Question

16. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". d. The Loss on the Sale of Equipment? 17. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". e. A decrease in Accounts Payable? 18. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". f. An increase in Accounts Receivable? 19. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". g. An increase in the current liability Warranty Liability. 20. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". h. Dividends declared and paid. 21. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". i. Proceeds from the issuance of Preferred Stock? 22. Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative". j. The Gain on the Sale of Equipment formerly used in the business? 23. Using the indirect method, the increase in accumulated depreciation is added to net income in the operating section. True/False. 24. 25. Interest and dividends from investments held by a company are reported as a cash inflows from investing activities on the statement of cash flows. True/False.

Answer 1

16-22 Indicate whether the following will have a positive or negative EFFECT ON CASH. A positive effect could also be thought of as a source of cash, an increase in cash, or a positive amount on the cash flow statement. A negative effect could also be thought of as a use of cash, a decrease in cash, or a negative amount on the cash flow statement. For an answer, either write "positive" or "negative".

d.The Loss on the Sale of Equipment?

Solution: Positive

Explanation: When the sale of equipment happens then in turn cash will come in, which is a cash inflow, an increase in cash but the loss on it does not affect cash balance so POSITIVE.

e. A decrease in Accounts Payable?

Sol: NEGATIVE

Explanation: Accounts payable means money owed by a business to its suppliers. A decrease in Accounts Payable due to payment is done which is a cash outflow- decrease in cash so NEGATIVE.

f. An increase in Accounts Receivable?

Sol: POSITIVE

Explanation: Accounts receivable means money owed by customers to a business. An increase in Accounts receivable due to payment received which is a cash inflow- increase in cash so POSITIVE.

g. An increase in the current liability Warranty Liability.

Sol: POSITIVE

Explanation: Current liability means which is an amount will be spent to repair or replace a product during its warranty period. It is also known as the warranty payable. So an increase in warranty liability is a cash inflow which is an increase in cash so POSITIVE.

h. Dividends declared and paid.

Sol: NEGATIVE

Explanation: Dividends are paid out of profits which effect a decrease in cash so NEGATIVE.

i. Proceeds from the issuance of Preferred Stock?

Sol: NEGATIVE

Explanation: Specific dividends are paid to preference shareholders before dividends paid to equity shareholders out of profits which effect a decrease in cash so NEGATIVE.

j. The Gain on the Sale of Equipment formerly used in the business?

Solution: Positive

Explanation: When the sale of equipment happens then in turn cash will come in, which is a cash inflow, an increase in cash but the gain on it does not affect cash balance so POSITIVE.

23. Using the indirect method, the increase in accumulated depreciation is added to net income in the operating section. True/False.

Sol: TRUE

Explanation: Preparation of cashflow statement under indirect method starts with net income adjusts by non-cash transactions and all cash-based transactions. Depreciation is a non-cash item so it is added to net income as it does not affect cash.

24. 25. Interest and dividends from investments held by a company are reported as a cash inflows from investing activities on the statement of cash flows. True/False.

Sol: TRUE

Explanation: Interest and dividends from investments are treated as income from investments. Under indirect method of cash flow statement income from investments are added to net income.