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1

The following items relate to the preparation of statement of cash flows:

                               year 2        year I                            year 2

Cash                        $150,000  $100,000  Net sales     $3,200,000

Dividends payable      35,000    0              CGS            (2,500,000)

Common stock         600,000    450,000  Expenses     (500,000)

Retained earnings    280,000     165,000  Net income   $200,000 

Capital stock was sold to provide additional working capital. Under financing activities, cash dividend payments during year 2 amounted to 

$ 50,000

2

The following items relate to the preparation of statement of cash flows:

                               year 2        year I                         year 2

Cash                        $150,000  $100,000  

Inventory                    330,000   210,000  Net sales $3,200,000

Prepaid Expenses        50,000    25,000   CGS         (2,500,000)

Non current assets     565,000  300,000  Expenses    (500,000)

Accumulated Dep       (55,000)  (25,000)  Net income$200,000

Accrued Exp.                70,000    65,000 

The direct approach is used for operating activities.  Under operating activities, cash paid for operating expenses for year 2 amounted to 

$490,000

3

New England Co. had net cash provided by operating activities of $351,000; net cash used by investing activities of $420,000; and cash provided by financing activities of $250,000. New England's cash balance was $27,000 on January I. During the year, there was a sale of land that resulted in a gain of $25,000 and proceeds of $40,000 were received from the sale. What was New England's cash balance at the end of the year?

$208,000 

4

In its cash flow statement for the current year, Ness Co. reported cash paid for interest of $70,000. Ness did not capitalize any interest during the current year. Changes occurred in several balance sheet accounts as follows:

Accrued interest payable    17,000 decrease

Prepaid interest                   23,000 decrease

In its income statement for the current year, what amount should Ness report as interest expense? 

$ 76,000

5

Stevie Company owns shares of stock in Rod Inc.  Stevie received $5,000 cash dividend. If Stevie reports under IFRS, the dividend received can be classified as 

 Either an operating activity or investing activity.

6

Reed Co.'s year 2 statement of cash flows reported cash provided from operating activities of $400,000. For year 2, depreciation of equipment was $190,000, amortization of patent was $5,000, and dividends paid on common stock were $100,000. In Reed's year 2 statement of cash flows, what amount was reported as net income? 

$205,000

7

In a statement of cash flows in which the operating activities section is prepared under the indirect method, a gain on the sale of an investment in available-for-sale securities should be presented as a

Deduction from net income

8

In statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for

Operating activities. 

9

Bay Manufacturing Co. purchased 3-month US Treasury bill. In preparing Bay's statement of cash flows, this purchase would

Have no effect.

10

Able Company reports its income from investments under the equity method and recognized income of $15,000 from its investment in Tech Company during the current year even though no dividends were declared or paid by Tech Company during the year. On Able Company's statement of cash flows in which the operating activities section is prepared under the indirect method, the $15,000 must

Be shown as a deduction from net income under operating activities.

11

Darinda Corporation has a cash advance from the bank for an overdraft of $5,000 on its checking account. Darinda prepares its financial statements in accordance with IFRS. The cash advances from the bank due to the overdraft should be reported on the statement of cash flows as

Operating activities. 

12

In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method? (Ignore income tax considerations.)

a. Gain on sale of equipment.

b. Change from straight-line to accelerated depreciation.

c. Gain on early retirement of bonds.

d. Dividends received from investments.

Dividends received from investments.

13

The purchase for cash of treasury stock should be presented in statement of cash flows as a(n) 

a. Neither

b. Financing activity

c. Investing activity

d. Investing activity and Financian activity

Financing activity

14

A company's accounts receivable decreased from the beginning to the end of the year. In the company's statement of cash flows (operating activities shown using direct approach), the cash collected from customers would be 

Sales revenues plus the decrease in accounts receivable from the beginning to the end of the year. 

15

The following items relate to the preparation of statement of cash flows:

                              year 2       year I 

Cash                      $150,000  $100,000  Net sales      $3,200,000

MES*

(Available for sale)  40,000       0             CGS              (2,500,000)

AR net                    420,000   290,000   Expenses      (500,000)

Inventory                330,000   210,000    Net income   $200,000

Noncurrent assets  565,000   300,000

Accum. Deprec.       (5,000)     (25,000)

*Cost and market value          

All accounts receivable relate to trade merchandise. Cash discounts are not allowed to customers but a service charge is added to an account for late payment. The allowance for doubtful accounts at the end of year 2 was the same as the end of year I; no receivables were charged against the allowance during year 2. Under investing activities, cash outflows during year 2 totaled 

$305,000

16

The following information is available from Sand Corp.'s accounting records for the year ended December 31, year 2: 

Cash received from customers               $870,000 

Rent received                                             10,000  

Cash paid to suppliers and employees     510,000

Taxes paid                                                110,000

Cash dividends paid                                  30,000

The Net cash flow provided by operations for year 2 was 

$260,000 

17

Deferred income tax expense resulting from temporary differences related to depreciation of plant assets should be presented in statement of cash flows (using indirect approach for operating activities) as an 

Addition to net income.

18

Paper Co. had net income of $70,000 during the year. Dividend payment was $10,000. The following information is available:   

Mortgage repayment            $20,000 

Available-for-sale securities

purchased                             10,000 increase

Bonds payable—issued         50,000 increase

Inventory                              40,000 increase

Accounts payable                 30,000 decrease 

What amount should Paper report as net cash provided by operating activities in its statement of cash flows for the year? 

$0

19

Which of the following items is included in the financing activities section of the statement of cash flows?

a. Cash effects of transactions obtaining resources from owners and providing them with return on their investment. 

b. Cash effects of transactions that enter into the determination of net income.

c. Cash effects of acquiring and disposing of investments and property, plant, and equipment.

d. Cash effects of transactions involving making and collecting loans. 

Cash effects of transactions obtaining resources from owners and providing them with return on their investment. 

20

Kresley Co. has provided the following year 2 current account balances for the preparation of the annual statement of cash flows:

                                                           January I   December 31

Accounts receivable                           $11,500     $14,500    

Allowance for uncollectible accounts       400           500  

Prepaid rent expense                            6,200        4,100

Accounts payable                                  9,700       11,200

Kresley's year 2 net income is $75,000. Net cash provided by operating activities in the statement of cash flows should be 

$75,700

21

Tam Co. reported the following items in its year-end financial statements:

Capital expenditures      $1,000,000

Capital lease payments       125,000

Income taxes paid              325,000

Dividends paid                   200,000

Net interest payments        220,000 

What amount should Tam report as supplemental disclosures in its statement of cash flows prepared using the indirect method?

$545,000

22

Baker Co. began its operations during the current year. The following is Baker's balance sheet at December 31: .

                                       Baker Co

                                 BALANCE SHEET

Assets                            

Cash                              $192,000

 Accounts receivable         82,000

 Total assets                   $274 000

 Liabilities and stockholders ' equity

Accounts payable           $24,000

Common stock               200,000     

Retained earnings             50,000

Total liabilities and

stockholders' equity      $274 000

Baker's net income for the current year was $78,000 and dividends of $28,000 were declared and paid. Common stock was issued for $200,000. What amount should Baker report as cash provided by operating activities in its statement of cash flows for the current year? 

$ 20,000 

23

KoIlar s transactions for the year ended December 31, year 2, Included the following:

Purchased real estate for $550,000 cash which was borrowed from bank.

Sold investment securities for $500,000.

Paid dividends of $600,000. I

ssued 500 shares of common stock for $250,000.

Purchased machinery and equipment for $125,000 cash.

Paid $450,000 toward bank loan.

Reduced accounts receivable by $100,000.

Increased accounts payable by $200,000.

Kollar's net cash from financing activities for year 2 was 

 $250,000

24

A loss on the sale of machinery in the ordinary course of business should be presented in statement of cash flows (using indirect approach for operating activities) 
as an 

Addition to net income. 

25

Abbey Corporation prepares its financial statements in accordance with IFRS. Abbey acquired equipment by signing $100,000 note payable with the seller of the equipment. How should this transaction be reported on the statement of cash flows? 

In the notes to the financial statements as a significant noncash transaction. 

26

KoIlar s transactions for the year ended December 31, year 2, Included the following:

Purchased real estate for $550,000 cash which was borrowed from bank.

Sold investment securities for $500,000.

Paid dividends of $600,000. I

ssued 500 shares of common stock for $250,000.

Purchased machinery and equipment for $125,000 cash.

Paid $450,000 toward bank loan.

Reduced accounts receivable by $100,000.

Increased accounts payable by $200,000.

Kollar's net cash used in investing activities for year 2 was

$175,000

27

Green Co. had the following equity transactions at December 31 : Cash proceeds from sale of                        $75,000

investment in Blue Co. (carrying value -

$60,000)                                                      10,500 

Dividends received on Grey Co. stock

Common stock purchased from Brown Co.   38,000 

What amount should Green recognize as net cash from investing activities in its statement of cash flows at December 31? 

$37,000 

28

Jackson Company classifies trading securities as an operating activity based on their nature and purpose. In a statement of cash flows in which the operating activities section is prepared under the indirect method, the realized gain on an investment in securities held for trading should be presented as an

Addition to net income in the amount of the securities' fair value at the beginning of the period. 

29

If company issues both balance sheet and an income statement with comparative figures from last year, statement of cash flows

Should be issued for each period for which an income statement is presented. 

30

Rory Co.'s prepaid insurance was $50,000 at December 31 year 2, and $25,000 at December 31 year Insurance expense was $20,000 for year 2 and $15,000 for year 1. What amount of cash disbursements for insurance would be repofled in Rory's year 2 net cash flows from operating activities presented on a direct basis? 

$45,000