ACG2071 Chapter 13: Cash Flow from Operations

The Trustworthy Corporation reported net income of $100,000. Trustworthy reported a depreciation expense of $20,000 and a gain on sale of equipment of $5,000. Current asset accounts increased by $8,000, and current liability accounts increased by $11,000. Trustworthy's net cash provided by operating activities is $______. (Enter your answer as a whole number.)

118,000

Jay Corporation began the year with a $153,000 balance in the accumulated depreciation account. The ending balance was $197,000. During the year a piece of equipment with $15,000 in accumulated depreciation was sold. Therefore, the depreciation adjustment that Jay needs to add to net income is $______. (Enter your answer as a whole number.)

59000

True or false: The first step in computing net cash provided by operating activities is to subtract depreciation from net income.

False Explanation: The first step is to add depreciation to net income.

When calculating net cash flows from operating activities, the change in accounts receivable is subtracted from net income when accounts receivable ______ during the period. A. increases B. decreases

A. increases Explanation: Decrease in non-cash current asset accounts are added to net income.

When preparing the investing activity section of the statement of cash flows increases in noncurrent ______ are subtracted and increases in noncurrent ______ are added. A. liabilities, assets B. assets, liabilities

B. assets, liabilities

To construct the statement of cash flows, the change in retained earnings ______. A. includes the sale of common stock B. is broken down into net income and dividends paid to stockholders C. is always equal to the net income or loss during the period D. is reported in the investing section of the statement of cash flows

B. is broken down into net income and dividends paid to stockholders Explanation: Common stock sales do not affect retained earnings. Investing activities are the purchase and sale of long-term assets.

If additions to property, plant and equipment are consistently less than depreciation, it suggests the company is ______. A. investing too much in noncurrent assets B. not investing enough to maintain its noncurrent assets C. purchasing too many short-term assets

B. not investing enough to maintain its noncurrent assets

Financing activities include ______. A. payment of interest B. repurchasing common stock C. borrowing money D. purchase of equipment

B. repurchasing common stock C. borrowing money

Company A reported net income of $40,000. Included in net income was $10,000 of deprecation expense, a gain of $50,000 from the sale of a fixed asset and a $30,000 loss from the sale of an investment. Cash provided by operating activities equals ______. A. $80,000 B. $130,000 C. $30,000 D. $50,000

C. $30,000 Explanation: (Net income) $40,000 + $10,000 (depreciation expense) - $50,000 (gain on sale of asset) + $30,000 (loss on sale of investment) = $30,000 cash provided from operations.

LTD, Inc. started the year with an $8,000 balance in Retained Earnings. Net income for the year was $1,500, and ending Retained Earnings were $9,000. The company paid a dividend of ______. A. $1000 B. $100 C. $500 D. $200

C. $500 Explanation: Debits = Beginning balance + Credits - Ending Balance = $8,000 + $1,500 - $9,000 = $500 paid in dividends

Assume a company's net cash provided by operating activities is $86,000. It provided the following excerpts from its balance sheet: This YearLast YearCurrent assets: Accounts receivable$ 40,000$ 46,000Inventory$ 53,000$ 50,000Prepaid expenses$ 13,000$ 11,000Current liabilities: Accounts payable$ 38,000$ 44,000Accrued liabilities$ 18,000$ 15,000Income taxes payable$ 13,000$ 10,000 Also assume the company incurred a loss on the sale of equipment of $4,000 and the credits to its accumulated depreciation account are $17,400. Based solely on the information provided, the company's net income would be: A. $63,600 B. $61,600 C. $59,600 D. $57,600

C. $59,600

Cardinal Company issues new common stock for $50,000. This transaction is a(n) _______ activity on the statement of cash flows. (Enter only one word per blank.)

financing

Net income is adjusted to a cash basis when using the _______ method to prepare the operating section of the statement of cash flows. (Enter only one word per blank.)

indirect

Cash inflows and outflows related to revenue and expense transactions that affect net income are generated by ______ activities. (Enter only one word per blank.)

operating

Changes in noncash balance sheet accounts that directly affect net income are classified as ______ activities. (Enter only one word per blank.)

operating

Either the direct or the indirect method may be used when preparing the net cash provided by ______ activities. (Enter only one word per blank.)

operating

U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS) require companies to organize the statement of cash flows into three sections that report cash flows resulting from ______ activities, ______ activities, and ______ activities. (Enter only one word per blank)

operating; investing; financing

JVL Corporation began the year with a $75,000 balance in retained earnings. Net income for the year was $24,000 and the ending balance in retained earnings was $90,000. Given this information, cash dividends paid to stockholders equaled $______. (Enter your answer as a whole number.)

9000

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 9-a. What is the amount and direction (+ or −) of the income taxes payable adjustment to net income in the operating activities section of the statement of cash flows? 9-b. What does this adjustment represent?

9A. Amount $9,300 deducted from net income 9B. Tax paid > Income tax expenses

When preparing the operating activities section using the indirect method, which of the following are added back to net income? A. Decreases in accounts receivable B. Increases in wages payable C. Decreases in accounts payable D. Increases in prepaid expenses

A. Decreases in accounts receivable B. Increases in wages payable

When preparing the operating activity section of the statement of cash flows using the indirect method, increases in current ______ are subtracted from and increases in current ______ are added to net operating income. A. assets, liabilities B. liabilities, assets

A. assets, liabilities

The ending balance of accounts receivable was $79,000. Sales, adjusted to a cash basis using the direct method on the statement of cash flows, were $364,000. Sales reported on the income statement were $393,000. Based on this information, the beginning balance in accounts receivable was: A. $108,000 B. $29,000 C. $109,000 D. $50,000

D. $50,000

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 15. What is the company's net cash provided by (used in) financing activities?

Net cash provided by financing $20,300

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 4-a. If the company debited Accounts Receivable and credited Sales for $870,000 during the year, what is the total amount of credits recorded in Accounts Receivable during the year? 4-b. What does the amount of these credits represent?

4A. Amount of credits recorded = $874,500 4B. Cash collections from customers

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 5-a. What is the amount and direction (+ or −) of the accounts receivable adjustment to net income in the operating activities section of the statement of cash flows? 5-b. What does this adjustment represent?

5A. Amount $4,500 added to net income 5B. Cash collected from customers > Credit sales

Operating activities include ______. A. corporate income taxes payments B. wage payments to employees C. dividend payments to stockholders D. interest on notes receivable or notes payable

A. corporate income taxes payments B. wage payments to employees D. interest on notes receivable or notes payable Explanation: dividend payments to stockholders is a financing activity.

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 6-a. If the company debited cost of goods sold and credited inventory for $580,000 during the year, what is the total amount of inventory purchases recorded on the debit side of the Inventory T-account and the credit side of the Accounts Payable T-account? 6-b. What is the total amount of the debits recorded in the Accounts Payable T-account during the year? 6-c. What does the amount of these debits represent?

6A. Purchases $587,100 6B. Total amount of debits recorded = $623,200 6C. supplier payments

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 7-a. What is the combined amount and direction (+ or −) of the inventory and accounts payable adjustments to net income in the operating activities section of the statement of cash flows? 7-b. What does this amount represent?

7A. Amount $(43,200) deducted from net income 7B. Cash paid to suppliers > cost of goods sold

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 8-a. If the company debited income tax expense and credited income taxes payable $1,060 during the year, what is the total amount of the debits recorded in the Income Taxes Payable account? 8-b. What does the amount of these debits represent?

8A. Total amount of debits recorded = $10,360 8B. cash paid for income taxes

Given the following, calculate cash provided by operating activities: Net income: $20,000 Depreciation expense: $50,000 Accounts receivable increase: $10,000 Prepaid expense decrease: $6,000 A. $66,000 B. $86,000 C. $16,000 D. $54,000

A. $66,000 Explanation: $20,000 + $50,000 - $10,000 + $6,000 = $66,000

Adams Inc. began the year with $495,000 in the Equipment account. During the year they sold equipment that had originally cost $50,000 for $20,000. The ending balance in the Equipment account was $650,000. Which of the following statements are true? A. Adams cash outflow for the purchase of equipment is $205,000. B. Adams cash outflow for the purchase of equipment is $155,000. C. Adams will report a cash inflow from investing activities of $20,000. D. Adams will report a cash inflow from investment activities of $50,000.

A. Adams cash outflow for the purchase of equipment is $205,000. C. Adams will report a cash inflow from investing activities of $20,000. Explanation: Cash outflow = $650,000 - $495,000 + $50,000 = $205,000. Cash inflow is what the equipment sold for, not its original cost.

JJP, Inc. started the year with a balance of $15,000 in Property, Plant and Equipment. During the year equipment with an original cost of $3,000 was sold for $2,000. The ending balance in the account was $20,000. Which of the following statements are true? A. The company purchased $8,000 of equipment during the year. B. The company purchased $5,000 of equipment during the year. C. A cash inflow of $2,000 will be reported from the sale of equipment. D. A cash inflow of $1,800 will be reported from the sale of equipment.

A. The company purchased $8,000 of equipment during the year. C. A cash inflow of $2,000 will be reported from the sale of equipment. Explanation: $15,000 - $3,000 = $12,000 after the sale. $20,000 - $12,000 = $8,000 purchased. Equipment with an original cost of $3,000 and accumulated depreciation of $1,200 was sold for $2,000. So, cash inflow is $2,000.

All transactions (other than interest payments) involving borrowing from creditors or repaying creditors as well as transactions with the company's owners are ______ activities. A. financing B. investing C. operating

A. financing Explanation: Investing activities involve the purchase or sale of long-term assets. Operating activities affect current assets, current liabilities or net income.

When preparing the operating activities section of the statement of cash flows using the indirect method ______. A. items that do not affect cash flow are removed from net income. B. cash collected from customer is reported instead of revenues C. net income is adjusted to a cash basis D. only cash payments for expenses are reported

A. items that do not affect cash flow are removed from net income. C. net income is adjusted to a cash basis

The sections of the statement of cash flows include ______ activities. A. operating B. administrative C. financing D. investing

A. operating C. financing D. investing

Investing activities include ______. A. purchase of machinery for cash B. payment of dividends to the stockholders C. depreciation charges D. sale of land for cash

A. purchase of machinery for cash D. sale of land for cash Explanation: Payment of dividends to the stockholders is a financing activity. When using the indirect method depreciation, charges are added back to net income in the operating activities section.

Under the direct method, the operating activities section of the statement of cash flows ______. A. reports cash collected from customers instead of revenues B. adds depreciation expense to net income C. presents revenues and expenses on the accrual basis D. treats cash disbursements as expenses

A. reports cash collected from customers instead of revenues D. treats cash disbursements as expenses

Explaining the change in the cash balance is the purpose of the ______. A. statement of cash flows B. income statement C. balance sheet D. cash operating budget

A. statement of cash flows

A gain on the sale of a fixed asset is ______ net income to arrive at the cash provided or (used) by operating activities prepared using the indirect method. A. subtracted from B. added back to

A. subtracted from Explanation: Gains on fixed assets increase net income but do not provide cash flow, so they must be subtracted to arrive at the cash flow from operations.

When preparing the operating activities section under the direct method ______. A. the difference between cash receipts and disbursements is calculated B. net income is adjusted to a cash basis C. cash receipts are reported instead of income statement revenues D. depreciation expense is added back to net income

A. the difference between cash receipts and disbursements is calculated C. cash receipts are reported instead of income statement revenues

Investing activities include ______. A. the purchase of a new building B. interest payments on long term loans C. the sale of common stock D. the sale of used equipment

A. the purchase of a new building D. the sale of used equipment

Assume a company's beginning and ending balances in the Accumulated Depreciation account are $30,000 and $45,200, respectively. During the period the company sold one noncurrent asset that had an original cost of $8,000. The cash proceeds from the sale were $3,000 and the gain on the sale was $1,000. What is the amount of the depreciation charges that the company would include in the operating activities section of its statement of cash flows? A. $19,200 B. $21,200 C. $25,200 D. $9,200

B. $21,200

Galas by Jacki had a beginning balance of retained earnings of $127 million and an ending balance of $134 million. Net income for the year was $11 million. Calculate the dividends paid to stockholders. A. $18 million B. $4 million C. $0 D. $7 million

B. $4 million Explanation: Beginning credit balance of $127 + credit for net income of $11 - debit of dividends = ending credit balance of $134. Dividends = $127 + $11 - $134 = $4.

Wister Corporation had sales of $462,000 for the just completed year. Shown below are the beginning and ending balances of various Wister accounts: EndingBeginningCash and cash equivalents$ 105,000$ 132,000Accounts receivable$ 168,000$ 142,000Inventory$ 472,000$ 536,000Accounts payable$ 74,000$ 91,000Retained earnings$ 364,000$ 292,000 Wister prepares its statement of cash flows using the direct method. On its statement of cash flows, what amount should Wister show for its sales adjusted to a cash basis (i.e., cash received from sales)? A. $488,000 B. $436,000 C. $462,000 D. $445,000

B. $436,000

Norbury Corporation's net income last year was $46,000. The company did not sell or retire any property, plant, and equipment last year. Changes in selected balance sheet accounts for the year appear below: Increases (Decreases)Asset and Contra-Asset Accounts: Accounts receivable$ 21,500Inventory$ (5,200)Prepaid expenses$ 17,000Accumulated depreciation$ 40,000Liability Accounts: Accounts payable$ 21,000Accrued liabilities$ (9,700)Income taxes payable$ 4,300 Based solely on this information, the net cash provided by (used in) operating activities under the indirect method on the statement of cash flows would be: A. $98,600 B. $68,300 C. $23,700 D. $134,900

B. $68,300

When calculating net cash flows from operating activities, the change in accounts payable is subtracted from net income when accounts payable ______ during the period. A. increases B. decreases

B. decreases Explanation: Increases in non-cash current liability accounts are added to net income.

The purpose of the statement of cash flows is to ______. A. explain the net income earned during the period B. explain the change in cash during the period C. report the assets and liabilities of the company D. explain the change in retained earnings for the period

B. explain the change in cash during the period

Financing activities include ______. A. purchase of land for resale B. payment of cash dividends to stockholders C. issuing new common stock D. purchase of stock in another company

B. payment of cash dividends to stockholders C. issuing new common stock

When preparing the financing activities section of the statement of cash flows ______. A. increases in common stock are subtracted B. retained earnings requires additional analysis C. increases in bonds payable are added

B. retained earnings requires additional analysis C. increases in bonds payable are added

A gain on the sale of an asset is deducted in the operating activities section of the statement of cash flows because ______. A. the entire proceeds from the sale must be reported in the financing section of the statement. B. the entire proceeds from the sale must be reported in the investing section of the statement. C. the gain increases net income, but is not a cash flow. D. the gain does not increase net income, but it increases net cash flow.

B. the entire proceeds from the sale must be reported in the investing section of the statement. C. the gain increases net income, but is not a cash flow.

Last year Anderson Corporation reported a cost of goods sold of $108,000. The company's inventory at the beginning of the year was $12,600, and its inventory at the end of the year was $21,400. The prepaid expense account increased by $2,800 between the beginning and end of the year, and the accounts payable account decreased by $4,800. Cost of goods sold adjusted to the cash basis under the direct method would be: A. $100,400 B. $115,600 C. $121,600 D. $119,600

C. $121,600

The data given below are from the accounting records of the Kuhn Corporation: Net Income (accrual basis): $ 49,000 Depreciation Expense: $ 11,000 Decrease in Accounts Payable: $ 2,700 Decrease in Inventory: $ 3,200 Increase in Bonds Payable: $ 12,000 Sale of Common Stock for cash: $ 30,400 Increase in Accounts Receivable: $ 4,900 Based on this information, the net cash provided by (used in) operating activities using the indirect method would be: A. $61,000 B. $64,200 C. $55,600 D. $67,600

C. $55,600

When preparing the operating activity section of the statement of cash flows using the indirect method, which of the following statements regarding gains and losses on fixed assets is correct? A. Losses are subtracted from net income and gains are added to net income. B. Net income should not be adjusted for any gains or losses on the sale of fixed assets. C. Losses are added back to net income and gains are subtracted from net income.

C. Losses are added back to net income and gains are subtracted from net income.

Depreciation expense is ______ net income when preparing the operating activities section using the ______ method. A. added to, direct B. subtracted from, direct C. added to, indirect D. subtracted from, indirect

C. added to, indirect

When preparing the operating section using the indirect method, ______ is added back to net income. A. cash received from the sale of equipment B. purchase of fixed assets C. depreciation expense D. redemption of bonds payable

C. depreciation expense Explanation: Cash received from the sale of equipment is an investing activity. Fixed asset purchases are shown as cash outflows in the investing activities section. Redemption of bonds is a financing section cash outflow.

If net cash flow from operating activities is less than current liabilities, it indicates the company ______. A. purchased all new long term assets with cash rather than with financing B. does not have enough current assets C. did not generate enough operating cash flow to pay bills at the end of the period

C. did not generate enough operating cash flow to pay bills at the end of the period

Operating activities include changes in ______. A. noncurrent assets that are not included in income B. current notes payable accounts C. noncurrent assets that affect net income D. current liability accounts for amounts owed to employees

C. noncurrent assets that affect net income D. current liability accounts for amounts owed to employees

Last year Burch Corporation's cash account decreased by $21,000. Net cash provided by (used in) investing activities was $7,600. Net cash provided by (used in) financing activities was $(19,000). On the statement of cash flows, the net cash provided by (used in) operating activities was: A. $(21,000) B. $(32,400) C. $11,400 D. $(9,600)

D. $(9,600)

Cridberg Corporation's selling and administrative expenses for last year totaled $280,000. During the year the company's prepaid expense account balance increased by $28,000 and accrued liabilities decreased by $22,000. Depreciation for the year was $45,000. Based on this information, selling and administrative expenses adjusted to a cash basis under the direct method on the statement of cash flows would be: A. $275,000 B. $375,000 C. $185,000 D. $285,000

D. $285,000

Alcoser Corporation's most recent balance sheet appears below: Comparative Balance Sheet Ending BalanceBeginning BalanceAssets: Cash and cash equivalents$ 67$ 33Accounts receivable4548Inventory6589Property, plant, and equipment602522Less accumulated depreciation232218Total assets$ 547$ 474Liabilities and stockholders' equity: Accounts payable$ 53$ 62Accrued liabilities2928Income taxes payable2840Bonds payable241212Common stock8781Retained earnings10951Total liabilities and equity$ 547$ 474 Net income for the year was $73. Cash dividends were $15. The company did not dispose of any property, plant, and equipment. It 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) operating activities for the year was: A. $64 B. $114 C. $(21) D. $94

D. $94

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 3. How much depreciation would the company add to net income on its statement of cash flows?

Depreciation = $26,650 Explanation: Beginning balance − Debits + Credits = Ending balance $50,750 − $6,400 + Credits = $71,000 $44,350 + Credits = $71,000 Credits = $26,650

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 10. Would the operating activities section of the company's statement of cash flows contain an adjustment for a gain or a loss? What would be the amount and direction (+ or − ) of the adjustment?

Gain of $1,150 deducted from net income

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 14. What is the amount of gross cash inflows reported in the financing section of the company's statement of cash flows?

Gross cash inflows $29,000

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 12. What is the amount of gross cash outflows reported in the investing section of the company's statement of cash flows?

Gross cash outflows $(19,600)

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 13. What is the company's net cash provided by (used in) investing activities?

Net cash used in investing activities $(15,250)

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 11. What is the amount of net cash provided by (used in) operating activities in the company's statement of cash flows?

Net cash used in operating activities $(19,300)

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 1. What is the amount of the net increase or decrease in cash and cash equivalents that would be shown on the company's statement of cash flows?

Net decrease in cash and cash equivalents $14,250 Explanation: The net decrease in cash and cash equivalents would equal the $14,250 decrease in the cash balance (from $86,850 to $72,600) as shown on the balance sheet.

Ravenna Company is a merchandiser that uses the indirect method to prepare the operating activities section of its statement of cash flows. Its balance sheet for this year is as follows: Ending BalanceBeginning BalanceCash & cash equivalents$ 72,600$ 86,850Accounts receivable59,30063,800Inventory79,60072,500Total current assets211,500223,150Property, plant, and equipment213,000203,000Less accumulated depreciation71,00050,750Net property, plant, and equipment142,000152,250Total assets$ 353,500$ 375,400Accounts payable$ 46,400$ 82,500Income taxes payable36,10045,400Bonds payable87,00072,500Common stock101,50087,000Retained earnings82,50088,000Total liabilities and stockholders' equity$ 353,500$ 375,400 During the year, Ravenna paid a $8,700 cash dividend and it sold a piece of equipment for $4,350 that had originally cost $9,600 and had accumulated depreciation of $6,400. The company did not retire any bonds or repurchase any of its own common stock during the year. 2. What net income would the company include on its statement of cash flows?

Net income = $3,200 Explanation: Beginning balance − Debits + Credits = Ending balance $88,000 − $8,700 + Credits = $82,500 $79,300 + Credits = $82,500 Credits = $3,200

Net cash provided by operating activities may be computed using either the _____ or the _____ method. (Enter only one word per blank.)

direct; indirect

Purchases of equipment and the sale of land are transactions that are classified as ______ activities. (Enter only one word per blank.)

investing

Transactions that involve acquiring or disposing of noncurrent assets are ______ activities. (Enter only one word per blank.)

investing