th

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?

95000 + 5000 -7000

$90,000

$97,000

$95,000

$93,000

The statement of cash flows will not report the

sources of cash in the current period.

uses of cash in the current period.

amount of checks outstanding at the end of the period.

change in the cash balance for the current period.

When a worksheet is used, all but one of the following statements is correct. The incorrect statement
is

Reconciling items on the worksheet are not journalized or posted.

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)

subtraction from net income.

subtraction from cash flow from investing activities.

addition to net income.

addition to cash flow from investing activities

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

Which of the following transactions would not be classified as a financing activity?

Payment of dividends.

Issuance of bonds at a discount.

Purchase of a long-term investment in bonds.

Purchase of treasury shares.

The following data are available for Springer Corporation.

Net income ₤380,000

Depreciation expense 60,000
Dividends paid 90,000
Gain on disposal of land 15,000
Decrease in accounts receivable 30,000
Decrease in accounts payable 45,000
Net cash provided by operating activities is:

Don’t include dividents

₤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

The following data are available for Cole Company.

Increase in accounts payable $280,000

Increase in bonds payable 600,000
Sale of investments 300,000
Issuance of ordinary shares 420,000
Payment of cash dividends 210,000
Net cash provided by financing activities is:

600+420-210

$630,000.

$1,190,000.

$810,000.
 $1,120,000.

LF’s Pest Control Products has the following information available:

Net income $30,000

Cash Provided by Operations 40,000
Cash Sales 65,000
Capital Expenditures 11,000
Dividends Paid 3,000
What is LF’s free cash flow?

Free Cash Flow = Cash Provided by operations – Capital Expenditure - Dividents

$37,000

$29,000

$26,000

$16,000

Using the indirect method, patent amortization expense for the period

is deducted from net income.

causes cash to increase.

is added to net income.

causes cash to decrease.

Which one of the following items is not necessary in preparing a statement of cash flows?

Determine the cash provided by operations.

Determine cash from financing and investing activities.

Determine the cash in all bank accounts.

Determine the change in cash.

When equipment is sold for cash, the amount received is reflected as a cash

inflow in the operating section.

 inflow in the financing section.
inflow in the investing section.
outflow in the operating section.

Carter Company reports the following:

End of Year Beginning of Year

Inventory $25,000 $40,000
Accounts Payable 30,000 10,000
If cost of goods sold for the year is $280,000, the amount of cash paid to suppliers is

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

provided net cash of $10,000.

used net cash of $10,000.

provided net cash of $40,000.

used net cash of $40,000.

Utley Company had purchases of $330,000. The comparative statement of financial posititon analysis
revealed a $10,000 decrease in inventory and a $20,000 increase in accounts payable. What were
Utley's cash payments to suppliers?

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?

2950000 + 380,000 – 20,000 – 80, 000 + 10,000 - 110000

¥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.

Cash payments to suppliers.

Cash collections from customers.

Cash from the sale of equipment.

Indicate where the transaction of paying income taxes would appear, if at all, on the statement of
cash flows.

Does not represent a cash flow

Operating activities section

 Investing activities section

Financing activities section

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

90000 -18000 + 12000 + 20000 -9000

$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:

as a net purchase of land, $48,000.

as a purchase of land $198,000 and a sale of land $150,000.

only as a sale of land $150,000.

only as a purchase of land $198,000.

Gary Company reports a $15,000 increase in inventory and a $5,000 increase in accounts payable
during the year. Cost of Goods Sold for the year was $200,000. The cash payments made to suppliers
were
200,000 – 5000 + 15000

$180,000.

$200,000.

$210,000.

$195,000.

Joy Elle’s Vegetable Market had the following transactions during 2017:

1. Issued $100,000 of par value ordinary shares for cash.

2. Repaid a 6 year note payable in the amount of $44,000.
3. Acquired land by issuing ordinary shares of par value $200,000.
4. Declared and paid a cash dividend of $4,000.
5. Sold a non-current investment (cost $84,000) for cash of $12,000.
6. Acquired an investment in IBM shares for cash of $24,000.

What is the net cash provided by investing activities?

12,000 – 24,000

$12,000

$64,000

($12,000)

$24,000

Financing activities involve

cash receipts from sales of goods and services.

lending money to other entities and collecting on those loans.

acquiring and disposing of productive long-lived assets.

non-current liability and equity items.