Deck 13: Statement of Cash Flows

Question 1

A decrease in inventory is added to net income when preparing the operating activities section under the indirect method.

Answer 1

True

Question 2

A statement of cash flows provides information on cash inflows and outflows for a specified period of time.

Answer 2

True

Question 3

Cash paid for wages and salaries is determined by adding a decrease in wages payable or subtracting an increase in wages payable to the amount of wages and salaries expense. 18. When the direct method of preparing the statement of cash flows is used, the payment of dividends to stockholders appears in the operating activities section.

Answer 3

True

Question 4

Cash equivalents are short-term investments that are highly liquid and can be readily converted into cash.

Question 5

The format of a statement of cash flows prepared using the direct method is much like an income statement prepared on the cash-flow basis.

Question 6

Proceeds from the sale of equipment is reported as an investing activity when using the direct method to prepare the statement of cash flows.

Question 7

Cost of goods sold less any increase in accounts payable equals cash paid for inventory.

Question 8

Cash used to retire long-term debt that was used to build a new factory is classified as an investing activity.

Question 9

Cash proceeds from issuing a long-term note payable is classified as an operating activity.

Question 10

Financing activities are presented as the first classification on a statement of cash flows because a company must first obtain financing when it begins operations before it can acquire assets to start operations.

Question 11

Issuing common stock is an investing activity.

Question 12

Cash payments for salaries to employees are classified as an operating activity.

Question 13

Financial statement users focus a great deal of attention on cash flows related to operating activities, because, over the long run, a business must generate positive cash flows from its profit-oriented activities to be successful.

Question 14

Cash paid for interest expense is shown as an operating activity under the direct method.

Question 15

Under the direct method, a gain on the sale of equipment is included in net income and subtracted in the operating activities section of the statement of cash flows because it is not a cash flow.

Question 16

A firm may have a significant amount of net income, as computed under the accrual basis of accounting, yet have an insignificant net inflow of cash.

Question 17

For purposes of a statement of cash flows, cash is defined to include cash and investments such as those in stock of other companies.

Question 18

A loss on the sale of a building is added to net income in the operating activities section of the statement of cash flows under the direct method.

Question 19

Cash received from customers includes cash from current period sales plus cash from customer payments on account.

Question 20

When the indirect method is used, GAAP requires a separate schedule reconciling cash flows from operating activities to net income.

Question 21

Which one of the following is an important reason to evaluate a company's cash flow?

A) Without positive cash flows, a company is unable to recognize a positive net income.
B) Minimum cash balances must be maintained by all companies.
C) Stockholders want to know that the company can generate cash consistent with earning a reasonable return on their investments.
D) Creditors want to be assured that the company has significant cash inflows from financing activities.

Question 22

Under the indirect method of preparing the statement of cash flows, a loss on the sale of equipment is added to net income in the investing activities section.

Question 23

Watley Surf Shop provided the following information for the current year: $$\begin{array} { l r } \text { Proceeds from sale of equipment } & \$ 120,000 \\\text { Dividends paid to stockholders } & 16,000 \\\text { Purchase of inventories on account } & 92,000 \\\text { Borrowing a long-term loan } & 60,000 \\\text { Loan principal payments made } & 14,000 \\\text { Interest paid on loan payments } & 1,000 \\\text { Purchase of land for cash } & 65,000 \\\text { Payment for inventory previously acquired on account } & 85,000 \\\text { Cash collected from customers } & 450,000\end{array}$$ How much is the net cash provided/(used) by investing activities during the year?

A) $55,000
B) $115,000
C) $100,000
D) $40,000

Question 24

Speedy Supermarket reported net income of $24,000 in 2014. No dividends were declared nor paid during the year. Changes in the selected accounts during the year are: $\begin{array} { l c } & \text { Increase/(Decrease) } \\\text { Accounts receivable } & \$ 16,200 \\\text { Inventory } & 11,800 \\\text { Prepaid expenses } & (4,000) \\\text { Accounts payable } & 27,300 \\\text { Salaries payable } & (3,000)\end{array}$ How much is the company's net cash provided by operating activities?

A) $24,300
B) $72,300
C) $300
D) $48,300

Question 25

Increases in receivables and prepaid expenses are added to net income to determine cash provided/(used) by operating activities when using the indirect method.

Question 26

Marquette Décor is a merchandiser that operates a small retail store. Comparative balance sheets for the years ending December 31, 2014 and 2013 and its income statement for 2014 follow:
$\begin{array}{lrr}&\text { December } 31\\\text { Assets }&2014&2013\\\text { Cash } & \$ 35,400 & \$ 45,300 \\\text { Accounts receivable } & 11,400 & 14,500 \\\text { Merchandise inventories } & 36,500 & 34,100 \\\text { Equipment } & 90,000 & 66,000 \\\text { Accumulated depreciation } & (28,600) & (31,400) \\\text { Total assets } & \$ 144,700 & \$ 128,500\\\\\text { Liabilities and Stockholders'Equity }\\\text { Accounts payable } & \$ 14,300 & \$ 12,500 \\\text { Income taxes payable } & 4,500 & 8,800 \\\text { Long-term notes payable } & 16,500 & 23,000 \\\text { Common stock, \$2 par } & 88,200 & 65,300 \\\text { Retained earnings } & 21,200 & 18,900 \\\text { Total liabilities and stockholders' equity } & \$ 144,700 & \$ 128,500\\\\\text { Sales } & \$ 224,000 \\\text { Cost of goods sold } & 123,000 \\\text { Depreciation expense } & 14,000 \\\text { Other expenses } & 56,000 \\\text { Gain on sale of equipment } & 3,400 \\\text { Income taxes } & 16,000 \\\text { Net income } & \$ 18,400\end{array}$
During the year, equipment with an original cost of $17,000, and accumulated depreciation totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year. How much cash did Marquette collect from customers during the year?

A) $227,100
B) $224,000
C) $235,400
D) $220,900

Question 27

The presentation of each the three sections of the statement of cash flows will differ when comparing the format of the direct and indirect methods of preparing the statement of cash flows.

Question 28

Generally, the most important section of the statement of cash flows is operating activities because a company is required to have positive cash flows according to GAAP.

Question 29

Depreciation expense is added to net income when determining net cash provided by operating activities under the indirect method.

Question 30

Randolph Retail reported the following results during 2014: $$\begin{array} { l r } \text { Cash collected from accounts receivable } & \$ 56,000 \\\text { Cash paid to purchase office supplies } & 2,000 \\\text { Cash collected from customers for current period sales } & 98,000 \\\text { Cash paid for dividends } & 12,000 \\\text { Cash paid for inventory acquisitions } & 87,000 \\\text { Cash collected from the issuance of common stock } & 50,000 \\\text { Cash paid to purchase equipment with a 5-year life } & 80,000\end{array}$$ How much is the company's net cash provided by operating activities?

A) $23,000
B) $103,000
C) $65,000
D) $53,000

Question 31

Watley Surf Shop provided the following information for the current year: $$\begin{array} { l r } \text { Proceeds from sale of equipment } & \$ 120,000 \\\text { Dividends paid to stockholders } & 16,000 \\\text { Purchase of inventories on account } & 92,000 \\\text { Borrowing a long-term loan } & 60,000 \\\text { Loan principal payments made } & 14,000 \\\text { Interest paid on loan payments } & 1,000 \\\text { Purchase of land for cash } & 65,000 \\\text { Payment for inventory previously acquired on account } & 85,000 \\\text { Cash collected from customers } & 450,000\end{array}$$ How much is the net cash provided/(used) by financing activities during the year?

A) $29,000
B) ($56,000)
C) ($90,000)
D) $30,000

Question 32

Harnett Enterprises had a net loss of $14,000 in 2014. Dividends of $15,000 were declared and paid during the year and the company reported depreciation expense of $15,000. Changes in the following selected accounts occurred during the year: $$\begin{array} { l c } & \text { Increase/(Decrease } ) \\\text { Accounts receivable } & (\$ 3,000) \\\text { Long-term investments } & 16,000 \\\text { Interest payable } & (2,000) \\\text { Notes payable } & 65,000 \\\text { Property, plant, and equipment } & 42,000\end{array}$$ No property, plant, and equipment items were sold during the year. How much is the company's net cash provided/(used) by financing activities?

A) $2,000
B) ($65,000)
C) ($79,000)
D) ($80,000)

Question 33

An increase in accounts receivable is subtracted from net income to determine cash provided/(used) by operating activities when using the indirect method.

Question 34

If cash flows provided by operating activities are a relatively small amount, a company may offset this problem on a short-term basis by cutting back on capital expenditures or by borrowing funds or issuing stock.

Question 35

Marquette Décor is a merchandiser that operates a small retail store. Comparative balance sheets for the years ending December 31, 2014 and 2013 and its income statement for 2014 follow:
$\begin{array}{lrr}&\text { December } 31\\\text { Assets }&2014&2013\\\text { Cash } & \$ 35,400 & \$ 45,300 \\\text { Accounts receivable } & 11,400 & 14,500 \\\text { Merchandise inventories } & 36,500 & 34,100 \\\text { Equipment } & 90,000 & 66,000 \\\text { Accumulated depreciation } & (28,600) & (31,400) \\\text { Total assets } & \$ 144,700 & \$ 128,500\\\\\text { Liabilities and Stockholders'Equity }\\\text { Accounts payable } & \$ 14,300 & \$ 12,500 \\\text { Income taxes payable } & 4,500 & 8,800 \\\text { Long-term notes payable } & 16,500 & 23,000 \\\text { Common stock, \$2 par } & 88,200 & 65,300 \\\text { Retained earnings } & 21,200 & 18,900 \\\text { Total liabilities and stockholders' equity } & \$ 144,700 & \$ 128,500\\\\\text { Sales } & \$ 224,000 \\\text { Cost of goods sold } & 123,000 \\\text { Depreciation expense } & 14,000 \\\text { Other expenses } & 56,000 \\\text { Gain on sale of equipment } & 3,400 \\\text { Income taxes } & 16,000 \\\text { Net income } & \$ 18,400\end{array}$
How much cash did Marquette pay for inventory purchases during the year?

A) $122,400
B) $125,400
C) $123,600
D) $118,800

Question 36

Both the direct and indirect method yield the same total amount for net cash provided or used by operating activities.

Question 37

An increase in accounts payable is added to net income to determine cash provided/(used) by operating activities when using the indirect method.

Question 38

What primary information is provided in the statement of cash flows?

A) The amount of profits earned during a period
B) The source and uses of a company's money
C) Estimates of future cash flows
D) Cash receipts and cash payments of an entity's profitable activities during a period

Question 39

Harnett Enterprises had a net loss of $14,000 in 2014. Dividends of $15,000 were declared and paid during the year and the company reported depreciation expense of $15,000. Changes in the following selected accounts occurred during the year: $$\begin{array} { l c } & \text { Increase/(Decrease) } \\\text { Accounts receivable } & (\$ 3,000) \\\text { Long-term investments } & 16,000 \\\text { Interest payable } & (2,000) \\\text { Notes payable } & 65,000 \\\text { Property, plant, and equipment } & 42,000\end{array}$$ No property, plant, and equipment were sold during the year. How much is the company's net cash provided(used) by investing activities?

A) $7,000
B) $60,000
C) $18,000
D) ($58,000)

Question 40

Bath Works had a net loss of $5,100 in 2014. During the year, a gain of $4,000 was recognized on the sale of fully depreciated equipment that had cost $14,000 and had no salvage value. Depreciation expense during the year totaled $17,400. Changes in the following selected accounts occurred during the year: $$\begin{array} { l c } & \text { Increase/(Decrease) } \\\text { Accounts receivable } & \$ 6,500 \\\text { Inventory } & (3,200) \\\text { Interest payable } & 1,200 \\\text { Accounts payable } & (1,000) \\\text { Accumulated depreciation } & 3,400 \\\text { Notes payable } & (6,400) \\\text { Long-term investments } & (9,000)\end{array}$$ Using the indirect method, how much is the company's net cash provided(used) by operating activities?

A) $15,800
B) $9,200
C) $8,800
D) $5,200

Question 41

How is cash paid for interest on a mortgage classified on a statement of cash flows?

A) As an investing activity
B) As an operating activity
C) As a financing activity
D) As a receiving activity

Question 42

During 2014, Lance Chips sold equipment that had an original cost of $143,000 and accumulated depreciation of $110,000, for cash totaling $25,000. Which one of the following is one effect of this transaction on the statement of cash flows if the indirect method is used?

A) An addition to net income in the operating activities section for $25,000
B) An addition to net income of $8,000 in the operating activities section
C) A subtraction of $33,000 in the investing activities section
D) An addition of $8,000 in the investing activities section

Question 43

Econ Services' statement of cash flows indicates a $73,000 increase in cash during the year. The statement also indicates that the company used $42,000 for operating activities and $89,000 was provided by financing activities. How much was net cash provided/(used) by investing activities?

A) $204,000
B) ($58,000)
C) $26,000
D) ($47,000)

Question 44

In addition to cash flows that occurred during the period, which of the following amounts listed below appear on the statement of cash flows prepared using the direct method?
I) Beginning balance of cash and cash equivalents
II) Ending balance of cash and cash equivalents
III) Net income

A) I and II
B) II and III
C) I and III
D) I, II, and III

Question 45

In 2014, Maxi Office Supplies sold a plant asset that had an original cost of $54,000 and accumulated depreciation of $28,000 for $15,000 in cash. Which one of the following is one item to be reported on the statement of cash flows prepared using the indirect method?

A) An addition to net income in the operating activities section for $11,000
B) A subtraction from net income in the operating activities section for $11,000
C) A source of cash of $15,000 in the financing activities section
D) A use of cash in the investing activities section for $26,000

Question 46

If a company sells equipment with accumulated depreciation totaling $4,200 and an original cost of $5,100, for a loss of $400, what amount will appear in the investing activities section of the statement of cash flows?

A) $500 inflow
B) $400 inflow
C) $900 inflow
D) $4,700 inflow

Question 47

Which is the most important item in a company's statement of cash flows?

A) Positive operating cash flows
B) Positive operating, investing, and financing cash flows
C) Positive operating and investing cash flows
D) Positive operating and financing cash flows

Question 48

First National Eatery prepares its statement of cash flows using the indirect method. The statement reported that cash provided by operating activities for the year was $7,000. If the company experienced a $14,000 decrease in accounts receivable, a $13,000 decrease in accounts payable, and a $4,000 increase in inventory during the year, how much is the company's net income/(loss) for the year?

A) ($3,000)
B) $4,000
C) ($16,000)
D) $10,000

Question 49

During 2014, Thomas Windows completed the following transactions:
.Purchased equipment for $41,000 cash that will be depreciated over a 10-year life
.Sold equipment that had an original cost of $46,000 and accumulated depreciation of $43,000 for $7,000 cash
The January 1, 2014 balance in the accumulated depreciation account was $134,000 and the December 31, 2014 balance was $145,000. How much depreciation expense will Thomas Windows report on the company's 2014 statement of cash flows if the indirect method is used?

A) $32,000
B) $54,000
C) $14,000
D) $57,000

Question 50

Thomas Electric's statement of cash flows indicates a $12,000 decrease in cash during the year. The statement also indicates that $28,000 was provided by operating activities and $15,000 was used by investing activities. How much is net cash provided/(used) by financing activities?

A) ($25,000)
B) ($1,000)
C) ($31,000)
D) $42,000

Question 51

Marquette Décor is a merchandiser that operates a small retail store. Comparative balance sheets for the years ending December 31, 2014 and 2013 and its income statement for 2014 follow:
$\begin{array}{lrr}&\text { December } 31\\\text { Assets }&2014&2013\\\text { Cash } & \$ 35,400 & \$ 45,300 \\\text { Accounts receivable } & 11,400 & 14,500 \\\text { Merchandise inventories } & 36,500 & 34,100 \\\text { Equipment } & 90,000 & 66,000 \\\text { Accumulated depreciation } & (28,600) & (31,400) \\\text { Total assets } & \$ 144,700 & \$ 128,500\\\\\text { Liabilities and Stockholders'Equity }\\\text { Accounts payable } & \$ 14,300 & \$ 12,500 \\\text { Income taxes payable } & 4,500 & 8,800 \\\text { Long-term notes payable } & 16,500 & 23,000 \\\text { Common stock, \$2 par } & 88,200 & 65,300 \\\text { Retained earnings } & 21,200 & 18,900 \\\text { Total liabilities and stockholders' equity } & \$ 144,700 & \$ 128,500\\\\\text { Sales } & \$ 224,000 \\\text { Cost of goods sold } & 123,000 \\\text { Depreciation expense } & 14,000 \\\text { Other expenses } & 56,000 \\\text { Gain on sale of equipment } & 3,400 \\\text { Income taxes } & 16,000 \\\text { Net income } & \$ 18,400\end{array}$
During the year, equipment with an original cost of $17,000, and accumulated depreciation totaling $16,800 was sold for $3,600. Dividends were declared and paid during the year. The company uses the indirect method. How much is cash provided/(used) by operating activities?

A) $27,200
B) $30,600
C) $29,000
D) $30,800

Question 52

Which one of the following is not a use of cash?

A) The payment of a loan of which was borrowed in order to purchase a factory
B) The issuance of a stock dividend
C) Payments to suppliers
D) A payment to reduce long-term debt

Question 53

How is the payment of previously accrued salaries reported on the statement of cash flows?

A) As an investing activity
B) As an operating activity
C) As a financing activity
D) As a non-cash activity

Question 54

Kingston Jerk Factory reported the following results for 2014:
$\begin{array}{llr}&\text { December } 31&\text { January } 1\\\text { Property, plant, and equipment } & \$ 420,000 & \$ 405,000 \\\text { Accumulated depreciation } & \underline{(189,000)} & (180,000) \\\text { Net property, plant, and equipment } & \$ 231,000 & \$ 225,000 \\\hline\end{array}$
During 2014, the company sold equipment that had an original cost of $39,000 and accumulated depreciation of $31,000 for $13,000. New equipment was purchased for cash during the year. How much is reported for cash paid to acquire property, plant, and equipment on the statement of cash flows for 2014?

A) $5,000
B) $54,000
C) $28,000
D) There is not enough information provided to answer this question.

Question 55

Limon Grill's balance in retained earnings was $87,000 at the beginning of the year and $92,000 at the end of the year. If the company declared and paid dividends of $26,000 during the year, how much was net income/(loss) for the year?

A) $5,000
B) $31,000
C) $21,000
D) ($5,000)

Question 56

Kingston Jerk Factory reported the following results for 2014:
$\begin{array}{llr}&\text { December } 31&\text { January } 1\\\text { Property, plant, and equipment } & \$ 420,000 & \$ 405,000 \\\text { Accumulated depreciation } & \underline{(189,000)} & (180,000) \\\text { Net property, plant, and equipment } & \$ 231,000 & \$ 225,000 \\\hline\end{array}$
During 2014, the company sold equipment that had an original cost of $39,000 and accumulated depreciation of $31,000 for $13,000. New equipment was purchased for cash during the year. How much gain/(loss) will Kingston add or subtract from net income when preparing the operating activities section of the statement of cash flows using the indirect method for 2014?

A) Subtract $5,000
B) Add $2,000
C) Subtract $26,000
D) There is not enough information provided to answer this question.

Question 57

How is the repurchase of a company's own stock classified on the statement of cash flows?

A) As an investing activity
B) As an operating activity
C) As a financing activity
D) As a non-cash activity

Question 58

Kermit Productions purchased $44,000 worth of stock in the Enterprise Company in 2010. In 2014, the stock was sold for $87,000. Which one of the following is one effect of this transaction on the statement of cash flows if the indirect method is used during 2014?

A) An addition of $43,000 in the investing activities section
B) A subtraction of $43,000 in the investing activities section
C) A subtraction from net income of $43,000 in the operating activities section
D) An addition to net income of $87,000 in the operating activities section

Question 59

Natural Market's statement of cash flows showed the following totals: $\begin{array}{lc}\text { Cash for operating activities } & (\$ 45,000) \\\text { Cash from financing activities } & 32,000 \\\text { Cash from investing activities } & 28,000\end{array}$ Which statement most likely explains what occurred during the year?

A) Natural Market is using cash from operations and borrowing money from the bank to buy long-term assets.
B) Natural Market is using its profits in order to sell plant assets and repay debt.
C) Natural Market is using cash from the sale of long-term assets to fund its operations and to repay debt.
D) Natural Market is selling long-term assets and borrowing cash to fund operations.

Question 60

The accounting records of Snapdog Enterprises include the following information: $\begin{array}{lrr}&\text { December } 31 \text {, }\\&2013&2014\\\text { Accounts payable } & \$ 12,800 & \$ 13,200 \\\text { Accounts receivable } & 24,000 & 21,700\end{array}$
$\text { The company's income statement for } 2014 \text { appears below. }$
$\begin{array}{lr}\text { Sales } & \$ 280,000 \\\text { Cost of goods sold } & 150,000 \\\text { Depreciation expense } & 15,000 \\\text { Other operating expenses } & 68,000 \\\text { Loss on sale of plant asset } & 10,200 \\\text { Income taxes } & 24,000 \\\text { Net income } & \$ 12,800\end{array}$ What amount of net cash provided by operating activities will Snapdog Enterprises report for 2014 using the indirect method?

A) $35,300
B) $25,900
C) $36,100
D) $39,900

Question 61

Which one of the following is a common use of the statement of cash flows by investors?

A) To determine if the company can generate enough cash to acquire another company
B) To determine if the company can generate enough cash to pay cash dividends to stockholders
C) To determine if the company can generate enough cash to pay its employees
D) To determine if the company can generate enough cash to buy equipment

Question 62

In which of the following sections of the statement of cash flows will users find cash flows that are the most important to the long-run success of a company?

A) Operating activities section
B) Investing activities section
C) Financing activities section
D) Operating, investing, and financing activities

Question 63

How are changes in long-term assets that result in cash flows reported on the statement of cash flows?

A) As investing activities
B) As operating activities
C) As financing activities
D) As non-cash activities

Question 64

Which of the following is added to net income under the indirect method of determining cash provided/(used) by operating activities?

A) Gain on the sale of equipment
B) Increase in notes payable
C) Increase in inventory
D) Decrease in prepaid rent

Question 65

Which one of the following is a cash inflow reported in the operating activities section of the statement of cash flows?

A) The issuance of common stock
B) The issuance of a long-term note payable
C) The collection of accounts receivable
D) The payment for raw materials

Question 66

What information is needed to determine cash paid to suppliers?
I) The change in accounts receivable during the period
II) Cost of goods sold for the period
III) The change in inventories during the period
IV) The change in accounts payable during the period

A) I, II, III, and IV
B) I, II, and III
C) II, III, and IV
D) II and III
E) III and IV

Question 67

Which of the following is a method that can often be used to offset problems related to cash flows from operating activities?

A) Reduce capital expenditures
B) Lay off employees
C) Increase payments on short-term notes payable
D) Acquire treasury stock

Question 68

Which of the following is reported as an operating activity on the statement of cash flows?

A) Cash payments for income taxes
B) Cash received from the collection of long-term notes receivable
C) Cash paid for dividends to stockholders
D) Cash proceeds from issuing long-term debt

Question 69

How is the receipt of dividends from stock investments reported on the statement of cash flows?

A) As an investing activity
B) As an operating activity
C) As a financing activity
D) As a non-cash activity

Question 70

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

A) The payment of interest on notes payable
B) The receipt of dividends from stock investments
C) The making loans to other entities
D) The payment of principal on notes payable

Question 71

Handley Mowers prepares its statement of cash flows using the indirect method. The following information was taken from its income statement and balance sheet for 2014: $\begin{array}{lr}\text { Net loss } & (\$ 6,000) \\\text { Increase in accounts receivable } & 2,400 \\\text { Depreciation expense } & 3,500 \\\text { Decrease in accounts payable } & 800 \\\text { Loss on sale ofinvestments } & 1,300 \\\text { Payment of dividends } & 1,500\end{array}$ How much is cash provided/(used) by operating activities?

A) $4,400
B) ($2,900)
C) ($4,400)
D) ($7,600)

Question 72

When preparing the operating activities section of a statement of cash flows using the indirect method, various adjustments are needed. Which of the following adjustments is incorrectly stated?

A) Deduct any increases in inventories from net income.
B) Deduct any decreases in non-cash current liabilities from net income.
C) Add depreciation and amortization expense to net income.
D) Add any gain on the sale of equipment.

Question 73

In order to be economically viable in the long run, what must a business generate?

A) Negative financing activities, positive investing activities, and positive operating activities
B) Positive operating activities
C) Positive investing, financing, and operating activities
D) Negative investing and financing activities and positive operating activities

Question 74

Race World reported credit sales of $445,000, ending accounts receivable of $41,500, and beginning accounts receivable of $33,500. What is the amount of cash collected from customers?

A) $486,500
B) $453,000
C) $411,500
D) $437,000

Question 75

Which of the following is not a cash flow included in the investing activities section of the statement of cash flows?

A) The payment of the principal balance on a long-term loan payable
B) Purchase of another company
C) The proceeds from the sale of a building
D) The collection of a long-term note receivable

Question 76

Which of the following is a cash equivalent?

A) Accounts receivable
B) A one-year note receivable
C) Money market funds
D) An investment in Microsoft's stock

Question 77

Under the indirect method of preparing the statement of cash flows, an increase in inventories is deducted from net income to calculate cash provided or used by operating activities because

A) cash payments to customers were less than the inventory purchases made during the period.
B) cash paid to acquire inventory was greater than cost of goods sold by the amount that inventories increased.
C) cash payments to customers were larger than the inventory purchases made during the period.
D) inventory purchases were less than the cost of goods sold by the amount that inventories increased.

Question 78

Why is a decrease in accounts receivable added to net income when determining cash provided by operating activities?

A) Cash collections from customers were greater than the sales generated.
B) Cash collections increased due to an increase in sales.
C) Cash collections decreased due to a decline in sales.
D) Cash collections from customers were less than the sales reported.

Question 79

Which section(s) of the statement of cash flows is(are) identical under both the direct and indirect methods?

A) The operating activity section
B) The investing and financing activity sections
C) The financing and operating activity sections
D) The operating, investing, and financing activity sections

Question 80

Ogden Company uses its accounts payable account only for inventory purchases. The following account balances were reported on its financial statements:
$\begin{array}{|l|r|r|}\hline \text { Accounts }&\text { December } 31,2014&\text { December } 31,2013\\\hline \text { Merchandise inventory } & \$ 70,000 & \$ 66,000 \\\hline \text { Accounts payable } & 68,000 & 65,000 \\\hline \text { Cost of goods sold } & 889,000 & 856,000\\\hline\end{array}$
How much cash did Ogden Company pay to suppliers during 2014?

A) $887,000
B) $890,000
C) $896,000
D) $34,000