Question

Which of the following transactions should be classified as investing activities on an entity's statement of cash flows?

Increase in accounts receivable.

Sale of property, plant and equipment.

Payment of cash dividend to the shareholders.

Issuance of common stock to the shareholders.

On January 1 of the current year, Wren Co. leased a building to Brill under an operating lease for ten years at $50,000 per year, payable the first day of each lease year. Wren paid $15,000 to a real estate broker as a finder’s fee. The building is depreciated $12,000 per year. For the year, Wren incurred insurance and property tax expense totaling $9,000. Wren’s net rental income for the year should be

$27,500

$29,000

$35,000

$36,500

Brock Corp.'s transactions for the current year ended December 31 included the following: Acquired 50% of Hoag Corp.'s common stock for $225,000 cash which was borrowed from a bank. Issued 5,000 shares of its preferred stock for land having a fair value of $400,000. Issued 500 of its 11% debenture bonds, due in 3 years, for $490,000 cash. Purchased a patent for $275,000 cash. Paid $150,000 toward a bank loan. Sold investment securities for $995,000 Brock's net cash provided by investing activities for the year was

$370,000

$495,000

$595,000

$770,000

Kemp Corporation’s income statement for the year ended December 31, year 7, shows pretax income of $500,000. The following items are treated differently on the tax return and on the accounting records.

Tax Return Accounting Records

Rent income $ 35,000 $ 60,000

Depreciation expense 140,000 110,000

Premium on officer's life insurance none 45,000

Kemp’s tax rate for year 7 is 40%. What is the current portion of Kemp’s total income tax expense for year 7?

$218,000

$200,000

$196,000

$178,000

Which of the following costs are unique to postretirement healthcare benefits?

Per capita claims.

Service.

Prior service.

Interest

A company enters into a three-year operating lease agreement effective January 1, year 1. The amounts due on the first day of each year are $25,000 in year 1, $30,000 in year 2, and $35,000 in year 3. What amount, if any, is the related liability on the first day of year 2?

$0

$5,000

$60,000

$65,000

Which of the following indicates when revenues are usually recognized under GAAP?

When the earnings process is complete or virtually complete.

When an exchange has taken place.

When cash has been collected.

When BOTH the earnings process is complete or virtually complete AND when an exchange has taken place.

Which of the following examples belongs in the cash flow statement?

Converting debt to equity

Purchasing a building by incurring a mortgage to the seller

Obtaining an asset by entering into a capital lease

None of the above

When an entity prepares a statement of cash flows, it should do which of the following?

Report significant noncash investing and financing activities in the body of the statement of cash flows

Provide a reconciliation of net income to net cash flow from operating activities in a separate schedule, if the direct method of reporting net cash flow from operating activities is used

Disclose amounts of interest paid (net of amounts capitalized) and income taxes paid during the period, if the direct method is used

None of the above

Which of the following is a (are) fundamental aspect(s) that shape financial reporting in the application of accrual accounting to pensions?

Immediate recognition of certain events

Reporting gross cost

Offsetting liabilities and assets

All of the above

Answer 1

Which of the following transactions should be classified as investing activities on an entity's statement of cash flows?

Ans: Option (B) Sale of property, plant and equipment.

Explanation:

Cash Flow from Investing Activities is the section of a company's cash flow statement which shows how much money is used or generated from investing activities.

This section includes , purchase and sale of property, pland and equipment.

Hence option (b) is correct choice.

Rest of the activities can be classified as follows.

Increase in accounts receivable.	Operating Activity
Payment of cash dividend to the shareholders.	Financing Activity
Issuance of common stock to the shareholders.	Financing Activity