Question

1. Donnegan Inc. bought a piece of land for $218,000. What would be the effect of this transaction on the statement of cash flows?

a.The cash received for land would be listed in the Investing Activities section.

b.The cash paid for land would be listed in the Investing Activities section.

c.The gain on sale of land would be listed in the Operating Activities section.

d.The cash paid for land would be listed in the Operating Activities section.

2. Which of the following cash activities would be listed in the Financing Activities section of the statement of cash flows?

a.Net income

b.Gain on sale of a long-term asset

c.Purchase of a new office building

d.Issuance of company stock

3. The net income reported on the income statement for the current year was $80,200. Depreciation recorded on fixed assets and amortization of patents for the year were $10,200 and $2,100, respectively. The company purchased equipment for $85,100 and an acre of land for $49,300. What amount of cash flows from (used for) investing activities is reported on the statement of cash flows?

a.$(42,300)

b.$146,700

c.$(134,400)

d.$134,400

4.Dora Inc. reported the following on the company's statement of cash flows:

Net cash flows from operating activities	$380,000
Net cash flows used for investing activities	(150,000)
Net cash flows used for financing activities	(210,000)

55% of the net cash flows used for investing activities was used to purchase property, plant, and equipment. What is the free cash flow?

a.$297,500

b.$462,500

c.$170,000

d.$230,000

5. The net income reported on the income statement for the current year was $275,200. Depreciation recorded on fixed assets and amortization of patents for the year were $30,200 and $4,100, respectively. Balances of current asset and current liability accounts at the end and beginning of the year are as follows:

	End	Beginning
Cash	$50,100	$60,300
Accounts receivable	102,300	108,100
Inventories	88,300	93,300
Prepaid expenses	8,600	6,600
Accounts payable (merchandise creditors)	95,200	89,200

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

6. A company reports net income of $129,200, depreciation expense of $46,200, an increase in inventory of $38,100, sale of land for $286,000, payment of dividends for $75,300, and purchase of new equipment for $137,300. The Investing Activities section of the statement of cash flows would show a net cash flow of

a.$210,700.

b.$277,900.

c.$148,700.

d.$423,300.

Answer 1

1]	b] The cash paid for land would be listed in the Investing Activities section.
2]	d] Issuance of company stock
3]	c] $(134,400)
	[It is -$85,100-$49,300]
4]	a] $297,500
	[380000-150000*55%]
5]	Cash flows from operating activities:
	Net income		$           275,200
	Adjustments to reconcile net income to net cash provided by operations:
	Depreciation+Amortization	$ 34,300
	Decrease in accounts receivables [108100-102300]	$                   5,800
	Decrease in inventories [93300-88300]	$                   5,000
	Increase in prepaid expenses [8600-6600]	$ -2,000
	Increase in accounts payable [95200-89200]	$                   6,000	$             49,100
	Net cash from operating activities		$           324,300
6]	c] $148,700
	[286000-137300]