Question

Question 11

The Kerchin Company purchased $60,000 worth of stock in theXeronics company in 2006. In 2012 the stock was sold for $78,000.On the statement of cash flows prepared using the indirect methodthe company will report:

	A.	a subtraction of $60,000 in the investing section.
	B.	an addition to net income of $18,000 in the operatingsection.
	C.	a subtraction from net income of $18,000 in the operatingsection.
	D.	an addition of $18,000 in the investing section.

2 points

Question 12

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

	A.	Add gains on sale of equipment.
	B.	Add to net income any increases in current liabilities.
	C.	Add to net income depreciation and amortization expense.
	D.	Deduct any increases in inventories from net income.

2 points

Question 13

In 2011 Armstrong Company sold for $76,000 cash, an asset whichhad an original cost of $204,000 and accumulated depreciation of$98,000. On the statement of cash flows prepared using the indirectmethod the company should report:

	A.	an addition to net income in the operating section of$30,000.
	B.	a subtraction from net income of $30,000 in the operatingsection.
	C.	a subtraction of $106,000 in the investing section.
	D.	an addition of $76,000 in the investing section.
	E.	Both A and D are correct.

2 points

Question 14

In 2011 Covington Company sold an asset which had an originalcost of $54,000 and accumulated depreciation of $28,000 for $15,000in cash. On the statement of cash flows prepared using the indirectmethod the company should report:

	A.	an addition to net income in the operating section of$11,000.
	B.	a subtraction from net income in the operating section of$11,000.
	C.	a source of cash of $15,000 in the investing section.
	D.	a use of cash in the investing section of $39,000.
	E.	Both a and c are correct.

2 points

Question 15

Henry Company's statement of cash flows indicated a $52,000decrease in cash during the year. The statement also indicated that$63,000 was provided by operating activities and $71,000 was usedby investing activities. How much are net cash used by financingactivities?

	A.	$86,000
	B.	($44,000)
	C.	$42,000
	D.	$40,000

2 points

Question 16

Which of the following would be an example of a cashequivalent?

	A.	Notes receivable.
	B.	Accounts receivable.
	C.	Money market funds.
	D.	Investment in GMC stock.

2 points

Question 17

Carte Company reported cost of goods sold for $100,000 anddepreciation expense totaling $7,000. On January 1, Carte hadinventory and accounts payable of $21,000 and $24,000,respectively. On December 31, inventory and accounts payable were$28,000 and $20,000, respectively. Net income is $60,000. Beginningaccounts receivable was $13,000 and ending was $12,000. How muchare the cash flows from operating activities using the indirectmethod?

	A.	$57,000
	B.	$50,000
	C.	$65,000
	D.	$77,000

2 points

Question 18

The statement of cash flows is typically used to determine if acompany can:

	A.	generate enough cash to pay cash dividends to stockholders.
	B.	generate enough cash to pay an increase in employees wages.
	C.	generate enough cash to acquire another company.
	D.	generate enough cash to buy equipment.

2 points

Question 19

Cash flows related to buying and selling long-term assets areclassified as:

	A.	financing activities.
	B.	investing activities.
	C.	non-cash activities.
	D.	operating activities.

2 points

Question 20

Given the following information, what amount of cash wascollected from customers during 2012? All sales are on account.

	2011	2012
Accounts receivable	$ 800,000	$ 580,000
Sales	3,100,000	3,250,000

	A.	$2,880,000
	B.	$3,620,000
	C.	$2,670,000
	D.	$3,470,000

2 points