Ch 11 SB

Which of the following accounts results in adjustments to net income under the indirect method of preparing the statement of cash flows if their balances change during the year?

Accounts receivable Accounts payable Inventory

Which of the following statements best describes the reason depreciation expense is added to net income when preparing the statement of cash flows?

Depreciation expense originally reduced net income, but it is a noncash expense.

Which method of preparing the operating activities section of the statement of cash flows consists of a summary of all operating transactions that result in either a debit or a credit to cash?

Direct

Which of the following are classified as cash inflows from investing activities?

Sale of land Sale of equipment

Grant's income statement reveals a loss from the sale of land. In preparing the operating activities section of the statement of cash flows using the indirect format, the loss should be

added to net income.

Which of the following are common noncash items requiring adjustment to net income under the indirect method?

amortization expense depreciation expense

The purchase and sale of long-term assets and current investments are classified as

investing activities.

Cash receipts and cash payments for transactions relating to revenue and expense activities are classified on the statement of cash flows as

operating activities

Which of the following items are classified as cash inflows from operating activities on the statement of cash flows?

Interest received on notes receivable Collection from customers

Which of the following are nonoperating items that require adjustments under the indirect method?

Losses on the sale of long-term assets Gains on the sale of long-term assets

Sales on account are $200,000. Cash sales during the period are $50,000. Beginning accounts receivable is $20,000, and ending accounts receivable is $30,000. What is the total cash collected from customers during the period?

$240,000 Reason: Sales on account + cash sales + the change in accounts receivable = cash collected for the period. $200,000 + 50,000 - 10,000 = $240,000