← Back to Chapter 7




Hide All Solutions Show All Solutions











Refresh

Depreciation in Indirect Cash Flows Chapter 7

What effect does depreciation expense have on the Statement of Cash Flows (indirect method)?

  1. Add to net income in operating activities
  2. Subtract from net income in operating activities
  3. Cash inflow from investing activities
  4. Cash outflow from investing activities
  5. Would not appear on the statement of cash flows

Investing Activity Classification Chapter 7

Which of the following is an investing activity?

  1. Purchase of treasury stock
  2. Payment of dividends
  3. Collecting a note receivable
  4. Repayment of a long-term note payable
  5. All of the above are investing activities

Operating Activities, Indirect Method Chapter 7

Which of the following could not appear on the statement of cash flows in the operating activity section as an adjustment to net income (indirect method)?

  1. subtract loss on sale of investments
  2. add amortization expense
  3. subtract decrease in accounts payable
  4. subtract increase in prepaid insurance
  5. all of the above could be adjustments to net income in the operating activity section

Cash Flows and Gains Chapter 7

Phoenix Co. sold an unused building for 187,000. The building's book value on the date of sale was 182,000. How will this transaction appear on a statement of cash flows prepared using the indirect method.

  1. 187,000 increase in investing activities and 5,000 decrease in operating activities
  2. 187,000 increase in investing activities and 5,000 increase in operating activities
  3. 182,000 increase in investing activities and 5,000 increase in operating activities
  4. 182,000 increase in investing activities and 5,000 decrease in operating activities
  5. 182,000 increase in investing activities and no effect in operating activities

Gain on Sale of Equipment Chapter 7

Maverick Co. sold equipment with a cost of $30,000 and accumulated depreciation of $12,000 for an amount that resulted in a gain of $4,000. What amount should Maverick report on the statement of cash flows as "proceeds from sale of plant assets"?

  1. 30,000
  2. 14,000
  3. 22,000
  4. 34,000

Investing vs Financing Chapter 7

Given the following information, compute the cash flow from investing and financing activities.

Purchase of treasury stock $40,000
Proceeds from sale of equipment 25,000
Interest expense on borrowing 3,000
Issuance of bonds payable 52,500
Payment of dividends 10,000
Gain on sale of equipment 2,000
Stock dividends 15,000
Issuance of common stock 20,000

Investing: 25,000

Financing: 22,500

Comprehensive Cash Flow Chapter 7

The Murray Company reported the following income statement for the current year and two years of balance sheet information.

Sales 440,000
Gain on sale of equipment 6,000
  Total revenue   446,000
Expenses
  Cost of Goods Sold 285,000  
  Wages Expense 60,000  
  Rent Expense 24,000  
  Depreciation Expense 15,000  
  Insurance Expense 12,000 396,000
Net Income   50,000

Balance Sheets

Year 2 Year 1
Cash 5,000 4,000
Accounts Receivable 48,000 42,000
Inventory 60,000 76,000
Prepaid Insurance 6,000 4,000
Land 20,000 10,000
Building, net 90,000 100,000
Equipment, net 60,000 60,000
Total Assets 289,000 296,000
 
Accounts Payable 28,000 16,000
Wages Payable 5,000 8,000
Long-term Notes Payable 53,000 100,000
Common Stock 157,000 150,000
Retained Earnings 46,000 22,000
Total Liabilities + SHE 289,000 296,000

Equipment with a book value of 10,000 was sold for cash. Depreciation expense on the building was 10,000. The remainder of depreciation expense was attributable to equipment.

Q1: The amount of cash generated from operations this year was:

  1. 30,000
  2. 42,000
  3. 59,000
  4. 76,000
  5. 82,000

Q2: The cash payment for dividends was:

  1. 23,000
  2. 24,000
  3. 26,000
  4. 29,000

Q3: The cash inflow (outflow) from investing activities was:

  1. (9,000)
  2. (6,000)
  3. (4,000)
  4. (15,000)
  5. 6,000

Q4: The cash inflow (outflow) from financing activities was:

  1. (40,000)
  2. 31,000
  3. (78,000)
  4. (66,000)
In the video I forgot to subtract the 26,000 dividend. The answer is 66k, not 40k. Thanks R.R. for pointing this out!