Question

41.

Depreciation on factory equipment would be reported in the statement of cash flows prepared by the indirect method in

a. the cash flows from investing activities section.

b. a separate schedule.

c. the cash flows from operating activities section.

d. the cash flows from financing activities section.

42.

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

a decrease in accounts receivable

preferred dividends declared and paid

an increase in inventory

a decrease in accounts payable

43.

Which of the following should be added to net income in calculating net cash flow from operating activities using the indirect method?

a decrease in accounts payable

an increase in accrued liabilities

a gain on the sale of land

dividends paid on common stock

44.

The current period statement of cash flows includes the following:

Cash balance at the beginning of the period	$310,000
Net cash flow from operating activities	185,000
Net cash flow used for investing activities	43,000
Net cash flow used for financing activities	97,000

The cash balance at the end of the period is

$355,000

$635,000

$45,000

$125,000

45.

Accounts receivable from sales to customers amounted to $40,000 and $32,000 at the beginning and end of the year, respectively. Income reported on the income statement for the year was $110,000. Exclusive of the effect of other adjustments, the net cash flows from operating activities to be reported on the statement of cash flows using the indirect method is

$110,000

$102,000

$118,000

$150,000

46.

Comparative financial statements are designed to compare the financial statements of two or more corporations.

True

False

47.

Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency, profitability, and liquidity.

True

False

48.

The excess of current assets over current liabilities is referred to as working capital.

True

False

49.

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

True

False

50.

When you are interpreting financial ratios, it is useful to compare a company's ratios to the same ratios from a prior period or to the ratios of another company in the same industry.

True

False

Answer 1

41-c cash flow from Operating activities because Depreciation is non cash expenditure so it must be added to the net profit because there is no outflow of cash

42-a it should be added to the cash flow from operating activities because decrease in receivables means receipt of cash by collecting the receivables

43-b increase in accrued liabilities means receipt of cash in the form of loan,so it should be added

44 635000 is the answer we should add all the cashflows

45 (40000+110000-32000) = 118000 is the answer, it is the collections made from the receivables in the current year

46 yes the statement is true:Comparative financial statements are designed to compare the financial statements of two or more corporations.

47 True, they are the factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency, profitability, and liquidity.

48 formula for working capital is CURRENT ASSETS-CURRENT LIABILITIES therefore the answer is TRUE

49 YES, the decrease in receivable turnover ratio is due to increase in collections from the receivables

50-YES, THE COMPARATIVE STATEMENTS ARE PREPARED TO COMPARE THE RATIOS FROM PREVIOUS PERIOD OR WITH COMPANY IN THE SAME INDUSTRY