Deck 5: Statement of Cash Flows

Question 1

Activities that involve obtaining resources as a borrower or issuer of securities and repaying creditors and owners are included in which section of the statement of cash flows?

A)Operating
B)Investing
C)Financing
D)Managing
E)Net income

Answer 1

C

Question 2

The statement of cash flows reports on where cash came from and how it was used.

Answer 2

True

Question 3

A statement of cash flows reports cash inflows and cash outflows on a particular day.

Answer 3

False

Question 4

Which of the following would be classified as an operating activity on a statement of cash flows?

A)Issuing bonds
B)Receipt of loan repayments
C)Collections from customers
D)Issuing stock
E)Repayment of amounts borrowed

Question 5

All of the following activities would be included in a company's operating activities on a statement of cash flows except

A)payments to employees.
B)payment to a local government for property taxes.
C)payment to suppliers.
D)payment to the bank to reduce loan balance.
E)payment to landlord for rent.

Question 6

Like the income statement,the statement of cash flows covers a period of time.

Question 7

One of the purposes of a statement of cash flows is to determine a company's ability to pay its debts when they become due.

Question 8

Which of the following would be classified as an operating activity on a statement of cash flows?

A)Purchase of a building
B)Sale of another company's stock
C)Borrowing money through a promissory note
D)Payment of dividends
E)Purchase of inventory for cash

Question 9

The issuance of a long-term debt for cash would appear on the statement of cash flows as a(n)

A)investing activity.
B)operating activity.
C)financing activity.
D)equity activity.
E)debt activity.

Question 10

A firm may have a significant amount of net income,as computed by accountants on the accrual basis,and yet have a severe decline in cash.

Question 11

Cash and cash equivalents include all of the following except

A)an investment purchased in March,2012 with a maturity of March,2014.
B)money market funds.
C)cash balance in a savings account.
D)cash balance in a checking account.
E)Treasury bills.

Question 12

All of the following would be included in a company's investing activities except

A)taking out a loan from the bank.
B)purchase of equipment.
C)sale of another company's stock.
D)making loans to another company.
E)sale of a building.

Question 13

Which of the following statements show the results of a company over a period of time? 1.Balance sheet
2)Income statement
3)Statement of cash flows
4)Statement of stockholders' equity

A)2 and 4
B)3 and 4
C)1
D)2
E)2,3,and 4

Question 14

All of the following would be included in a company's operating activities except

A)dividend payments.
B)collections from customers.
C)cash payments to suppliers.
D)income tax payments.
E)interest and dividends collected.

Question 15

Cash payments to suppliers would appear on a statement of cash flows using the direct method as a(n)

A)financing activity.
B)operating activity.
C)investing activity.
D)debt activity.
E)equity activity.

Question 16

Activities that involve (1)providing and collecting cash as a lender and (2)acquiring and disposing of fixed assets are included in which section of the statement of cash flows?

A)Operating
B)Investing
C)Financing
D)Managing
E)Fixed assets

Question 17

Which of the following statements is false?

A)The statement of cash flows reports the cash receipts and cash payments of an entity over a period of time.
B)The statement of cash flows is similar to the income statement,as they both determine the net income for a company.
C)The operating activities in a cash flow statement include transactions that affect the sale and the purchase or production of goods and services.
D)Investing activities in a cash flow statement include acquiring and selling long-term assets.
E)Financing activities in a cash flow statement include obtaining resources from owners and creditors and repaying amounts borrowed.

Question 18

Activities or transactions that affect the income statement are primarily included in which section of the statement of cash flows?

A)Operating
B)Investing
C)Financing
D)Managing
E)Net income

Question 19

The issuance of stock for cash would be classified as a(n)

A)investing activity on the statement of cash flows.
B)equity activity on the statement of cash flows.
C)operating activity on the statement of cash flows.
D)would not appear on the statement of cash flows.
E)financing activity on the statement of cash flows.

Question 20

The statement of cash flows has classifications of

A)operating,investing,and debt activities.
B)investing,operating,and expense activities.
C)operating,investing,and equity activities.
D)operating,financing,and equity activities.
E)operating,investing,and financing activities.

Question 21

The purchase of another company's stock is an example of an investing activity.

Question 22

All of the following would be included in a company's financing activities except

A)receipt of dividends.
B)payment of dividends.
C)issuing stock.
D)purchase of treasury stock.
E)issuing bonds.

Question 23

Cash flows from operating activities include the receipt of interest income.

Question 24

Cash dividends paid to stockholders are an operating activity on the statement of cash flows.

Question 25

Cleft Company had the following account balances on its balance sheet at December 31,2012 and 2011,respectively:
Assume no bonds were retired during 2012.What was the positive cash flow associated with the long-term debt for Cleft Company in 2012?

A)$10,000
B)$3,000
C)$13,000
D)$4,000
E)$7,000

Question 26

Issuing equity securities is an operating activity on the statement of cash flows.

Question 27

Which of the following would appear in the financing activities section of a statement of cash flows?

A)Cash payments to employees
B)Cash payment of dividends
C)Cash purchase of equipment
D)Cash paid for income taxes
E)Cash purchase of land

Question 28

Cash flows from financing activities include borrowing cash through a lender.

Question 29

Companies with divisions outside the United States

A)prepare their Statement of Cash Flows with consolidated equipment purchases,but retain individual financial statements otherwise.
B)confirm account balances on their Statement of Cash Flows using the throughput method.
C)show the effect of exchange rate differences on their Statement of Cash Flows.
D)indicate variances on material purchases on a separate coinciding schedule.
E)label their Statement of Cash Flows by preceding the label with the term "International Operations."

Question 30

Cash received from customers is a financing activity on the statement of cash flows.

Question 31

Investing activities involve obtaining resources as a borrower and repaying creditors.

Question 32

Cash flows from financing activities include the payment of interest on a note payable.

Question 33

A transaction in which long-term debt of $50,000 is converted to common stock would be reported in the financing section of the cash flow statement.

Question 34

The issuance of long-term debt results in a cash outflow as reported in the financing section.

Question 35

Dividends received from a subsidiary would be classified as an investing activity on a statement of cash flows.

Question 36

All of the following would be included in a company's investing activities except

A)purchase of land.
B)payment of dividends.
C)collection of loan repayments.
D)purchase of equipment.
E)purchase of another company's stock.

Question 37

Operating activities on a statement of cash flows relate to acquiring assets such as buildings and equipment.

Question 38

The receipt of loan repayments is an investing activity on the statement of cash flows.

Question 39

Designate how each transaction would be reported on the statement of cash flows using OP for operating activities,IN for investing activities,FI for financing activities,I for an inflow of cash and O for an outflow of cash.If the transaction is included only in a supplemental schedule,denote this as SS.
6.Sold shares of another company's stock held for

Question 40

All of the following would be included in a company's financing activities except

A)issuing equity securities.
B)purchasing treasury stock.
C)repayment of amounts borrowed.
D)borrowing cash from a bank.
E)interest payments.

Question 41

Cleft Company had the following account balances on its balance sheet at December 31,2012 and 2011,respectively:
Assume no bonds were retired during 2012.What was the negative cash flow associated with long-term debt for Cleft Company in 2012?

A)$10,000
B)$4,000
C)$7,000
D)$0
E)$3,000

Question 42

Payment of dividends is a financing activity.

Question 43

The investing section of the Statement of Cash Flows includes the sale of fixed assets for cash.

Question 44

The purchase of treasury stock would be considered a financing activity.

Question 45

The Statement of Cash Flows for Urban Athletic Company included the following items,among others:
Prepare the cash flows from financing activities section of the statement of cash flows.All items necessary for that section appear above,in addition to items that belong in the operating and investing sections.

Question 46

Telder Amusement Park issued common stock for $650,000 on January 1,2012.The company bought fixed assets for $435,000 cash and inventory for $50,000 cash.Later that same year,the company sold fixed assets for $10,000 more than their book value of $65,000.Half of the inventory was sold for $98,350 during the year.On December 15,cash was used to purchase $49,000 worth of Allen Food Services common stock,which Telder regarded as a long-term investment.Prepare the cash flows from investing activities of the statement of cash flows for Telder Amusement Park.

Question 47

Retall Company refinanced its long-term debt in 2012.It bought and retired common shares of stock for cash of $20,000.The company spent $72,500 to retire long-term debt due in 3 years and issued $185,000 of 10-year bonds at par.Interest expense for 2012 was $21,000,of which $17,000 was paid in cash; the other $4,000 was still payable at the end of the year.Dividends declared and paid during the year were $12,500.Determine net cash flows from financing activities.

Question 48

Chorba Chocolates had the following account balances on its balance sheets at December 31,2012 and 2011,respectively: Depreciation expense for 2012 was $7,000.There were no gains or losses on the 2012 income statement.One fixed asset with an original cost of $8,000 was sold during 2012.What was the cash flow associated with the acquisition of fixed assets by Chorba Chocolates in 2012?

A)$(2,000)
B)$(8,000)
C)$(14,000)
D)$(13,000)
E)$(21,000)

Question 49

A company acquired a small building by signing a mortgage payable.How would this transaction be shown in the statement of cash flows? Explain how this treatment fulfills the investors' need for information regarding the financial management of the company.

Question 50

Which of the following will not affect cash in the financing section of the Statement of Cash Flows?

A)increasing long or short term debt
B)selling common or preferred shares of stock
C)converting debt to common stock
D)repurchasing common shares of stock
E)paying dividends

Question 51

Receipt of loan repayments is a financing activity.

Question 52

When an increase in cash occurs,it ensues from

A)increases in assets.
B)increases in liabilities.
C)increases in paid-in-capital.
D)both A and B
E)both B and C

Question 53

Which of the following activities does not affect cash on the investing section of the Statement of Cash Flows?

A)purchased store equipment on credit
B)purchased stock in another company for investment purposes using cash
C)collected partial payment on a loan made to an employee
D)purchased building using cash
E)sold investment securities and received cash

Question 54

When a fixed asset is sold for other than its book value,which one of the following incorrectly states the effect of this transaction on a company's statement of cash flows?

A)Under the direct method,no gain or loss from the sale of fixed assets is included in the operating activities section.
B)Under the indirect method,gains from the sale of fixed assets are subtracted from net income in the operating activities section.
C)Under the indirect method,losses from the sale of fixed assets are added back to net income to arrive at net cash from operations.
D)Losses and gains from the sale of fixed assets are operating items to be listed in the operating activities section under both the direct and indirect methods.
E)Under both the direct and indirect methods,the sale of a fixed asset would affect the investing activities section.

Question 55

The schedule of noncash investing and financing activities is used by investors to determine a company's net worth.

Question 56

Important non-cash investing and financing activities

A)belong in the investing and financing section of the Statement of Cash Flows.
B)belong in the operating section of the Statement of Cash Flows.
C)belong in a separate schedule of non-cash investing and financing activities.
D)belong on the Income Statement.
E)belong on the Balance Sheet.

Question 57

The purchase of an intangible asset such as a trademark would be a financing activity on the statement of cash flows.

Question 58

If a company extinguishes debt,which of the following explains the effect of this transaction on a statement of cash flows?

A)If the debt is extinguished with a loss,the loss is subtracted from the operating section if the company uses the direct method.
B)If the debt is extinguished with a loss,the loss will not appear in the operating or the investing section if the company uses the direct method.
C)If the debt is extinguished with a gain,the gain is added to the cash flow from financing section if the company uses the indirect method.
D)If the debt is extinguished with a gain,the gain is added to the operating section if the company uses the indirect method.
E)If the debt is extinguished with a loss,the loss is added to the financing section if the company uses the indirect method.

Question 59

Which balance sheet accounts are most affected by investing activities?

A)Current assets
B)Current liabilities
C)Long term assets
D)Long term liabilities
E)Stockholders' equity

Question 60

Chorba Chocolates had the following account balances on its balance sheets at December 31,2012 and 2011,respectively: Depreciation expense for 2012 was $7,000.There were no gains or losses on the 2012 income statement.One fixed asset with an original cost of $8,000 was sold during 2012.What would be the net cash flow from investing activities for Chorba Chocolates in 2012?

A)($2,000)
B)($8,000)
C)($13,000)
D)($15,000)
E)($21,000)

Question 61

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the cash collected from customers by Cartell Paper Products in 2012?

A)$138,000
B)$145,900
C)$147,600
D)$149,200
E)$157,200

Question 62

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the net cash flow from operations for Cartell Paper Products in 2012?

A)$18,300
B)$19,500
C)$8,200
D)$14,500
E)$13,000

Question 63

Under the direct method,dividends from investments are included when calculating cash flows from operations.

Question 64

Under the direct method,a gain from the sale of a fixed asset is added to net income when calculating cash flows from operations.

Question 65

When preparing the statement of cash flows under the direct method,an appropriate procedure would be to

A)subtract a gain from the sale of a fixed asset to net income.
B)subtract an increase in accounts receivable from sales when calculating cash received from customers.
C)subtract depreciation expense from net income.
D)add a loss from the sale of a fixed asset to net income.
E)add depreciation expense to net income.

Question 66

Net income is always used in determining a company's cash flow from operations.

Question 67

Which of the following items will NOT appear in the operating activities section of the statement of cash flows when using the direct method?

A)Payments to employees
B)Collections from customers
C)Net income
D)Payments to suppliers
E)Income tax payments

Question 68

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what were the dividends paid by Cartell Paper Products in 2012?

A)$11,900
B)$0
C)$22,600
D)$4,000
E)$9,300

Question 69

The direct method of preparing the statement of cash flows

A)is preferred by IASB and FASB.
B)is the same as the indirect method with the exception of the cash account.
C)is an accumulation of net income accounts so that accountants can locate discrepancies in balances.
D)omits the financing section of the statement.
E)focuses on cash outflows over cash inflows.

Question 70

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the cash paid from the purchase of fixed assets by Cartell Paper Products in 2012? Assume no fixed assets were sold in 2012.

A)$(13,000)
B)$(9,100)
C)$(16,900)
D)$9,100
E)Cannot be determined from the information given

Question 71

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the cash paid for supplies by Cartell Paper Products in 2012? (Assume all purchases of supplies were for cash.)

A)$3,600
B)$4,500
C)$2,400
D)$2,700
E)$4,800

Question 72

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the cash paid to employees by Cartell Paper Products in 2012?

A)$40,500
B)$39,700
C)$40,100
D)$38,000
E)$42,300

Question 73

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the cash paid to suppliers of inventory by Cartell Paper Products in 2012?

A)$63,800
B)$61,500
C)$63,700
D)$63,900
E)$66,100

Question 74

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the net cash flow from investing activities for Cartell Paper Products in 2012?

A)$(9,100)
B)$9,100
C)$(13,000)
D)$(12,000)
E)$2,000

Question 75

Under the direct method,depreciation is ignored when calculating cash flows from operations.

Question 76

Which of the following items will NOT appear in the operating activities section of the statement of cash flows when using the direct method?

A)Collections from customers
B)Depreciation expense
C)Cash paid for income taxes
D)Payments to employees
E)Payments to suppliers

Question 77

When preparing the statement of cash flows under the direct method,all of the following would be an inappropriate procedure except

A)add depreciation expense to net income under the operating activities.
B)subtract depreciation expense from net income under the operating activities.
C)add depreciation expense to net income under the financing activities.
D)subtract depreciation expense from net income under the financing activities.
E)ignore depreciation expense.

Question 78

Wages and salaries expense plus the increase in wages and salaries payable equals cash paid for wages and salaries.

Question 79

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,how much inventory did Cartell Paper Products purchase in 2012?

A)$81,300
B)$63,800
C)$64,900
D)$46,300
E)$62,700

Question 80

Exhibit 5-1
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Cartell Paper Products }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Balance Sheet }$
$\quad$$\quad$$\quad$$\quad$$\quad$$\text { December 31, } 2012 \text { and } 2011$

$\begin{array}{lrr}&\underline {12/3 1 / 12} & \underline {12/3 1 / 11}\\\text { Current Assets: }\\\text { Cash } & \$ 4,600 & \$ 3,100 \\\text { Accounts Receivable } & 9,600 & 7,900 \\\text { Inventory } & 17,500 & 18,600 \\\text { Supplies } & 1,200 & 2,100 \\\text { Prepaid Insurance } & \underline{1,400} & \underline{1,000} \\\text { Total Current Assets } & 34,300 & 32,700\\\text { Long-term Assets: }\\\text { Fixed Assets }&71,000&58,000 \\\text { Accumulated Depre } &(30,400)&(26,500) \\\text { Patent } &\underline{6,000} &\underline{7,100}\\\text { Total Long-term Assets } &{46,600} &\underline{38,600} \\\text { Total Assets }&\underline{\$ 80,900 }&\underline{\$ 71,300 } \end{array}$
$\begin{array}{lrr}\text { Current Liabilities: }\\\text { Accounts Payable } & \$ 6,100 & \$ 4,900 \\\text { Wages Payable } & 2,200 & 2,600 \\\text { Interest Payable } & 800 & 1,000 \\\text { Taxes Payable } & \underline{2,300 }& \underline{1,600} \\\text { Total Current Liabilities } & 11,400 & 10,100 \\\text { Long-term Liabilities: Bonds Payable } & \underline{20,300} & \underline{24,000} \\\text { Total Liabilities } & \underline{31,700} & \underline{34,100}\\\text { Stockholders' Equity: }\\\text { Common Stock } & 22,700 & 20,000 \\\text { Retained Earnings } & \underline{26,500} & \underline{17,200} \\\text { Total Stockholders' Equity } & \underline{49,200} & \underline{37,200} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\underline{\$ 80,900}} & \underline{\underline{\$ 1,300}}\end{array}$
$\begin{array}{lcl}&\text { Cartell Paper Products}\\ &\text { Income Statement}\\ &\text { For the Year Ended December 31, 2012}\\ \text { Sales }&& \$ 147,600 \\\text { Cost of Goods Sold }&& \underline{63,800}\\\text { Gross Profit }&& {83,800}\\\text { Less Operating Expenses: }\\\text { Wage Expense } & \$ 40,100 \\\text { Supply Expense } & 3,600 \\\text { Insurance Expense } & 3,000 \\\text { Depreciation Expense } & 3,900 \\\text { Amortization Expense } & 1,100 & \\\text { Rent Expense } & \underline{5,400} & \underline{57,100} \\\text { Perating Income } & & \underline{26,700} \\\text { Interest Expense } & & \underline{2,600} \\\text { Income before Taxes } && 24,100 \\\text { Income Tax Expense } & & \underline{10,800}\\\text { Net Income } & & \underline{\$ 13,300}\end{array}$

-Referring to Exhibit 5-1,what was the cash paid for income taxes by Cartell Paper Products in 2012?

A)$7,100
B)$11,700
C)$10,100
D)$10,900
E)$8,600