ch17 Cash Flow

7/17/2019 Test Bank - Chapter17 Cash Flows
Chapt
er17
“
HowWel
lAm IDoi
ng?”St
atementofCashFl
ows
True/False
1. Every transaction classified as "source" or "use" of cash for purposes of constructing a

T statement of cash flows involves a change in some noncash balance sheet account.
Medium
2. In the statement of cash flows, increases in a companys capital stoc! accounts are generally
T treated as a "source" rather than as a "use" of cash.
Medium
. %ividends received on stoc! held as an investment should be treated as an investing activity on

# the statement of cash flows.
$ard
&. ' change in deferred ta(es is considered to be a financing activity on the statement of cash
# flows.
Medium
). *nder the indirect method of determining the net cash flow from operating activities on the
T statement of cash flows, a gain on the sale of e+uipment would be subtracted from net income.
$ard
. 'n increase in ta(es payable between the beginning and the end of the year would be added to
T net income when determining the net cash provided by operating activities under the indirect
Medium method on the statement of cash flows.

-. *nder the indirect method of determining the net cash provided by operating activities on the
# statement of cash flows, increases in current liabilities such as accounts payable are subtracted
Medium from net income.
. If the income statement shows a loss for the period, then the net cash provided by operating
# activities on the statement of cash flows cannot be positive.
$ard
/. Transactions that involve ac+uiring or disposing of noncurrent assets are generally classified as
# financing activities on the statement of cash flows.
Medium
10. ash dividends paid to the owners of a company would be classified as part of financing
T activities on the statement of cash flows.
Medium
Managerial Accounting, 9/e 98
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11. 'ppendi(3 If accounts receivable increase during a period, then the amount of cash collected
# from customers will be greater than the amount of sales reported on the income statement for
Medium the period.
12. 'ppendi(3 *nder the direct method of determining net cash provided by operating activities
# on the statement of cash flows, the net income figure is ad4usted for changes in current assets
Medium and liabilities.
1. 'ppendi(3 *nder the direct method of determining the net cash provided by operating
# activities on the statement of cash flows, an increase in accounts payable would be added to
$ard cost of goods sold to convert cost of goods sold to a cash basis.
1&. The net cash provided by operating activities on the statement of cash flows will generally be
T different than net income.
Easy
1). #or e(ternal reporting purposes, the #'56 recommends that the direct method of determining
T the net cash provided by operating activities be used for the statement of cash flows.
Easy
Multiple hoice
1. 'n increase in the Inventory account of a company from 710,000 at the beginning of the year
6 to 71),000 at the end of the year would be shown on the companys statement of cash flows
Medium prepared under the indirect method as8
a. an addition to net income of 7),000 in order to arrive at cash flows from operating
activities.
b. a deduction from net income of 7),000 in order to arrive at cash flows from operating
activities.
c. an addition to net income of 71),000 in order to arrive at cash flows from operating
activities.
d. a deduction from net income of 710,000 in order to arrive at cash flows from
operating activities.
1-. *nder the indirect method of determining net cash provided by operating activities, which of
 the following would be recorded as a deduction from net income9
$ard a. ' decrease in accounts receivable.
b. 'n increase in salaries payable.
c. ' decrease in accounts payable.
d. 'n increase in deferred ta( liability.
99 Managerial Accounting, 9/e
1. 'n increase in the Interest :ayable account of a company from 70 at the beginning of the year,
' to 71,000 at the end of the year, would be shown on the companys statement of cash flows
Medium prepared under the indirect method as8
a. an addition to net income of 71,000 in order to arrive at cash flows from operating
activities.
b. a deduction from net income of 71,000 in order to arrive at cash flows from operating
activities.
c. a cash flow of 71,000 under the Investing 'ctivities heading.
d. a cash flow of 71,000 under the #inancing 'ctivities heading.
1/. ;hich of the following would be considered a "use" of cash for purpose of constructing a
 statement of cash flows9
Medium a. selling the companys own common stoc! to investors.
b. issuing long<term debt.
c. purchasing e+uipment.
d. amorti=ing a patent.
20. ;hich of the following would be considered a "use" of cash for purposes of constructing a
' statement of cash flows9
Medium a. an increase in accounts receivable.
b. a decrease in prepaid e(penses.
c. an increase in bonds payable.
d. an increase in accumulated depreciation.
21. ;hich of the following would be considered a "use" of cash for purposes of constructing a
6 statement of cash flows9
Medium a. an increase in accounts payable.
b. an increase in prepaid e(penses.
c. an increase in accrued liabilities.
d. an increase in accumulated depreciation.
22. 'n increase in the prepaid e(penses account of 71,000 over the course of a year would be
6 shown on the companys statement of cash flows prepared under the indirect method as8
Medium a. an addition to net income of 71,000 in order to arrive at net cash provided by operating
activities.
b. a deduction from net income of 71,000 in order to arrive at net cash provided by operating
activities.
c. an addition of 71,000 under financing activities.
d. a deduction of 71,000 under financing activities.
2. ;hen using the indirect method to prepare the statement of cash flows, amorti=ation of
% goodwill should be presented as an38
Medium a. cash flow from investing activities.
M' adapted b. cash flow from financing activities.
c. deduction from net income.
d. addition toand
e. investing netfinancing
income. activity not affecting cash.
2&. 'ppendi(3 %uring the year the balance in the accounts payable account decreased by 7,000.
% In order to ad4ust the companys net income to a cash basis using the direct method on the
$ard statement of cash flows, it would be necessary to8
a. deduct the 7,000 from the sales revenue reported on the income statement.
b. add the 7,000 to the sales revenue reported on the income statement.
c. deduct the 7,000 from the cost of goods sold reported on the income statement.
d. add the 7,000 to the cost of goods sold reported on the income statement.
2). 'ppendi(3 %uring the year the balance in the accrued liabilities account increased by
' 712,000. In order to ad4ust the companys net income to a cash basis using the direct method on
$ard the statement of cash flows, it would be necessary to8
a. deduct the 712,000 from the operating e(penses on the income statement.
b. add the 712,000 to the operating e(penses on the income statement.
c. deduct the 712,000 from the cost of goods sold reported on the income statement.
d. add the 712,000 to the cost of goods sold reported on the income statement.
2. In a statement of cash flows, a change in prepaid e(penses would be classified as8
' a. an operating activity.
Easy b. a financing activity.
c. an investing activity.
d. a noncash item that need not appear on the statement of cash flows.
2-. In a statement of cash flows, a change in the inventories account would be classified as8
' a. an operating activity.
Easy b. a financing activity.
c. an investing activity.
d. a noncash item that need not appear on the statement of cash flows.
2. 'll of the following should be classified under the operating section of the statement of cash
% flows E>E:T8
Medium a. a decrease in inventory.
M' adapted b. an increase in accumulated depreciation.
c. a decrease in prepaid insurance.
d. a purchase of land in e(change for a long<term note.
e. an increase in income ta( payable.
101Managerial Accounting, 9/e
2/. 'n increase in the plant and e+uipment account of 7100,000 over the course of a year would
% be shown on the companys statement of cash flows prepared under the indirect method as8
Medium a. an addition to net income of 7100,000 in order to arrive at net cash provided by operating
activities.
b. a deduction from net income of 7100,000 in order to arrive at net cash provided by
operating activities.
c. an addition of 7100,000 under investing activities.
d. a deduction of 7100,000 under investing activities.
0. 'n increase in the bonds payable account of 7200,000 over the course of a year would be
 shown on the companys statement of cash flows prepared under the indirect method as8
Medium a. an addition of 7200,000 under investing activities.
b. a deduction of 7200,000 under investing activities.
1. 'n decrease in the bonds payable account of 7200,000 over the course of a year would be
% shown on the companys statement of cash flows prepared under the indirect method as8
Medium a. an addition of 7200,000 under investing activities.
b. a deduction of 7200,000 under investing activities.
2. ;hich one of the following transactions should be classified as a financing activity on the
6 statement of cash flows9
$ard a. :urchase of e+uipment.
M' adapted b. :urchase of the companys own stoc!.
c. 5ale of a patent.
d. :ayment of interest on a note.
e. ?eceipt of an income ta( refund.
. ;hich of the following would be classified as a #inancing 'ctivity on the statement of cash
6 flows9
$ard a. Interest paid on bonds issued by the reporting company.
b. %ividends paid to shareholders of the company on the companys common stoc!.
c. Interest received on investments in another companys bonds.
d. %ividends received on investments in another companys common stoc!.
&. The sale of e+uipment at a gain would be shown on the statement of cash flows prepared under
' the indirect method in which of the following manners9
$ard a. ash received would be shown under Investing 'ctivities and the gain would be
deducted from net income.
b. ash received would be shown under Investing 'ctivities and the gain would be
added to net income.
c. ash received would be shown under Investing 'ctivities and the gain would not
appear on the statement of cash flows.
d. ash received would be shown as an ad4ustment to net income and the gain would not
appear on the statement of cash flows.
). ;hich of the following presentations on the statement of cash flows of the transactions
 described is correct9
$ard a. ' company that purchases 700,000 in property during a year, and sells other
property for 7&00,000, shows a 7200,000 net investment in property for the year as an
Investing 'ctivity.
b. ' company that receives 7-00,000 from the issuance of bonds, and pays 700,000 to
retire other bonds, shows a 7100,000 net amount from #inancing 'ctivities.
c. ' company has an increase of 7&00,000 in accounts receivable as a result of sales for
the year, and a decrease of 700,000 in accounts receivable as a result of collections
during the year, shows a 7100,000 net difference in determining the cash flow from
operating activities during the year.
d. @one of the above presentations is correct.
. The data given below are from the accounting records of the Auhn ompany8

$ard @et Income accrual basis3 ............... 7&),000
%epreciation E(pense ..................... 7 /,000
%ecrease in 'ccounts :ayable ............. 7 2,)00
%ecrease in Merchandise Inventory ........ 7 ,000
Increase in Bong<term Biabilities ........ 710,000
5ale of apital 5toc! for cash ........... 70,000
Increase in 'ccounts ?eceivable .......... 7 &,)00
6ased on this information, the cash provided by operating activities using the indirect method
would be8
a. 7)),000.
b. 7),000.
c. 7)0,000.
d. 70,000.
-. Morey ompanys net income last year was 72-,000 and cash dividends declared and paid to
 the companys stoc!holders totaled 71,000. hanges in selected balance sheet accounts for
$ard the year appear below8
Increases
%ecreases3
%ebit balances8
'ccounts receivable ......... 7 ,000
Inventory ................... ,0003
:repaid e(penses ............ &,000
redit balances8
'ccumulated depreciation .... 1,000
'ccounts payable ............ ,000
Ta(es payable ............... &,0003
6onds payable ............... 10,000
6ased solely on this information, the net cash provided by operations under the indirect
method on the statement of cash flows would be8
a. 71,000.
b. 7&),000.
c. 7,000.
d. 72),000.
. Moravec ompanys net income last year was 7&,000 and cash dividends declared and paid to
6 the companys stoc!holders totaled 71,000. hanges in selected balance sheet accounts for
Increases
%ecreases3
%ebit balances8
'ccounts receivable ......... 7 ,000
Inventory ................... ),0003
redit balances8
'ccumulated depreciation .... 2,000
'ccounts payable ............ 10,000
'ccrued liabilities ......... /,0003
Ta(es payable ............... &,000
6onds payable ............... 0,000
a. 712,000.
b. 7-&,000.
c. 7-2,000.
d. 71,000.
/. Morera ompanys net income last year was 7-,000 and cash dividends declared and paid to
% the companys stoc!holders totaled 71&,000. hanges in selected balance sheet accounts for
Increases
%ecreases3
%ebit balances8
'ccounts receivable ......... 7 ,000
Inventory ................... ),000
:repaid e(penses ............ ,0003
Bong term investments ....... 20,000
redit balances8
'ccumulated depreciation .... 2,000
'ccounts payable ............ -,0003
Ta(es payable ............... ,000
a. 7,000.
b. 72,000.
c. 71,000.
d. 7),000.
&0. @ordstrand ompanys net income last year was 7,000. hanges in selected balance sheet
6 accounts for the year appear below8
Medium
Increases
%ecreases3
%ebit balances8
'ccounts receivable ......... 7-,0003
Inventory ................... ),0003
:repaid e(penses ............ ,000
redit balances8
'ccumulated depreciation .... 1,000
'ccounts payable ............ 1,000
Ta(es payable ............... <0<
%eferred ta(es .............. 1,000
a. 7&,000.
b. 7,000.
c. 7)0,000.
d. 7)&,000.
&1. @ord+uist ompanys net income last year was 7,000. hanges in selected balance sheet
 accounts for the year appear below8
Medium
Increases
%ecreases3
%ebit balances8
'ccounts receivable ......... 712,000
Inventory ................... &,0003
:repaid e(penses ............ ,000
redit balances8
'ccumulated depreciation .... 2,000
'ccounts payable ............ 1&,000
Ta(es payable ............... <0<
%eferred ta(es .............. ,000
a. 70,000.
b. 71,000.
c. 7&,000.
d. 7),000.
&2. @orbury ompanys net income last year was 7&,000. hanges in selected balance sheet
' accounts for the year appear below8
Medium
Increases
%ecreases3
%ebit balances8
'ccounts receivable ......... 712,000
Inventory ................... /,0003
:repaid e(penses ............ &,000
redit balances8
'ccumulated depreciation .... 1/,000
'ccounts payable ............ ),000
'ccrued liabilities ......... -,000
Ta(es payable ............... ,0003
%eferred ta(es .............. <0<
a. 7)2,000.
b. 7,000.
c. 7),000.
d. 71,000.
&. Bino ompanys records reveal the following account balances at the close and beginning of
' last year8
Medium
:' adapted %ecember 1 Canuary 1
'ccounts receivable 72/,000 72,000
'ccumulated depreciation 1,000 00
:repaid e(penses ,200 12,&00
'ccounts payable 22,&00 1/,&00
Binos net income last year was 71)0,000. The company uses the indirect method to determine
the net cash provided by operating activities. 6ased solely upon this data, what amount should
Bino include as net cash provided by operating activities in its statement of cash flows for the
year9
a. 71)1,&00
b. 71)-,000
c. 71&,00
d. 71&),&00
&&. 'ppendi(3 Bast year umley ompany reported a cost of goods sold of 7/0,000. Inventories
 increased by 721,000 during the year, and accounts payable decreased by 71&,000. The
Medium company uses the direct method to determine the net cash provided by operating activities on
the statement of cash flows. The cost of goods sold ad4usted to a cash basis would be8
a. 7)),000.
b. 7111,000.
c. 712),000.
d. 710&,000.
&). 'ppendi(3 Bast year umber ompany reported a cost of goods sold of 7-0,000. Inventories
% decreased by 712,000 during the year, and accounts payable increased by 7,000. The
Medium company uses the direct method to determine the net cash provided by operating activities on
the statement of cash flows. The cost of goods sold ad4usted to a cash basis would be8
a. 7/0,000.
b. 72,000.
c. 7),000.
d. 7)0,000.
&. 'ppendi(3 Bast year umberland ompany reported a cost of goods sold of 7120,000.
' Inventories increased by 7),000 during the year, and accounts payable increased by 720,000.
Medium The company uses the direct method to determine the net cash provided by operating activities
on the statement of cash flows. The cost of goods sold ad4usted to a cash basis would be8
a. 71),000.
b. 7100,000.
c. 71)),000.
d. 710),000.
&-. 'ppendi(3 Bast year Bawton ompany reported sales of 7110,000 on its income statement.
6 %uring the year, accounts receivable decreased by 710,000 and accounts payable decreased by
$ard 71),000. The company uses the direct method to determine the net cash provided by operating
activities on the statement of cash flows. The sales revenue ad4usted to a cash basis for the year
would be8
a. 712),000.
b. 7120,000.
c. 711),000.
d. 710),000.
&. 'ppendi(3 Bast year Bawsby ompany reported sales of 7120,000 on its income statement.
 %uring the year, accounts receivable increased by 710,000 and accounts payable increased by
would be8
a. 710),000.
b. 712),000.
c. 7110,000.
d. 711),000.
&/. 'ppendi(3 Bast year Bawn ompany reported sales of 711),000 on its income statement.
' %uring the year, accounts receivable decreased by 710,000 and accounts payable increased by
would be8
a. 712),000.
b. 7/0,000.
c. 71&0,000.
d. 7100,000.
)0. 'ppendi(3 Bast year %arrow ompany reported sales of 700,000 on its income statement.
6 %uring the year, accounts receivable increased by 70,000 and accounts payable decreased by
Medium 720,000. The company uses the direct method to determine the net cash provided by operating
would be8
a. 70,000.
b. 7)-0,000.
c. 710,000.
d. 7)/0,000.
)1. 'ppendi(3 Bast year Madson company reported a cost of goods sold of 700,000 on its income
' statement. The following additional data were ta!en from the companys comparative balance
Medium sheet for the year8
Ending 6eginning
Inventory ............. 7120,000 7100,000
'ccounts payable ...... 7 -0,000 7 0,000
The company uses the direct method to determine the net cash provided by operating activities
on the statement of cash flows. The cost of goods sold ad4usted to a cash basis would be8
a. 70,000.
b. 710,000.
c. 7--0,000.
d. 7-/0,000.
)2. 'ppendi(3 ridge ompanys operating e(penses for last year totaled 71-0,000. %uring the
' year the companys prepaid e(pense account balance increased by 7/,000 and accrued
Medium liabilities decreased by 71,000. %epreciation charges for the year were 71),000. 6ased on this
information, operating e(penses ad4usted to a cash basis under the direct method on the
statement of cash flows would be8
a. 71--,000.
b. 720-,000.
c. 71,000.
d. 71,000.
). 'ppendi(3 ridwell ompanys operating e(penses for last year totaled 7210,000. %uring the
6 year the companys prepaid e(pense account balance increased by 71,000 and accrued
Medium liabilities increased by 712,000. %epreciation charges for the year were 72&,000. 6ased on this
a. 710,000.
b. 71/2,000.
c. 722,000.
d. 72&0,000.
)&. 'ppendi(3 ridman ompanys operating e(penses for last year totaled 710,000. %uring the
 year the companys prepaid e(pense account balance decreased by 7),000 and accrued
Medium liabilities increased by 7,000. %epreciation charges for the year were 712,000. 6ased on this
a. 720),000.
b. 711,000.
c. 71)),000.
d. 71-/,000.
)). 'ppendi(3 The ending balance of accounts receivable was 7)2,)00. 5ales, ad4usted to a cash
' basis using the direct method on the statement of cash flows, were 7&2),000. 5ales reported on
$ard the income statement were 7&&&,000. 6ased on this information, the beginning balance in
accounts receivable was8
a. 7,)00.
b. 7,)00.
c. 7-1,)00.
d. 7/,)00.
). 'ppendi(3 %uring the year 4ust completed, 'nderson ompany reported a cost of goods sold
 of 7100,000. The companys inventory at the beginning of the year was 711,000, and its
$ard inventory at the end of the year was 71/,000. The :repaid E(pense account increased by
72,000 between the beginning and end of the year, and the 'ccounts :ayable account
decreased by 7&,000. ost of goods sold ad4usted to the cash basis under the direct method
would be8
a. 7/&,000.
b. 710,000.
c. 7112,000.
d. 7110,000.
)-. 'ppendi(3 arlton ompany reported on its income statement sales for the year 4ust ended of
' 7&),000. 5ales during the year ad4usted to the cash basis on its statement of cash flows
$ard constructed using the direct method were 7&0,000. arlton ompany recorded the following
account balances8
6alance o
'ccount o 6eginning of the Dear End of the Dear
'ccounts ?eceivable ...... 9 7),000
:repaid E(penses ......... 712,000 71,000
Inventory ................ 722,000 71/,000
6ased on this information, the balance in 'ccounts ?eceivable at the beginning of the year was8
a. 70,000.
b. 7,000.
c. 7)/,000.
d. 710,000.
). 'ppendi(3 B#M ompany reported ost of oods 5old on its income statement of 71),000 for
6 the year 4ust ended, as well as the balances shown in the following accounts at the respective year<
$ard ends8
6eginning of Dear End of Dear

Inventory ............... 70,000 7,000
'ccounts :ayable ........ 721,000 72,000
*sing the direct method of constructing the statement of cash flows, the cost of goods sold
ad4usted to a cash basis would be8
a. 71&,000.
b. 71,000.
c. 710,000.
d. 71),000.
)/. 'ppendi(3 %uring the year 4ust completed, 6lume ompany reported total cost of goods sold
 on the income statement as 71&0,000. %uring the year, the balance in 'ccounts :ayable
$ard decreased 72),000 and the balance in Inventory increased 710,000. *nder the direct method,
cost of goods sold ad4usted to the cash basis would be8
a. 710),000.
b. 712),000.
c. 71-),000.
d. 71)),000.
0. Bast year Marmin ompany sold e+uipment with a net boo! value of 7120,000 for 710,000 in
 cash. This e+uipment was originally purchased for 720,000. ;hat will be the net effect of this
$ard transaction on the net cash provided by investing activities on the statement of cash flows9
a. ' net deduction of 7&0,000 from cash.
b. ' net addition of 7&0,000 to cash.
c. ' net deduction of 7-0,000 from cash.
d. ' net addition of 7-0,000 to cash.
1. Bast year Marlstrom ompany sold e+uipment with a net boo! value of 7110,000 for 7/0,000
6 in cash. This e+uipment was originally purchased for 720,000. ;hat will be the net effect of
$ard this transaction on the net cash provided by investing activities on the statement of cash flows9
a. ' net addition of 71/0,000 to cash.
b. ' net deduction of 71/0,000 from cash.
c. ' net addition of 720,000 to cash.
d. ' net deduction of 720,000 from cash.
2. Bast year Marty ompany sold e+uipment with a net boo! value of 712),000 for 7110,000 in
% cash. This e+uipment was originally purchased for 72-),000. ;hat will be the net effect of this
$ard transaction on the net cash provided by investing activities on the statement of cash flows9
a. ' net addition of 71),000 to cash.
b. ' net deduction of 71),000 from cash.
c. ' net addition of 71),000 to cash.
d. ' net deduction of 71),000 from cash.
. The following events occurred last year for the ashbac! ompany8

$ard Issuance of ommon 5toc! ................ 7&,000
%ividends paid to shareholders .......... 11,000
%ividends received from investments ..... &,000
Interest paid on 6onds :ayable .......... 1&,000
:roceeds from sale of used e+uipment .... 1/,000
?epurchase of preferred stoc! ........... 10,000
6ased solely on the above information, the net cash provided by financing activities for the
year on the statement of cash flows was8
a. 7&&,000.
b. 7&,000.
c. 72),000.
d. 71),000.
&. The following transactions occurred last year at Cowlson ompany8


$ard Issuance of shares of the
companys own common stoc! ............. 7 &0,000
%ividends paid to the
companys own shareholders ............. ,000
%ividends received from investments
in other companies shares ............. ),000
Interest paid on the companys own bonds .. 22,000
?epayment of principal on
the companys own bonds ................ 100,000
:roceeds from sale of the
companys used e+uipment ............... 2/,000
:urchase of land .......................... 0,000
year on the statement of cash flows would be8
a. 711,0003.
b. 72-/,000.
c. 7,0003.
d. 7),0003.
). The following transactions occurred last year at Cogger ompany8

%
companys own common stoc! ............. 7110,000
companys own shareholders ............. ,000
in other companies shares ............. &,000
Interest paid on the companys own bonds .. ,000
the companys own bonds ................ 100,000
companys used e+uipment ............... 2/,000
:urchase of land .......................... 1-0,000
a. 7&2&,000.
b. 71,0003.
c. 71,0003.
d. 7-,000.
. The following transactions occurred last year at Colly ompany8

6
companys own common stoc! ............. 7120,000
companys own shareholders ............. 1,000
in other companies shares ............. -,000
Interest paid on the companys own bonds .. 1,000
the companys own bonds ................ 0,000
companys used e+uipment ............... ,000
:urchase of land .......................... 1-0,000
a. 7-/,000.
b. 7)/,000.
c. 710/,0003.
d. 7&,000.
-. rading ompanys cash and cash e+uivalents consist of cash and mar!etable securities. Bast
% year the companys cash account decreased by 71&,000 and its mar!etable securities account
$ard increased by 71,000. ash provided by operating activities was 721,000. @et cash used for
financing activities was 722,000. 6ased on this information, the net cash flow from investing
activities on the statement of cash flows was8
a. a net 71,000 decrease.
b. a net 71,000 increase.
c. a net 7,000 decrease.
d. a net 7),000 increase.
. Bast year 6urbach ompanys cash account increased by 710,000. @et cash provided by
' investing activities was 71,000. @et cash used in financing activities was 7&,000. Fn the
Medium statement of cash flows, the net cash flow provided by used in3 operating activities was8
a. 72,000.
b. 7,0003.
c. 710,000.
d. 71,0003.
/. Bast year 6urford ompanys cash account decreased by 71/,000. @et cash used in investing
6 activities was 7/,000. @et cash provided by financing activities was 71,000. Fn the statement
Medium of cash flows, the net cash flow provided by used in3 operating activities was8
a. 71/,0003.
b. 72,0003.
c. 712,0003.
d. 7-,000.
-0. Bast year 6urch ompanys cash account decreased by 7,000. @et cash provided by investing
% activities was 71,000. @et cash used in financing activities was 70,000. Fn the statement of
Medium cash flows, the net cash flow provided by used in3 operating activities was8
a. 72,0003.
b. 71-,0003.
c. 7,0003.
d. 711,000.
?eference8 1-<1
'ppendi(3 6alance sheet accounts for $ollis, Inc. contained the following amounts at the ends of years 1 and 28
Dear 2 Dear 1
%ebit balances
ash .......................... 7 -,)00 7 ),000
'ccounts ?eceivable ........... 21,000 1),000
Inventory ..................... -,000 2,000
:repaid E(penses .............. 2,)00 2,000
Bong<term Investments ......... 21,000 2),000
:lant and E+uipment ........... 1/,000 1-),000
Totals .............. 72),000 72)0,000
redit balances
'ccumulated %epreciation ...... 7 &1,000 7 2,000
'ccounts :ayable .............. 2&,000 2,000
'ccrued Biabilities ........... /,000 ),000
6onds :ayable ................. 0,000 ),000
ommon 5toc! .................. -),000 0,000
?etained Earnings ............. 10,000 /0,000
Totals .............. 72),000 72)0,000
The companys income statement for year 2 follows8
5ales .................. 712,000

ost of oods 5old ..... --,000
ross profit ........... &/,000
Fperating E(pense ...... 2,000
@et Income ............. 7 21,000
There were no sales or retirements of plant and e+uipment in Dear 2. ash dividends of 7),000 were paid during
Dear 2. The company pays no income ta(es. The company uses the direct method to determine the net cash
provided by operating activities on the statement of cash flows.
-1. #or Dear 2, sales ad4usted to a cash basis would be8
6 a. 7111,000.
Medium b. 7120,000.
?efer To8 1-< c. 712,000.
1 d. 712,000.
-2. ost of goods sold ad4usted to a cash basis for Dear 2 would be8
% a. 7&,000.
Medium b. 7-2,000.
?efer To8 1-< c. 72,000.
1 d. 7/0,000.
-. The net cash provided by operating activities for Dear 2 would be8
' a. 71&,)00.
Medium b. 70,000.
?efer To8 1-< c. 71,)00.
1 d. 72-,)00.
-&. @et cash used for investing activities for Dear 2 would be8
 a. 712,000.
Medium b. 721,000.
?efer To8 1-< c. 71-,000.
1 d. 722,000.
-). @et cash provided by financing activities for Dear 2 would be8
 a. 7,000.
Medium b. 710,000.
?efer To8 1-< c. 7),000.
1 d. 711,000.
?eference8 1-<2
;atley ompanys comparative balance sheet and income statement for last year appear below8
5tatement of #inancial :osition
Ending 6eginning
6alance 6alance
ash ....................... 7 2-,000 7 21,000
'ccounts receivable ........ 2,000 ),000
Inventory .................. &,000 ,000
:repaid e(penses ........... ,000 1,000
Bong<term investments ...... 2/0,000 20,000
:lant and e+uipment ........ &&0,000 &&0,000
'ccumulated depreciation ... 2-,0003 202,0003
Total assets ............. 70&,000 7)-,000
'ccounts payable ........... 7 &-,000 7 2,000

'ccrued liabilities ........ 2&,000 1,000
Ta(es payable .............. <0< 10,000
6onds payable .............. 100,000 10,000
%eferred ta(es ............. 2,000 1-,000
ommon stoc! ............... 0,000 )0,000
?etained earnings .......... 2),000 2,000
Total liabilities and
owners e+uity ........ 70&,000 7)-,000
Income 5tatement
5ales ........................ 7--0,000

Bess8 costs of goods sold .... )0,000
ross margin ................. &20,000
Bess8 operating e(penses ..... 20,000
@et operating income ......... 10,000
Bess8 income ta(es ........... &,000
@et income ................... 7112,000
The company declared and paid 7)),000 in cash dividends during the year. The following +uestions pertain to the
companys statement of cash flows.
-. The net cash provided by used in3 operating activities last year was8
' a. 71-1,000.
Medium b. 71&,000.
?efer To8 1-< c. 7),000.
2 d. 7112,000.
--. The net cash provided by used in3 investing activities last year was8
% a. 70,000.
Medium b. 70,0003.
?efer To8 1-< c. 70,000.
2 d. 70,0003.
-. The net cash provided by used in3 financing activities last year was8
6 a. 710),000.
Medium b. 710),0003.
?efer To8 1-< c. 7)0,0003.
2 d. 7)0,000.
?eference8 1-<
;abash ompanys comparative balance sheet and income statement for last year appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 0,000 7 ,000
'ccounts receivable ........ -,000 &,000
Inventory .................. ,000 &&,000
:repaid e(penses ........... 1,000 /,000
Bong<term investments ...... 2&0,000 200,000
:lant and e+uipment ........ &0,000 &0,000
'ccumulated depreciation ... 220,0003 1/0,0003
Total assets ............. 712,000 7)/),000
'ccounts payable ........... 7 )1,000 7 -,000

'ccrued liabilities ........ 10,000 2),000
Ta(es payable .............. 1,000 21,000
6onds payable .............. 0,000 110,000
%eferred ta(es ............. 21,000 1-,000
ommon stoc! ............... 110,000 /0,000
?etained earnings .......... 2/,000 2/),000
owners e+uity ........ 712,000 7)/),000
Income 5tatement
5ales ........................ 7-10,000

Bess8 costs of goods sold .... &10,000
ross margin ................. 00,000
Bess8 operating e(penses ..... 1/0,000
@et operating income ......... 110,000
Bess8 income ta(es ........... ,000
@et income ................... 7 --,000
The company declared and paid 7&,000 in cash dividends during the year. The following +uestions pertain to the
-/. The net cash provided by used in3 operating activities last year was8
 a. 710-,000.
Medium b. 7&/,000.
?efer To8 1-< c. 710),000.
 d. 7--,000.
0.
% The net cash provided by used in3 investing activities last year was8
a. 720,0003.
Medium b. 720,000.
?efer To8 1-< c. 7&0,003.
 d. 7&0,0003.
1. The net cash provided by used in3 financing activities last year was8
6 a. 7-,000.
Medium b. 7-,0003.
?efer To8 1-< c. 70,000.
 d. 70,0003.
?eference8 1-<&
Megan ompanys net income last year was 7/,000. hanges in the companys balance sheet accounts for the
year appear below8
Increases
%ecreases3
%ebit balances8
ash ........................ 7 ,0003
'ccounts receivable ......... 1&,0003
Inventory ................... ,000
:repaid e(penses ............ -,0003
Bong<term investments ....... 0,000
:lant and e+uipment ......... )),000
redit balances8
'ccumulated depreciation .... ),000
'ccounts payable ............ <0<
'ccrued liabilities ......... 1),000
Ta(es payable ............... 1,0003
6onds payable ............... 0,0003
%eferred ta(es .............. 2,000
ommon stoc! ................ 20,000
?etained earnings ........... 2,000
The company declared and paid cash dividends of 7,000 last year. The following +uestions pertain to the
2. The net cash provided by used in3 operating activities last year was8
6 a. 7/,000.
Medium b. 71-,000.
?efer To8 1-< c. 71),000.
& d. 7120,000.
. The net cash provided by used in3 investing activities last year was8
% a. 7,000.
Medium b. 711),0003.
?efer To8 1-< c. 71),000.
& d. 71),0003.
&. The net cash provided by used in3 financing activities last year was8
' a. 7&,0003.
Medium b. 7&,000.
?efer To8 1-< c. 710,0003.
& d. 710,000.
?eference8 1-<)
'ppendi(3 Gan 'rdhom ompanys comparative balance sheet and income statement for last year appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 2),000 7 &0,000
'ccounts receivable ........ ),000 &,000
Inventory .................. -1,000 )2,000
:repaid e(penses ........... -,000 1,000
Bong<term investments ...... 10,000 2&0,000
:lant and e+uipment ........ &20,000 &20,000
'ccumulated depreciation ... 2,0003 20,0003
Total assets ............. 7),000 7)/1,000
'ccounts payable ........... 7 -,000 7 )-,000

'ccrued liabilities ........ ,000 21,000
Ta(es payable .............. 0,000 1/,000
6onds payable .............. -0,000 110,000
%eferred ta(es ............. &,000 22,000
ommon stoc! ............... 100,000 -0,000
?etained earnings .......... ),000 2/2,000
owners e+uity ........ 7),000 7)/1,000
Income 5tatement
5ales ........................ 7-0,000

Bess8 costs of goods sold .... 10,000
ross margin ................. 0,000
Bess8 operating e(penses ..... 20,000
@et operating income ......... 10,000
Bess8 income ta(es ........... /,000
@et income ................... 7 /1,000
The company declared and paid 7&,000 in cash dividends during the year. The company uses the direct method
to determine the net cash provided by operating activities.
). Fn the statement of cash flows, the sales revenue ad4usted to a cash basis would be8
' a. 7&,000.
$ard b. 7-,000.
?efer To8 1-< c. 7-0,000.
) d. 7/2,000.
. Fn the statement of cash flows, the cost of goods sold ad4usted to a cash basis would be8
6 a. 72/,000.
$ard b. 70,000.
?efer To8 1-< c. 710,000.
) d. 712,000.
-. Fn the statement of cash flows, the operating e(penses ad4usted to a cash basis would be8
6 a. 72/,000.
$ard b. 7211,000.
?efer To8 1-< c. 720,000.
) d. 72&/,000.
. Fn the statement of cash flows, the income ta( e(pense ad4usted to a cash basis would be8
% a. 7/,000.
$ard b. 72,000.
?efer To8 1-< c. 72,000.
) d. 71,000.
?eference8 1-<
'ppendi(3 Gan 6roder ompanys comparative balance sheet and income statement for last year appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 &,000 7 2-,000
'ccounts receivable ........ ),000 &,000
Inventory .................. ),000 ,000
:repaid e(penses ........... ,000 1,000
Bong<term investments ...... 20,000 210,000
:lant and e+uipment ........ )10,000 )10,000
'ccumulated depreciation ... 2-,0003 2),0003
Total assets ............. 7,000 7-,000
'ccounts payable ........... 7 12,000 7 2-,000

'ccrued liabilities ........ ),000 21,000
Ta(es payable .............. 2,000 1&,000
6onds payable .............. -0,000 10,000
%eferred ta(es ............. 0,000 2),000
ommon stoc! ............... 0,000 )0,000
?etained earnings .......... &2-,000 -0,000
owners e+uity ........ 7,000 7-,000
Income 5tatement
5ales ........................ 7&0,000

Bess8 costs of goods sold .... 00,000
ross margin ................. &0,000
Bess8 operating e(penses ..... 20,000
Bess8 income ta(es ........... ,000
@et income ................... 7 --,000
The company declared and paid 720,000 in cash dividends during the year. The company uses the direct method
/. Fn the statement of cash flows, the sales revenue ad4usted to a cash basis would be8
% a. 7&0,000.
$ard b. 7)0,000.
?efer To8 1-< c. 71-,000.
 d. 70,000.
/0. Fn the statement of cash flows, the cost of goods sold ad4usted to a cash basis would be8
6 a. 71),000.
$ard b. 702,000.
?efer To8 1-< c. 700,000.
 d. 72/,000.
/1. Fn the statement of cash flows, the operating e(penses ad4usted to a cash basis would be8
 a. 721,000.
$ard b. 7211,000.
?efer To8 1-< c. 71-/,000.
 d. 720,000.
/2. Fn the statement of cash flows, the income ta( e(pense ad4usted to a cash basis would be8
' a. 710,000.
$ard b. 7,000.
?efer To8 1-< c. 7),000.
 d. 71),000.
?eference8 1-<-
The changes in @orthrup ompanys balance sheet account balances for last year appear below8
Increases
%ecreases3
%ebit balances8
ash ........................ 7 &,000
'ccounts receivable ......... &,0003
Inventory ................... 2,0003
:repaid e(penses ............ 2,000
Bong<term investments ....... &0,000
:lant and e+uipment ......... 2),000
redit balances8
'ccumulated depreciation .... ,000
'ccounts payable ............ ,0003
'ccrued liabilities ......... ,000
Ta(es payable ............... 10,0003
6onds payable ............... -0,0003
%eferred ta(es .............. 2,000
ommon stoc! ................ 10,000
?etained earnings ........... ,000
The companys income statement for the year appears below8
Income 5tatement
5ales ........................ 7/0,000

Bess8 costs of goods sold .... )&0,000
ross margin ................. &&0,000
Bess8 operating e(penses ..... 10,000
Bess8 income ta(es ........... /,000
@et income ................... 7 /1,000
The company declared and paid 72,000 in cash dividends during the year. The company uses the direct method
/. Fn the statement of cash flows, the sales revenue ad4usted to a cash basis would be8
 a. 7/-,000.
$ard b. 7/2,000.
?efer To8 1-< c. 7/&,000.
- d. 7/0,000.
/&. Fn the statement of cash flows, the cost of goods sold ad4usted to a cash basis would be8
 a. 7)&,000.
$ard b. 7),000.
?efer To8 1-< c. 7)&&,000.
- d. 7)&0,000.
/). Fn the statement of cash flows, the operating e(penses ad4usted to a cash basis would be8
% a. 70&,000.
$ard b. 7&,000.
?efer To8 1-< c. 710,000.
- d. 72,000.
/. Fn the statement of cash flows, the income ta( e(pense ad4usted to a cash basis would be8
' a. 7&-,000.
$ard b. 7/,000.
?efer To8 1-< c. 71,000.
- d. 7&/,000.
?eference8 1-<
5pats ompany recorded the following events last year8
Issuance of shares of the

companys own common stoc! ........... 7120,000
:urchase of bonds issued by
other companies ...................... 0,000
%ividends paid to the companys
own shareholders ..................... 10,000
in other companies shares ........... 12,000
?epayment of principal on the
companys own bonds .................. 00,000
Interest paid on the companys
own bonds ............................ 1/,000
ollection of the principal amount
of a loan made to another company .... 220,000
:urchase of e+uipment .................. 0,000
Fn the statement of cash flows, some of these events are classified as operating activities, some are classified as
investing activities, and some are classified as financing activities.
/-. 6ased solely on the information above, the net cash provided by used in3 financing activities
6 on the statement of cash flows would be8
$ard a. 71,0-1,000.
?efer To8 1-< b. 71/0,0003.
 c. 71,000.
d. 720/,0003.
/. 6ased solely on the information above, the net cash provided by used in3 investing activities
 on the statement of cash flows would be8
$ard a. 71,0-1,0003.
?efer To8 1-< b. 7/0,0003.
 c. 71-0,0003.
d. 7/0,0003.
?eference8 1-</
5pawle ompany recorded the following events last year8
Issuance of shares of the

companys own common stoc! ........... 7200,000
:urchase of bonds issued by
other companies ...................... )0,000
%ividends paid to the companys
own shareholders ..................... /,000
in other companies shares ........... 1&,000
?epayment of principal on the
companys own bonds .................. 2-0,000
Interest paid on the companys
own bonds ............................ 1,000
ollection of the principal amount
of a loan made to another company .... -0,000
:urchase of e+uipment .................. 20,000
Fn the statement of cash flows, some of these events are classified as operating activities, some are classified as
investing activities, and some are classified as financing activities.
//. 6ased solely on the information above, the net cash provided by used in3 financing activities
 on the statement of cash flows would be8
$ard a. 71),0003.
?efer To8 1-< b. 7/&1,000.
/ c. 710/,0003.
d. 712-,0003.
100. 6ased solely on the information above, the net cash provided by used in3 investing activities
% on the statement of cash flows would be8
$ard a. 7/&1,0003.
?efer To8 1-< b. 720,0003.
/ c. 700,0003.
d. 720,0003.
?eference8 1-<10
Bucas ompany recorded the following events for the year 4ust ended8
?etirement of preferred stoc! .......................... 7)0,000

5ale of bonds issued by other companies ................ 7-),000
Interest paid on notes payable ......................... 7),000
%ividends paid to shareholders ......................... 7/0,000
ollection by Bucas of a loan made to a subsidiary ..... 7)),000
:ayment of deferred ta(es .............................. 7&),000
101. The net decrease in cash resulting from financing activities for the year was8
% a. 7&),000.
Medium b. 7),000.
?efer To8 1-< c. 7),000.
10 d. 71&0,000.
102. The net change in cash resulting from investing activities for the year was8
' a. 710,000.
Medium b. 7&0,000.
?efer To8 1-< c. 7),0003.
10 d. 710,000.
?eference8 1-<11
randall ompany recorded the following activity for the year 4ust ended8
:roceeds from sale of plant e+uipment ............. 7&00,000

%ividends received from investments ............... 7 0,000
ommon stoc! issued ............................... 7200,000
@otes issued to creditors for borrowed funds ...... 7 0,000
%ividends paid to stoc!holders .................... 7 20,000
:urchase of plant e+uipment ....................... 7120,000
10. The net cash provided by financing activities for the year was8
% a. 720,000.
Medium b. 7200,000.
?efer To8 1-< c. 700,000.
11 d. 720,000.
10&. The net cash provided by investing activities for the year was8
 a. 7&00,000.
$ard b. 7&10,000.
?efer To8 1-< c. 720,000.
11 d. 70,000.
Essay
10). ?ecent balance sheets of ;arnic! o. appear below, together with an income statement for the
Medium latest year.
;'?@IA F.
6alance 5heets
May 1, 1/(2 and 1/(1
1/(2 1/(1
ash ............................... 722,00 72&,000
'ccounts receivable ................ ,&00 -,)00
Inventories......................... /,/00 0,100
Bong<term investments .............. << ,000
:lant and e+uipment ................ 12,)00 120,000
Bess accumulated depreciation ......  )0,003  &,003
Total assets .................... 71)0,00 71&2,00
'ccounts payable ................... 7 1,00 7 2,&00

'ccrued liabilities ................ 2,100 1,00
ommon stoc! ....................... 10,000 100,000
?etained earnings .................. ,00 ,00
stoc!holders e+uity ...... 71),00 71&2,00
;'?@IA F.
Income 5tatement and
#or the Dear Ended May 1, 1/(2
5ales ............................ 7102,000

Bess cost of goods sold .......... -,000
ross margin ..................... 2/,000
Bess operating e(penses8.......... 1&,000
Income before ta(es .............. 1),000
Bess income ta(es ................ &,)00
@et income ....................... 7 10,)00
@ote8 5toc! in 6owen o., held as a long<term investment, was sold for 7,000 cash.
%ividends of 710,)00 were declared and paid during the year.
?e+uired8
:repare a statement of cash flows for ;arnic! o. for the year ended May 1, 1/(2. *se the
indirect method.
'nswer8
Fperating activities8
@et income ................................ 710,)00
'd4ustments to convert to cash basis8
%epreciation charges .................... &,000
%ecrease in accounts receivable ......... 1,100
Increase in inventories ................. /,003
%ecrease in accounts payable ............ 003
Increase in accrued liabilities ......... 00
@et cash provided by operating activities 7),00
Investing activities8
5ale of long<term investment ............. ,000
:urchase of e+uipment .................... 12,)003
@et cash used for investing activities ... &,)003
#inancing activities8
ash dividends ........................... 10,)003
Increase in common stoc! ................. ,000
@et cash used for financing activities ... 2,)003
@et decrease in cash ........................ 71,-003
10. 6urg ompanys net income last year was 7/1,000. hanges in the companys balance sheet
Medium accounts for the year appear below8
Increases
%ecreases3
%ebit balances8
ash ........................ 71,0003
'ccounts receivable ......... 1,000
Inventory ................... 21,000
:repaid e(penses ............ ,0003
Bong<term investments ....... 0,000
:lant and e+uipment ......... 0,000
redit balances8
'ccumulated depreciation .... ,000
'ccounts payable ............ 21,0003
'ccrued liabilities ......... 1&,000
Ta(es payable ............... 2&,000
6onds payable
%eferred ............... 1,000
ta(es .............. )0,0003
ommon stoc! ................ 20,000
?etained earnings ........... ),000
The company declared and paid cash dividends of 72,000 last year.
?e+uired8
a. onstruct in good form the operating activities section of the companys statement of cash
flows for the year. *se the indirect method.3
b. onstruct in good form the investing activities section of the companys statement of cash
flows for the year.
c. onstruct in good form the financing activities section of the companys statement of cash
flows for the year.
'nswer8
a. Fperating activities
@et income ................................ 7 /1,000

'd4ustments8
%epreciation charges .................... ,000
Increase in accounts receivable ......... 1,0003
Increase in inventory ................... 21,0003
%ecrease in prepaid e(penses ............ ,000
%ecrease in accounts payable ............ 21,0003
Increase in accrued liabilities ......... 1&,000
Increase in ta(es payable ............... 2&,000
Increase in deferred ta(es .............. 1,000
@et cash provided by operating activities . 71,000
b. Investing activities8

Increase in long<term investments ......... 70,0003
Increase in plant H e+uipment ............. 0,0003
@et cash used for investing activities .... 7/0,0003
c. #inancing activities8
%ecrease in bonds payable ................. 7)0,0003
Increase in common stoc! .................. 20,000
ash dividends ............................ 2,0003
@et cash used in financing activities ..... 7),0003
10-. 6urdge ompanys net income last year was 7--,000. hanges in the companys balance sheet
Medium accounts for the year appear below8
Increases
%ecreases3
%ebit balances8
ash ........................ 7 11,000
'ccounts receivable ......... 1,0003
Inventory ................... 1/,000
:repaid e(penses ............ &,0003
Bong<term investments ....... &0,000
:lant and e+uipment ......... 0,000
redit balances8
'ccumulated depreciation .... ,000
'ccounts payable ............ 2,000
'ccrued liabilities ......... ,000
Ta(es payable ............... 11,0003
6onds payable ............... &0,0003
%eferred ta(es .............. 1&,000
ommon stoc! ................ 0,000
?etained earnings ........... -1,000
The company declared and paid cash dividends of 7,000 last year.
?e+uired8
flows for the year. *se the indirect method.3
flows for the year.
flows for the year.
'nswer8
@et income ................................ 7 --,000

'd4ustments8
%epreciation charges .................... ,000
%ecrease in accounts receivable ......... 1,000
Increase in inventory ................... 1/,0003
%ecrease in prepaid e(penses ............ &,000
Increase
Increase in
in accounts payable ............
accrued liabilities 2,000
......... ,000
%ecrease in ta(es payable ............... 11,0003
Increase in deferred ta(es .............. 1&,000
@et cash provided by operating activities 71&-,000

Increase in long<term investments ......... 7 &0,0003
Increase in plant H e+uipment ............. 0,0003
@et cash used for investing activities .... 7120,0003
%ecrease in bonds payable ................. 7 &0,0003
Increase in common stoc! .................. 0,000
ash dividends ............................ ,0003
@et cash used in financing activities ..... 7 1,0003
10. 'ppendi(3 avett ompanys comparative balance sheet and income statement for last year
$ard appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 &),000 7 0,000
'ccounts receivable ........ ,000 &0,000
Inventory .................. -,000 0,000
Bong<term investments ...... 12,000 200,000
:lant and e+uipment ........ 2-,000 1)0,000
'ccumulated depreciation ... )2,0003 )0,0003
Total assets ............. 7),000 7&0,000
'ccounts payable ........... 7 ,000 7 &0,000

'ccrued liabilities......... 2&,000 0,000
6onds payable...... ........ 20,000 0,000
Mortgage payable............ 100,000 <
%eferred ta(es ............. 1),000 20,000
ommon stoc! ............... 2/),000 2-0,000
?etained earnings .......... &,000 &0,000
stoc! holders e+uity . 7),000 7&0,000
Income 5tatement
5ales .......................................... 72)0,000
Bess costs of goods sold ....................... 100,000
ross margin ................................... 71)0,000
Bess operating e(penses including depreciation3 /0,000
@et operating income before ta(es .............. 7 0,000
Boss on sale of investments .................... ),000
Income before ta(es ............................ 7 )),000
Bess income ta(es .............................. 22,000
@et income ..................................... 7 ,000

The following additional information is available for the year8
a. %uring the year, the company sold long<term investments with a cost of 7,000 when
purchased for 7,000 in cash.
b. 'll sales were on credit.
c. The company paid a cash dividend of 72),000.
d. 6onds payable of 72),000 were retired by issuing common stoc! for 72),000.
e. 'n addition to one of the companys buildings was completed on %ecember 1, at a
cost of 712,000. The company paid for the addition with a 7100,000 mortgage and
72,000 in cash.
f. The company raised 71),000 in cash by issuing additional bonds payable.
?e+uired8
a. *sing the direct method, determine the net cash provided by operating activities for
the year.
b. *sing the indirect method, determine the net cash provided by operating activities for the
year.
c. *sing the net cash provided by operating activities figure from either part a or b, prepare
a statement of cash flows for the year.
'nswer8
a.
5ales ..................................... 72)0,000
'd4ustment to a cash basis8
%ecrease in accounts receivable .........  2,000 72)2,000
ost of goods sold ........................ 100,000

'd4ustments to a cash basis8
Increase in inventory ...................  -,000
%ecrease in accounts payable ............  &,000
%ecrease in accrued liabilities..........  ,000 11-,000
Fperating e(penses ........................ /0,000

%epreciation charges .................... < 2,000 ,000
Income ta( e(pense ........................ 22,000

%ecrease in deferred ta(es ..............  ),000 2-,000
@et cash provided by operating activities 7 20,000
b.
Fperating activities8
@et income .............................. 7,000
'd4ustments to convert to cash basis8
%epreciation charges .................. 2,000
%ecrease in accounts receivable ....... 2,000
Increase in inventories ............... -,0003
%ecrease in accounts payable .......... &,0003
%ecrease in accrued liabilities ....... ,0003
Boss on sale of investments ........... ),000
%ecrease in deferred ta(es ............ ),0003
@et cash provided by operating activities 720,000
c.
@et cash provided by operating activities 720,000
5ale of long<term investment ........... ,000
:urchase of e+uipment .................. 2,0003
@et cash used for investing activities ),000

ash dividends ......................... 2),0003
5ale of bonds payable .................. 1),000
@et cash used for financing activities 10,0003
@et increase in cash .................... 71),000
10/. 'ppendi(3 omparative financial statements for :arr ompany follow8

$ard.
Ending 6eginning
6alance 6alance
ash ............................. 7 1),000 7 1,000
'ccounts receivable .............. 22,000 2),000
Inventory ........................ 20,000 22,000
:repaid e(penses ................. 1&,000 10,000
Bong<term investments ............ -,000 2),000
:lant and e+uipment .............. --,000 0,000
'ccumulated depreciation ......... 1,0003 &,0003
Total assets ................... 7 /&,000 711,000
'ccounts payable ................. 7 ,000 7 ,000

'ccrued liabilities............... ,&00 1),000
6onds payable..................... 12,000 1,000
%eferred ta(es ................... &,000 1),000
ommon stoc! ..................... 0,000 20,000
?etained earnings ................ ),00 &0,000
stoc!holders e+uity ......... 7 /&,000 711,000
Income 5tatement
5ales .......................................... 7),000
Bess costs of goods sold ....................... &),000
ross margin ................................... 7&0,000
Bess operating e(penses including depreciation3 0,000
@et
ainoperating
on sale ofincome before ta(es...............&,000
investments..................... 710,000
Income before ta(es............................. 7 ,000
Bess income ta(es .............................. 2,&00
@et income ..................................... 7 ,00
'dditional data for the year included8
a. %uring the year, :arr ompany sold e+uipment for 7,000 that had cost 71),000 and
on which there was accumulated depreciation of 7,000.
b. E+uipment was purchased for 712,000 cash.
c. ash dividends totaling 7,000 were paid.
d. Bong<term investments that cost 71,000 when purchased were sold for 722,000.
e. ommon stoc! was issued for 710,000.
f. %epreciation e(pense for the year was 7),000.
?e+uired8
:repare a statement of cash flows using the direct method.
'nswer8
:arr ompany
5tatement of ash #lows
5ales ..................................... 7),000

%ecrease in accounts receivable ......... ,000 7,000
ost of goods sold ........................ &),000

%ecrease in inventory ................... < 2,000
%ecrease in accounts payable ............  2,000 &),000
Fperating e(penses ........................ 0,000

Increase in prepaid e(penses ............  &,000
%epreciation charges .................... < ),000
%ecrease in accrued liabilities..........  ,00 -,00
Income ta( e(pense ........................ 2,&00

%ecrease in deferred ta(es .............. 11,000 1,&00
@et cash consumed by operating activities 7,0003
5ale of long<term investment ........... 71,000
5ale of e+uipment ...................... ,000
:urchase of e+uipment .................. 12,0003
@et cash provided by investing activities /,000
5ale of common stoc! ................... 10,000
ash dividends ......................... ,0003
:ayment of bonds ....................... ,0003
@et cash used for financing activities &,0003

@et decrease in cash ...................... ,0003
ash, beginning of the year ............... 1,000
ash, end of the year ..................... 71),000
110. 'ppendi(3 The changes in each balance sheet account for arver ompany during the year
Medium 4ust completed are as follows8
Increase %ecrease
ash ....................... 7 ,000 7
'ccounts receivable ........ ),000
Inventory .................. ,000
:repaid e(penses ........... ,000
Bong<term investments ...... 1-,000
:lant and e+uipment ........ 11,000
'ccumulated depreciation ... /,000
'ccounts payable ........... ,000
'ccrued liabilities......... ),000
6onds payable...... ........ 12,000
ommon stoc! ............... ,000
?etained earnings .......... 2,000
arver ompanys income statement for the year 4ust ended shows the following8
5ales ..................... 7)0,000

ost of goods sold ........ 1/0,000
ross margin .............. 710,000
Fperating e(pense ......... 1),000
@et income ................ 7 2,000
There were no sales or retirements of e+uipment and no dividends paid during the year. arver
ompany uses the direct method to construct its statement of cash flows.
?e+uired8
a. %etermine the sales ad4usted to the cash basis.

b. %etermine the cost of goods sold ad4usted to the cash basis.
c. %etermine the operating e(penses ad4usted to the cash basis.
d. %etermine the net cash provided used3 by operating activities.
e. %etermine the net cash provided used3 by investing activities.
f. %etermine the net cash provided used3 by financing activities.
'nswer8
?e+uirements a through d8
5ales ................................... 7)0,000

Increase in accounts receivable ....... < ),000 7&),000
ost of goods sold ...................... 1/0,000

%ecrease in inventory ................. < ,000
%ecrease in accounts payable ..........  ,000 1/2,000
Fperating e(penses ...................... 1),000

Increase in prepaid e(penses ..........  ,000
Increase in accrued liabilities........ < ),000
%epreciation charges .................. < /,000 1&-,000
@et cash provided by operating activities 7 ,000
e. Investing activities8
5ale of long<term investment ......... 71-,000
:urchase of e+uipment ................ 11,0003
@et cash provided by investing activities 7,000
f. #inancing activities8
5ale of common stoc! ................. 7 ,000
:ayment of bonds ..................... 12,0003
@et cash used for financing activities 7/,0003
111. 'ppendi(3 The changes in each balance sheet account for 6ryan ompany during the year
Medium 4ust completed are as follows8
Increase %ecrease
ash ....................... 7 7 ,000
'ccounts receivable ........ 2,000
Inventory .................. ,000
:repaid e(penses ........... ),000
Bong<term investments ...... 1),000
:lant and e+uipment ........ 1&,000
'ccumulated depreciation ... ,000
'ccounts payable ........... 10,000
'ccrued liabilities......... ,000
6onds payable...... ........ 1,000
ommon stoc! ...............

?etained earnings ),000
.......... &,000
6ryan ompanys income statement for the year 4ust ended shows the following8
5ales .................... 700,000

ost of goods sold ....... 10,000
ross margin ............. 7120,000
Fperating e(pense ........ 11,000
@et income ............... 7 &,000
There were no sales or retirements of e+uipment and no dividends paid during the year. 6ryan
ompany uses the direct method to construct its statement of cash flows.
?e+uired8
a. %etermine the sales ad4usted to the cash basis.

b. %etermine the cost of goods sold ad4usted to the cash basis.
c. %etermine the operating e(penses ad4usted to the cash basis.
d. %etermine the net cash provided used3 by operating activities.
e. %etermine the net cash provided used3 by investing activities.
f. %etermine the net cash provided used3 by financing activities.
'nswer8
?e+uirements a through d8
5ales ..................................... 700,000

Increase in accounts receivable ......... < 2,000 72/,000
ost of goods sold ........................ 10,000

%ecrease in inventory ................... < ,000
%ecrease in accounts payable ............ 10,000 1-,000
Fperating e(penses ........................ 11,000

Increase in prepaid e(penses ............  ),000
Increase in accrued liabilities.......... < ,000
%epreciation charges .................... < ,000 10-,000
@et cash provided by operating activities 7 &,000
e. Investing activities8
5ale of long<term investment ........... 71),000
:urchase of e+uipment .................. 1&,0003
@et cash provided by investing activities 71,000
f. #inancing activities8
5ale of common stoc! ................... 7 ),000
:ayment of bonds ....................... 1,0003
@et cash used for financing activities 7,0003
112. @FTE5 TF T$E I@5T?*TF?8

$ard J The problem re+uirement does not indicate whether the indirect or direct method must be used
to determine the net cash provided by operating activities. Dou can, if you choose, specify that
either or even both3 methods be used. The solution contains solutions for both methods.
J %ue to the length of the problem, you may want to eliminate one or more of the re+uirements.
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
%abney ompanys comparative balance sheet and income statement for last year appear
below8
Ending 6eginning
6alance 6alance
ash ....................... 7 &,000 7 2,000
'ccounts receivable ........ 2&,000 &,000
Inventory .................. )2,000 -0,000
:repaid e(penses ........... 1&,000 &,000
Bong<term investments ...... 10,000 220,000
:lant and e+uipment ........ )0,000 )0,000
'ccumulated depreciation ... &2&,0003 -,0003
Total assets ............. 700,000 7))0,000
'ccounts payable ........... 7 &/,000 7 ),000

'ccrued liabilities ........ 12,000 1-,000
Ta(es payable .............. 2,000 10,000
6onds payable .............. 1&0,000 1/0,000
%eferred ta(es ............. 2/,000 21,000
ommon stoc! ............... 10,000 1&0,000
?etained earnings .......... 1,000 1-,000
owners e+uity ........ 700,000 7))0,000
Income 5tatement
5ales ........................ 7)10,000

Bess8 costs of goods sold .... 2/0,000
ross margin ................. 220,000
Bess8 operating e(penses ..... 1&0,000
@et operating income ......... 0,000
Bess8 income...................
@et income ta(es ........... 2&,000
7 ),000
The company declared and paid 7-,000 in cash dividends during the year.
?e+uired8
flows for the year.
flows for the year.
flows for the year.
'nswer8
I@%I?ET MET$F%
@et income ................................ 7 ),000

'd4ustments8
%epreciation charges .................... &,000
%ecrease in accounts receivable ......... 2&,000
%ecrease in inventory ................... 1,000
Increase in prepaid e(penses ............ 10,0003
Increase in accounts payable ............ 1&,000
%ecrease in accrued liabilities ......... ),0003
Increase in ta(es payable ............... 1,000
Increase in deferred ta(es .............. /,000
@et cash provided by operating activities 71),000
%I?ET MET$F%
5ales ..................................... 7)10,000

%ecrease in accounts receivable ......... 2&,000 7)&,000
ost of goods sold ........................ 2/0,000

%ecrease in inventory ................... <1,000
Increase in accounts payable ............ <1&,000 2),000
Fperating e(penses ........................ 1&0,000

Increase in prepaid e(penses ............ 10,000
%ecrease in accrued liabilities .........  ),000
%epreciation charges .................... <&,000 10/,000
Income ta( e(pense ........................ 2&,000

Increase in ta(es payable ............... <1,000
Increase in deferred ta(es .............. < /,000 2,000
@et cash provided by operating activities 71),000

Increase in long<term investments ......... 7/0,0003
@et cash used for investing activities .... 7/0,0003
%ecrease in bonds payable ................. 7)0,0003
Increase in common stoc! .................. 20,000
ash dividends ............................  -,0003
@et cash used in financing activities ..... 7-,0003
11. @FTE5 TF T$E I@5T?*TF?8

$ard J The problem re+uirement does not indicate whether the indirect or direct method must be used
to determine the net cash provided by operating activities. Dou can, if you choose, specify that
either or even both3 methods be used. The solution contains solutions for both methods.
J %ue to the length of the problem, you may want to eliminate one or more of the re+uirements.
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
%auber ompanys comparative balance sheet and income statement for last year appear
below8
Ending 6eginning
6alance 6alance
ash ....................... 7 &,000 7 /,000
'ccounts receivable ........ )-,000 &&,000
Inventory .................. ),000 -0,000
:repaid e(penses ........... 1,000 10,000
:lant and e+uipment ........ )20,000 )20,000
'ccumulated depreciation ... /0,0003 ),0003
Total assets ............. 71-,000 7))),000
'ccounts payable ........... 7 1&,000 7 ,000

'ccrued liabilities ........ ),000 1-,000
Ta(es payable .............. ,000 1/,000
6onds payable .............. 10,000 10,000
%eferred ta(es ............. ,000 21,000
ommon stoc! ............... 1&0,000 110,000
?etained earnings .......... 1//,000 1-0,000
owners e+uity ........ 71-,000 7))),000
Income 5tatement
5ales ........................ 7)0,000

Bess8 costs of goods sold .... 2)0,000
ross margin ................. 0,000
Bess8 operating e(penses ..... 210,000
Bess8 income ta(es ........... ,000
@et income ................... 7 &,000
The company declared and paid 7)),000 in cash dividends during the year.
?e+uired8
flows for the year.
flows for the year.
flows for the year.
'nswer8
I@%I?ET MET$F%
@et income ................................ 7 &,000

'd4ustments8
%epreciation charges .................... 2,000
Increase in accounts receivable ......... 1,0003
%ecrease in inventory ................... 12,000
Increase in prepaid e(penses ............  ,0003
%ecrease in accounts payable ............ 2&,0003
Increase in accrued liabilities ......... 1,000
Increase in ta(es payable ............... 1&,000
Increase in deferred ta(es .............. 1),000
@et cash provided by operating activities 710,000
%I?ET MET$F%
5ales ..................................... 7)0,000

Increase in accounts receivable ......... <1,000 7)-,000
ost of goods sold ........................ 2)0,000

%ecrease in inventory ................... <12,000
%ecrease in accounts payable ............ 2&,000 22,000
Fperating e(penses ........................ 210,000

Increase in prepaid e(penses ............  ,000
Increase in accrued liabilities ......... <1,000
%epreciation charges .................... <2,000 1,000
Income ta( e(pense ........................ ,000

Increase in ta(es payable ............... <1&,000
Increase in deferred ta(es .............. <1),000 -,000
@et cash provided by operating activities 710,000

Increase in long<term investments ......... 70,0003
@et cash used for investing activities .... 70,0003
%ecrease in bonds payable ................. 720,0003
Increase in common stoc! .................. 0,000
ash dividends ............................ )),0003
@et cash used in financing activities ..... 7&),0003
11&. 'ppendi(3 arson ompanys comparative balance sheet and income statement for last year
$ard appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 20,000 7 1),000
'ccounts receivable ........ 2-,000 2),000
Inventory .................. 2,000 ),000
:repaid e(penses ........... ,000 ),000
Bong<term investments ...... ,000 ,000
:lant and e+uipment ........ 10,000 /2,000
'ccumulated depreciation ... &/,0003 0,0003
Total assets ............. 712,000 710,000
'ccounts payable ........... 7 0,000 7 ,000

@otes payable...... ........ &0,000 2,000
%eferred ta(es ............. 1-,000 ),000
ommon stoc! ............... &),000 &0,000
?etained earnings .......... )0,000 ),000
stoc! holders e+uity . 712,000 710,000
Income 5tatement
5ales .......................................... 7200,000
Bess costs of goods sold ....................... 100,000
ross margin ................................... 100,000
Bess operating e(penses including depreciation3 )2,000
@et operating income before ta(es............... &,000
ain on sale of investments..................... 2,000
Income before ta(es............................. )0,000
Bess income ta(es .............................. 20,000
@et income ..................................... 7 0,000
arson ompany constructs its statement of cash flows using the direct method.
?e+uired8
a. alculate the sales revenue ad4usted to a cash basis.

b. alculate the cost of goods sold ad4usted to a cash basis.
c. alculate the operating e(penses ad4usted to a cash basis.
d. alculate the net cash provided by operating activities.
'nswer8
5ales ..................................... 7200,000

Increase in accounts receivable ......... < 2,000 71/,000
ost of goods sold ........................ 100,000

%ecrease in inventory ................... < ,000
%ecrease in accounts payable ............  ,000 10),000
Fperating e(penses ........................ )2,000

Increase in prepaid e(penses ............  ,000
%epreciation charges .................... <1/,000 ,000
Income ta( e(pense ........................ 20,000

%ecrease in deferred ta(es .............. 1,000 ,000
@et cash provided by operating activities 7 1/,000
11). 'ppendi(3 arston ompanys comparative balance sheet and income statement for last year
$ard appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 ),000 7 2&,000
'ccounts receivable ........ )),000 /,000
Inventory .................. )1,000 &2,000
:repaid e(penses ........... ),000 10,000
Bong<term investments ...... 2-0,000 210,000
:lant and e+uipment ........ )0,000 )00,000
'ccumulated depreciation ... 2//,0003 2,0003
Total assets ............. 7-0,000 7)/2,000
'ccounts payable ........... 7 ,000 7 &0,000

'ccrued liabilities ........ &1,000 22,000
Ta(es payable .............. 1&,000 2,000
6onds payable .............. 100,000 10,000
%eferred ta(es ............. 2-,000 1/,000
ommon stoc! ............... /0,000 )0,000
?etained earnings .......... ),000 2-,000
Total liabilities
owners e+uityand
........ 7-0,000 7)/2,000
Income 5tatement
5ales ........................ 7-10,000

Bess8 costs of goods sold .... )0,000
ross margin ................. 0,000
Bess8 operating e(penses ..... 2&0,000
Bess8 income ta(es ........... ,000
@et income ................... 7 &,000
The company declared and paid 72-,000 in cash dividends during the year.
?e+uired8
onstruct in good form the operating activities section of the companys statement of cash
flows for the year using the direct method.
'nswer8
5ales ..................................... 7-10,000

%ecrease in accounts receivable ......... 1&,000 7-2&,000
ost of goods sold ........................ )0,000

Increase in inventory ...................  /,000
Increase in accounts payable ............ <2,000 ,000
Fperating e(penses ........................ 2&0,000

%ecrease in prepaid e(penses ............ < ),000
Increase in accrued liabilities ......... <1/,000
%epreciation charges .................... <,000 10,000
Income ta( e(pense ........................ ,000
%ecrease in ta(es payable ...............  /,000
Increase in deferred ta(es .............. < ,000 -,000
@et cash provided by operating activities 71-1,000
11. 'ppendi(3 arpp ompanys comparative balance sheet and income statement for last year
$ard appear below8
Ending 6eginning
6alance 6alance
ash ....................... 7 ),000 7 ,000
'ccounts receivable ........ /,000 )1,000
Inventory .................. )-,000 &,000
:repaid e(penses ........... 22,000 1-,000
:lant and e+uipment ........ &-0,000 &0,000
'ccumulated depreciation ... 2),0003 2)-,0003
Total assets ............. 7)1,000 7)),000
'ccounts payable ........... 7 &,000 7 &,000

'ccrued liabilities ........ 12,000 1-,000
Ta(es payable .............. &,000 1,000
6onds payable .............. 1&0,000 1-0,000
%eferred ta(es ............. 21,000 1),000
ommon stoc! ............... 1&0,000 120,000
?etained earnings .......... 2&0,000 1//,000
owners e+uity ........ 7)1,000 7)),000
Income 5tatement
5ales ........................ 710,000

Bess8 costs of goods sold .... 20,000
ross margin ................. )0,000
Bess8 operating e(penses ..... 220,000
Bess8 income ta(es ........... /,000
@et income ................... 7 /1,000
The company declared and paid 7)0,000 in cash dividends during the year.
?e+uired8
onstruct in good form the operating activities section of the companys statement of cash
flows for the year using the direct method.
'nswer8
5ales ..................................... 710,000

%ecrease in accounts receivable ......... 12,000 722,000
ost of goods sold ........................ 20,000

Increase in inventory ................... 11,000
Increase in accounts payable ............ <1,000 2)),000
Fperating e(penses ........................ 220,000

Increase in prepaid e(penses ............  ),000
%ecrease in accrued liabilities .........  ),000
%epreciation charges .................... <2,000 202,000
Income ta( e(pense ........................ /,000

Increase in ta(es payable ............... <1,000
Increase in deferred ta(es .............. < ,000 1),000
@et cash provided by operating activities 71)0,000

ch17 Cash Flow

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7/17/2019 Test Bank - Chapter17 Cash Flows

1. Every transaction classified as "source" or "use" of cash for purposes of constructing a

. %ividends received on stoc! held as an investment should be treated as an investing activity on

Medium method on the statement of cash flows.

Managerial Accounting, 9/e 98

99 Managerial Accounting, 9/e

Managerial Accounting, 9/e 100

101Managerial Accounting, 9/e

Managerial Accounting, 9/e 102

103Managerial Accounting, 9/e

Managerial Accounting, 9/e 104

105Managerial Accounting, 9/e

Managerial Accounting, 9/e 106

107Managerial Accounting, 9/e

Managerial Accounting, 9/e 108

109Managerial Accounting, 9/e

Managerial Accounting, 9/e 110

6eginning of Dear End of Dear

111Managerial Accounting, 9/e

&. The following transactions occurred last year at Cowlson ompany8

Managerial Accounting, 9/e 112

). The following transactions occurred last year at Cogger ompany8

. The following transactions occurred last year at Colly ompany8

113Managerial Accounting, 9/e

Managerial Accounting, 9/e 114

The companys income statement for year 2 follows8

5ales .................. 712,000

115Managerial Accounting, 9/e

5tatement of #inancial :osition

'ccounts payable ........... 7 &-,000 7 2,000

Managerial Accounting, 9/e 116

5ales ........................ 7--0,000

117Managerial Accounting, 9/e

5tatement of #inancial :osition

'ccounts payable ........... 7 )1,000 7 -,000

5ales ........................ 7-10,000

Managerial Accounting, 9/e 118

119Managerial Accounting, 9/e

5tatement of #inancial :osition

'ccounts payable ........... 7 -,000 7 )-,000

5ales ........................ 7-0,000

Managerial Accounting, 9/e 120

121Managerial Accounting, 9/e

5tatement of #inancial :osition

'ccounts payable ........... 7 12,000 7 2-,000

5ales ........................ 7&0,000

Managerial Accounting, 9/e 122

123Managerial Accounting, 9/e

The companys income statement for the year appears below8

5ales ........................ 7/0,000

Managerial Accounting, 9/e 124

Issuance of shares of the

125Managerial Accounting, 9/e

Issuance of shares of the

?etirement of preferred stoc! .......................... 7)0,000

:ayment of deferred ta(es .............................. 7&),000

Managerial Accounting, 9/e 126

:roceeds from sale of plant e+uipment ............. 7&00,000

127Managerial Accounting, 9/e

'ccounts payable ................... 7 1,00 7 2,&00

5ales ............................ 7102,000

Managerial Accounting, 9/e 128

@et decrease in cash ........................ 71,-003