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Exam 13: Differential Analysis: The Key to Decision Making

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Question 1

Multiple Choice

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In a statement of cash flows,which of the following would be classified as an investing activity?

A) The sale of the company's own common stock for cash.
B) The sale of equipment.
C) Interest paid to a lender.
D) The issuance of bonds payable.

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

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Question 2

Multiple Choice

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McCorey Corporation recorded the following events last year: On 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. Based solely on the information above,the net cash provided by (used in) financing activities on the statement of cash flows would be:

A) ($70,000)
B) $70,000
C) ($130,000)
D) $130,000

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

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C

Question 3

True/False

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Paying wages and salaries to employees is classified as a cash outflow in the operating activities section of the statement of cash flows.

In a statement of cash flows,the sale of a long-term investment would ordinarily be classified as:

Buying property,plant,or equipment would be reported as a cash outflow on the investing activities section of the statement of cash flows.

The most recent balance sheet and income statement of Penaloza Corporation appear below: The company paid a cash dividend of $18.It did not dispose of any property,plant,and equipment.The company did not retire any bonds payable or repurchase any of its own common stock.The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) financing activities for the year was:

NOTE TO THE INSTRUCTOR: The problem requirement does not indicate whether the indirect or direct method must be used to determine the net cash provided by operating activities.You can,if you choose,specify that either (or even both)methods be used.The solution contains solutions for both methods. Dauber Corporation's comparative balance sheet and income statement for last year appear below: The company declared and paid a cash dividend of $55,000 during the year.It did not sell any long-term investments,issue any bonds payable,or repurchase any of its own common stock. Required: a.Construct in good form the operating activities section of the company's statement of cash flows for the year. b.Construct in good form the investing activities section of the company's statement of cash flows for the year. c.Construct in good form the financing activities section of the company's statement of cash flows for the year.

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

In a statement of cash flows,a change in an income taxes payable account would be recorded in the:

Degeare Corporation's balance sheet and income statement appear below: Cash dividends were $10.The company sold equipment for $18 that was originally purchased for $10 and that had accumulated depreciation of $5.The net cash provided by (used in) operating activities for the year was:

Tomlin Corporation prepares its statement of cash flows using the indirect method.Which of the following would be subtracted from net income in the operating activities section of the statement?

The following events occurred last year for the Cart Corporation: Based solely on the above information,the net cash provided by financing activities for the year on the statement of cash flows was:

Krech Corporation's comparative balance sheet appears below: The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.It did not sell or retire any property,plant,and equipment during the year.The company uses the indirect method to determine the net cash provided by operating activities. The company's net cash used in investing activities is:

Illies Corporation's comparative balance sheet appears below: The company did not dispose of any property,plant,and equipment during the year.Its net income for the year was $5,000 and its cash dividends were $4,000.The company did not issue any bonds payable or purchase any of its own common stock during the year.Its net cash provided by operating activities and net cash used in financing activities are:

Vandy Corporation's balance sheet and income statement appear below: The company sold equipment for $18 that was originally purchased for $14 and that had accumulated depreciation of $12.It paid a cash dividend of $28 during the year and did not retire any bonds payable or repurchase any of its own common stock. Required: Prepare a statement of cash flows for the year using the indirect method.

Thunder Corporation's balance sheet and income statement appear below: The company did not dispose of any property,plant,and equipment,issue any bonds payable,or repurchase any of its own common stock during the year.The company declared and paid a cash dividend of $24. Required: Prepare a statement of cash flows in good form using the indirect method.

Kaze Corporation's cash and cash equivalents consist of cash and marketable securities.Last year the company's cash account increased by $25,000 and its marketable securities account decreased by $15,000.Cash provided by operating activities was $38,000.Net cash provided by investing activities was $9,000.Based on this information,the net cash flow from financing activities on the statement of cash flows was:

The net cash provided by operating activities on the statement of cash flows does not include any dividends paid to the company's own shareholders.

Megan Corporation's net income last year was $98,000.Changes in the company's balance sheet accounts for the year appear below: The company paid a cash dividend of $36,000 and it did not dispose of any long-term investments or property,plant,and equipment.The company did not issue any bonds payable or repurchase any of its own common stock.The following questions pertain to the company's statement of cash flows. The net cash provided by (used in) financing activities last year was:

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows,an increase in accounts receivable would be subtracted from net income.