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Ashley Co.uses the direct method in calculating its cash flow from operations.Which of the following items will not have an effect on cash flow from operating activities?


A) Increase in inventory.
B) Payment of dividends to stockholders.
C) Cash collections from customers.
D) Payment of interest to lenders.

E) C) and D)
F) All of the above

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Which of the following statements about calculation of cash flows from operating activities under the indirect method is correct?


A) When the indirect method is used,changes in current liabilities are subtracted while changes in current assets are added to convert net income to net cash flow from operating activities.
B) When the indirect method is used,depreciation expense is added to net income as a step in the process of calculating net cash flow provided by operating activities.
C) When the indirect method is used,changes in long-term assets are added to convert net income to net cash flow provided by operating activities.
D) When the indirect method is used,changes in long-term liabilities are subtracted to convert net income to net cash flow provided by operating activities.

E) A) and D)
F) None of the above

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Snowberry Corporation had a net increase in Retained Earnings of $182,000 for the year.The corporation also paid $56,000 of cash dividends that had been declared in the previous year.This year,the corporation declared $50,400 of dividends but has not paid them as of year-end.Given this information,the net income for the current year must have been:


A) $176,400
B) $238,000
C) $182,000
D) $232,400

E) B) and D)
F) None of the above

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Oakdale Co.borrowed $1,960,000 cash from Eugene National Bank last year.In addition,the company repaid a $1,260,000 note payable to Michigan State Bank.How should these transactions be listed in the Statement of Cash Flows?


A) Oakdale can combine the transactions and show an increase to cash of $700,000 in the investing activities section of the statement.
B) Oakdale can combine the transactions and show an increase to cash of $700,000 in the financing activities section of the statement.
C) A decrease to cash for $1,260,000 is listed in the investing activities section and an increase of $1,960,000 is in the financing activities section.
D) Transactions must be shown separately as a decrease to cash for $1,260,000 and an increase of $1,960,000 in the financing activities section.

E) A) and C)
F) A) and D)

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Consider the following information: Consider the following information: Required: Part a.Compute the cash provided by (used in)investing activities. Part b.Compute the cash provided by (used in)financing activities. Part c.If you did not use any of the items listed in parts a or b,explain why,and indicate,if appropriate,how each item would be reported on the statement of cash flows. Required: Part a.Compute the cash provided by (used in)investing activities. Part b.Compute the cash provided by (used in)financing activities. Part c.If you did not use any of the items listed in parts a or b,explain why,and indicate,if appropriate,how each item would be reported on the statement of cash flows.

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Part a
Proceeds from sale of building $ ...

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The following additional information is available from the financial statements of Garfield Industries: The following additional information is available from the financial statements of Garfield Industries: What is Garfield's net cash provided by operating activities? A) $526,000 B) $570,000 C) $792,000 D) $736,000 What is Garfield's net cash provided by operating activities?


A) $526,000
B) $570,000
C) $792,000
D) $736,000

E) A) and C)
F) B) and D)

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A

When preparing the operating activities section of the statement of cash flows using the direct method,net income must be adjusted for gains or losses realized when property,plant,and equipment is sold.

A) True
B) False

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Augusta Company reported that its bonds with a face value of $40,000 and a carrying value of $42,400 are retired for $44,800 cash.The amount to be reported under cash flows from financing activities is:


A) ($42,400) .
B) ($2,400) .
C) ($44,800) .
D) $0;this is an operating activity.

E) None of the above
F) B) and C)

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C

Assume a company uses the indirect method to prepare its statement of cash flows.If Accounts Receivable decreases and Unearned Revenue increases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?


A) Both are added to net income.
B) The change in accounts receivable is added to net income;the change in unearned revenue is subtracted.
C) Both are subtracted from net income.
D) The change in unearned revenue is added to net income;the change in accounts receivable is subtracted.

E) None of the above
F) A) and B)

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In arriving at cash from operating activities,subtracting a decrease in Salaries and Wages Payable from net income includes the cash effects of transactions that:


A) increased cash,but did not affect net income.
B) increased cash and increased net income.
C) decreased cash,but did not affect net income.
D) decreased cash and decreased net income.

E) A) and D)
F) A) and C)

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Alton Baker Company's balance sheet indicated that the cash account increased by $15,120 during the past year.Net cash provided by operating activities was $39,200 and net cash used in investing activities was $17,080.What was the net cash flow effect of the company's financing activities?


A) Net cash provided of $7,000.
B) Net cash used of $7,000.
C) Net cash used of $41,160.
D) Net cash provided of $41,160.

E) A) and B)
F) B) and D)

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Emerald Co.owned equipment with a book value of $72,000 that was sold during this accounting period for $18,300 in cash,and purchased new equipment for cash of $88,800.Emerald Co.would record a debit of:


A) $88,800 and a credit of $18,300 to the cash account for a net cash inflow of $70,500.
B) $88,800 and a credit of $53,700 to the cash account for a net cash inflow of $35,100.
C) $18,300 and a credit of $88,800 to the cash account for a net cash outflow of $70,500.
D) $53,700 and a credit of $88,800 to the cash account for a net cash outflow of $35,100.

E) A) and D)
F) B) and C)

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Indicate whether each of the following would be added to or subtracted from net income when using the indirect method to reconcile net income to cash flows from operating activities. Indicate whether each of the following would be added to or subtracted from net income when using the indirect method to reconcile net income to cash flows from operating activities.

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Which of the following would not be added to net income in calculating cash flows from operating activities on a statement of cash flows prepared using the indirect method?


A) Amortization Expense.
B) A decrease in Accounts Receivable.
C) An increase in Salaries and Wages Payable.
D) A gain on sale of equipment.

E) A) and B)
F) A) and C)

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D

How is the change in cash classified on the statement of cash flows?


A) It is found in the investing activities section of the statement.
B) It is found in the operating activities section of the statement.
C) It is found in the financing activities section of the statement.
D) It is the sum of the investing,operating,and financing activities sections.

E) None of the above
F) B) and C)

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Strawbale,Inc.purchases a $600,000 building,paying $400,000 in cash and signing a $200,000 promissory note.What will be reported on the statement of cash flows as a result of this transaction?


A) A $600,000 cash outflow from investing activities
B) A $400,000 cash outflow from investing activities and a $200,000 cash inflow from financing activities
C) A $400,000 cash outflow from investing activities and a $200,000 noncash transaction
D) A $600,000 cash outflow from investing activities and a $200,000 cash inflow from financing activities

E) None of the above
F) A) and D)

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Which of the following items would not be classified as a cash flow from financing activities?


A) Payments of amounts owed to owners.
B) Borrowing from financial institutions.
C) Issuing additional common stock.
D) Making a payment on account.

E) None of the above
F) A) and C)

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St.Pierre Enterprises reported the following information in its financial statements: St.Pierre Enterprises reported the following information in its financial statements: What is the amount of cash collected from customers during the current year? A) $350,000 B) $380,500 C) $340,000 D) $410,000 What is the amount of cash collected from customers during the current year?


A) $350,000
B) $380,500
C) $340,000
D) $410,000

E) A) and B)
F) All of the above

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A company's cash flows from investing activities include cash transactions relating to the purchase and disposal of which types of assets?


A) All of a company's assets.
B) All of a company's assets except inventory.
C) All of a company's non-current assets.
D) Property,plant and equipment.

E) C) and D)
F) All of the above

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Negative operating cash flow may indicate all of the following except:


A) the company may not be able to replace property,plant and equipment.
B) stockholders may not receive a dividend.
C) the company may be in the introductory phase of its life cycle.
D) the company did not earn a profit from its core business activity.

E) A) and C)
F) C) and D)

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