Question

10

A company had net income of $231,467. Depreciation expense was $26,338. During the year, accounts receivable and inventory increased by $18,957 and $38,824, respectively. Prepaid expenses and accounts payable decreased by $1,764 and $5,616, respectively. There was also a loss on the sale of equipment of $4,598. How much was the net cash flow from operating activities on the statement of cash flows using the indirect method?

a.$200,770

b.$246,388

c.$262,403

d.$191,574

11

Land costing $130,147 was sold for $174,490 cash. The gain on the sale was reported on the income statement as other income. On the statement of cash flows, what amount should be reported as an investing activity from the sale of land?

a.$174,490

b.$44,343

c.$304,637

d.$130,147

12.

Zenith Corporation sells some of its used store fixtures. The acquisition cost of the fixtures is $12,786, and the accumulated depreciation on these fixtures is $7,561 at the time of sale. The fixtures are sold for $3,912. The value of this transaction in the investing section of the statement of cash flows is

a.$16,435

b.$12,786

c.$7,561

d.$3,912

13.

The following information is available from the current period financial statements:

Net income	$100,207
Depreciation expense	26,016
Increase in accounts receivable	17,350
Decrease in accounts payable	29,672

The net cash flow from operating activities using the indirect method is

a.$173,245

b.$79,201

c.$27,169

d.$100,207

14.

The net income reported on the income statement for the current year was $257,943. Depreciation recorded on fixed assets and amortization of patents for the year were $37,916 and $8,203, respectively. Balances of current asset and current liability accounts at the end and at the beginning of the year are as follows:

	End	Beginning
Cash	$39,250	$66,113
Accounts Receivable	127,082	106,291
Inventories	109,061	87,557
Prepaid Expenses	2,421	6,922
Accounts Payable (merchandise creditors)	50,954	68,114

What is the amount of cash flows from operating activities reported on the statement of cash flows prepared by the indirect method?

a.$249,108

b.$325,010

c.$244,571

d.$261,767

Answer 1

Solution to QUESTION-10

Statement of Cash Flows (Indirect Method)
	Amount ($)	Amount ($)
Cash flows from Operating Activities
Net Income		231,467
Adjustments to reconcile net income to Net cash provided by operating activities
Add: Depreciation Expenses	26,338
Add: Loss on sale of equipment	4,598
Less: Increase in accounts receivables	-18,957
Less: Increase in inventory	-38,824
Add: Decrease in prepaid expenses	1,764
Less: Decrease in Accounts payables	-5,616	-30,697
Net cash provided by operating activities		200,770

“Hence, the net cash flow from operating activities on the statement of cash flows using the indirect method will be a.$200,770”

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