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Free cash flow describes the net cash provided by operating activities after adjustment for capital
expenditures and dividends.
Direct Method
Correct! Noncash and accrual basis adjustment amounts must be removed from net income to
determine cash flows from operating activities. Increases in current assets are subtracted. Decreases
in current assets are added. Increases in current liabilities are added. Decreases in current liabilities
are subtracted. Net cash provided by operating activities = Net Income (¥30,000) – Increase in
Accounts Receivable (¥7,000) – Decrease in Accounts Payable (¥3,000) + Depreciation Expense
(¥5,000) = ¥25,000.
Minchin Company reported net income for the year of ¥30,000. During the year, Accounts Receivable
increased by ¥7,000, Accounts Payable decreased by ¥3,000, depreciation expense of ¥5,000 was
recorded, and equipment was purchased for ¥40,000 cash. Using the indirect method, how much is
net cash provided by operating activities for the year?
¥25,000
¥45,000
¥65,000
¥39,000
Dobson Corporation shows income tax expense of $95,000. There has been a $5,000 decrease in
federal income taxes payable and a $7,000 increase in local income taxes payable during the year.
What was Dobson's cash payment for income taxes?
$90,000
$97,000
$95,000
$93,000
When a worksheet is used, all but one of the following statements is correct. The incorrect statement
is
Each line pertaining to a statement of financial position account should foot across.
The bottom portion of the worksheet shows the statement of cash flows effects.
The statement of financial position accounts portion of the worksheet is divided into
two parts: assets, and liabilities and equity.
In calculating cash flows from operating activities using the indirect method, a loss on the disposal of
equipment will appear as a(n)
Haden Inc. had cash sales of $300,000 and credit sales of $1,290,000. The accounts receivable
balance increased $15,000 during the year. How much cash did Haden receive from its customers
during the year?
$1,575,000
$1,605,000
$1,275,000
$1,305,000
Payment of dividends.
₤440,000.
₤320,000.
₤410,000.
₤500,000.
Bent Company reports a $20,000 increase in inventory and a $5,000 decrease in accounts payable
during the year. Cost of Goods Sold for the year was $230,000. Using the direct method of reporting
cash flows from operating activities, cash payments made to suppliers were
$255,000.
$215,000.
$230,000.
$245,000
600+420-210
$630,000.
$1,190,000.
$810,000.
$1,120,000.
$37,000
$29,000
$26,000
$16,000
Using the indirect method, patent amortization expense for the period
Which one of the following items is not necessary in preparing a statement of cash flows?
When equipment is sold for cash, the amount received is reflected as a cash
280-15-20
$285,000.
$245,000.
$275,000.
$313,000.
Wilton Company reported net income of $80,000 for the year. During the year, accounts receivable
decreased by $7,000, accounts payable increased by $3,000 and depreciation expense of $5,000 was
recorded. Net cash provided by operating activities for the year is
$95,000.
$79,000.
$70,000.
$75,000
Flynn Company reported a net loss of $50,000 for the year ended December 31, 2017. During the
year, accounts receivable decreased $25,000, inventory increased $40,000, accounts payable
increased by $50,000, and depreciation expense of $25,000 was recorded. During 2017, operating
activities
330-20
$340,000
$360,000
$300,000
$310,000
The net income reported on the income statement for the current year was ¥2,950,000. Depreciation
recorded on plant assets was ¥380,000. Accounts receivable and inventories increased by ¥20,000
and ¥80,000, respectively. Prepaid expenses and accounts payable decreased by ¥10,000 and
¥110,000 respectively. How much cash was provided by operating activities?
¥3,130,000
¥2,950,000
¥3,290,000
¥2,750,000
Which of the following items does not appear in the statement of cash flows under the direct method?
Depreciation Expense.
Indicate where the transaction of paying income taxes would appear, if at all, on the statement of
cash flows.
In Rooney Company, Treasury Shares increased $30,000 from a cash purchase, and Retained
Earnings increased $120,000 as a result of net income of $186,000 and cash dividends paid of
$66,000. Net cash used by financing activities is:
$30,000.
$66,000.
$150,000.
$96,000.
Harbor Company reported net income of $90,000 for the year ended December 31, 2017. During the
year, inventories decreased by $12,000, accounts payable decreased by $18,000, depreciation
expense was $20,000 and a gain on disposal of equipment of $9,000 was recorded. Net cash provided
by operating activities in 2017 using the indirect method was
$107,000.
$85,000.
$95,000.
$149,000.
In Shannon Company, there was an increase in the land account during the year of $48,000. Analysis
reveals that the change resulted from a cash sale of land at a cost $150,000, and a cash purchase of
land for $198,000. In the statement of cash flows, the change in the land account should be reported
in the investment section:
$180,000.
$200,000.
$210,000.
$195,000.
Joy Elle’s Vegetable Market had the following transactions during 2017:
12,000 – 24,000
$12,000
$64,000
($12,000)
$24,000