current assets (other than cash) increased by $12,000 and current liabilities increased by $8,000. Under the indirect method, the cash flows from operating activities would be:
A.	$30,000
B.	$10,000
C.	$26,000
D.	$34,000

Answer 31

Answer: C
Chapter: 11
Explanation:
$30,000 - $12,000 + $8,000 = $26,000

Question 32

389.	ABC Company had salaries payable of $60,000 and $90,000 at the end of 2015 and 2016, respectively. During 2016, ABC Company recorded $620,000 in salaries expense in its income statement. Cash outflows for salaries in 2016 were: 
A.	$590,000
B.	$650,000
C.	$620,000
D.	$530,000

Answer 32

Answer: A 
Chapter: 11
Explanation:
$60,000 + $620,000 – X = $90,000
X = $590,000

Question 33

390.	ABC Company had accounts receivable of $90,000 at the beginning of the year and $100,000 at the end of the year. Sales on account for the year amounted to $465,000. The amount to be reported on the statement of cash flows under the operating activities is:
A.	$475,000
B.	-$10,000
C.	$455,000
D.	$10,000

Answer 33

Answer: C 
Chapter: 11
Explanation:
$90,000 + $465,000 – X = $100,000
X = $455,000