Chapter 12 Accounting

Which of the following would not appear in the investing section of the statement of cash flows? a. Purchase of inventory. b. Sale of obsolete equipment used in the factory. c. Purchase of land for a new office building. d. All of the above would appear in the investing section.

a. Purchase of inventory.

If the balance in prepaid expenses has increased during the year, what action should be taken on the statement of cash flows when following the indirect method, and why? a. The change in the account balance should be subtracted from net income because the net increase in prepaid expenses did not impact net income but did reduce the cash balance. b. The change in the account balance should be added to net income because the net increase in prepaid expenses did not impact net income but did increase the cash balance. c. The net change in prepaid expenses should be subtracted from net income to reverse the income statement effect that had no impact on cash. d. The net change in prepaid expenses should be added to net income to reverse the income statement effect that had no impact on cash.

a. The change in the account balance should be subtracted from net income because the net increase in prepaid expenses did not impact net income but did reduce the cash balance.

Consider the following: Issued common stock for $18,000, sold office equipment for $1,200, paid cash dividends of $4,000, purchased investments for $2,000, paid accounts payable of $4,000. What was the net cash inflow (outflow) from financing activities? a. $20,000 b. $14,000 c. ($20,000) d. ($14,000)

b. $14,000

Which of the following items would not appear in the financing section of the statement of cash flows? a. The repurchase of the company's own stock. b. The receipt of dividends. c. The repayment of debt. d. The payment of dividends.

b. The receipt of dividends.

Consider the following: Net income = $10,000, depreciation expense = $2,000, accounts receivable increased by $800, inventory decreased by $100, and accounts payable increased by $500. Based on this information alone, what is cash flow from operating activities? a. $12,000 b. $11,600 c. $11,800 d. $13,400

c. $11,800

The total change in cash as shown near the bottom of the statement of cash flows for the year should agree with which of the following? a. The difference in retained earnings when reviewing the comparative balance sheet. b. Net income or net loss as found on the income statement. c. The difference in cash when reviewing the comparative balance sheet. d. None of the above.

c. The difference in cash when reviewing the comparative balance sheet.

Consider the following: Issued common stock for $18,000, sold office equipment for $1,200, paid cash dividends of $4,000, purchased investments for $2,000, purchased new equipment for $4,000. What was the net cash inflow (outflow) from investing activities? a. $20,200 b. ($2,800) c. ($10,800) d. ($4,800)

d. ($4,800)

Which of the following is not added to net income when computing cash flows from operations under the indirect method? a. The net increase in accounts payable. b. The net decrease in accounts receivable. c. Depreciation expense reported on the income statement. d. All of the above are added to net income.

d. All of the above are added to net income.

Total cash inflow in the operating section of the statement of cash flows should include which of the following? a. Cash received from customers at the point of sale. b. Cash collections from customer accounts receivable. c. Cash received in advance of revenue recognition (unearned revenue). d. All of the above.

d. All of the above.

In what order do the three sections of the statement of cash flows usually appear when reading from top to bottom? a. Financing, Investing, Operating b. Investing, Operating, Financing c. Operating, Financing, Investing d. Operating, Investing, Financing

d. Operating, Investing, Financing