Question

QUESTION 16 Which event describes a non-cash Investing and Financing activity? a. Payment of a cash dividend. b. Payment on a Note Payable. Oo. Purchase of inventory on account. d. Issue of Common Stook in exchange for Land. QUESTION 17 The Net Income for the year was $275,000. Depreciation on equipment and Amortization on a patent were $40,000 and 50.000 respectively. Balances in the current assets and current liabilities were as follows: Ending Beginning Cash $50,000 500.000 Acct. Rec. $112.000 $108,000 Inventory $105.000 503.000 Prepaid Exp.$4,500 $6,500 Acct. Pay. $75,000 $80,000 Cash from Operating Activities would be a. $198.000 b. $200,000 5324.000 d. 5362.000 QUESTION 18 A Bull Dozer with a book value of $54.000, sold for 303,000. This transaction would be shown on the Statement of Cash Flows as follows: a. An increase of $54.000 from Investing Activities b. An increase of $63.000 from Investing activities and a deduction to Operating activities of 50.000 c. An increase of 50.000 from investing Activities d. An increase of 554.000 from investing Activities and an addition to Operating Activities of 50.000 QUESTION 19 In calculating the cash flow from operating activities, again on the sale of equipment is a. Added to Net Income b. Deducted from Net Income Ignored because it does not affect cash d. Reported as a non-cash investing Activity

Answer 1

Question 16- d. Issue of common stock in exchange of land

• Non cash investing and financing activities are those activities which do not involve cash directly.

Question 17- b. $296,000

• Cash from operating activities= Net profit+ Non cash items+any adjustment in working capital
• =275,000+40,000+9,000+(108,000-112,000)+(93,000-105,000)+(6500-4500)-(89,000-75,000)
• =$296,000

Question 18- b. An increase of $63,000 from investing activities and deduction to operating activities of $9,000

• All the assets purchased and sold are considered to be investing activity. The profit from sell of asset which is included in net profit is actually to be considered in investing activities as this is not profit from regular operations of entity hence it cannot be considered in cashflow from operating activities so we deduct that profit from net profit and consider the entire sell proceeds in cashflow from investing activities.

Question 19- b. deduction from net income

• All the assets purchased and sold are considered to be investing activity. The profit from sell of asset which is included in net profit is actually to be considered in investing activities as this is not profit from regular operations of entity hence it cannot be considered in cashflow from operating activities so we deduct that profit from net profit.