Question :
31. Which method of preparing the operating activities section of a : 1224827
31. Which method of preparing the operating activities section of a statement of cash flows adjusts net income to remove the effects of deferrals and accruals for revenues and expenses? A. The direct methodB. The indirect methodC. Both the direct and indirect methodsD. Neither the direct method nor the indirect method
32. Presented below is the operating activities section of the statement of cash flows for Bruin Consulting for 2012:
Operating activities:
Net income
$120,000
Add:
Depreciation
10,000
Decrease in accounts receivable
5,000
$135,000
Deduct:
Decrease in accounts payable
15,000
Net cash inflow from operating activities
$120,000
Which method of preparing the operating activities section has Bruin Consulting used? A. The direct methodB. The indirect methodC. The allowance methodD. Cannot be determined without further information
33. The following items were reported on the balance sheets and income statement for Hawley Company:
Accounts receivable, December 31, 2011
$100,000
Accounts receivable, December 31, 2012
144,000
Sales–2012
945,000
How would the change in accounts receivable be reported in the operating activities section of Hawley’s statement of cash flows under the indirect method? A. As an addition to salesB. As a deduction from salesC. As an addition to net incomeD. As a deduction from net income
34. The following items were reported on the balance sheets and income statement for Hawkeye Corporation:
Accounts payable, December 31, 2011
$ 88,000
Accounts payable, December 31, 2012
99,000
Operating expenses
999,000
How would the change in accounts payable be reported in the operating activities section of Hawkeye’s statement of cash flows under the indirect method? A. As an addition to operating expensesB. As a deduction from operating expensesC. As an addition to net incomeD. As a deduction from net income
35. During 2011, the accounts receivable balance of Big Buck Corporation increased. From Big Buck’s statement of cash flows, the financial reader would conclude which of the following? A. This increase indicates that Big Buck sold more than it collected in cash during the period.B. This increase is added to net income in the operating activities section of a statement of cash flows prepared under the indirect method.C. This increase is added to sales recognized on the income statement to determine the cash collections from customers during the period.D. This increase indicates that Big Buck purchased more than it sold in cash during the period.
36. During 2012, the accounts payable balance of Bombay Corporation decreased. From the statement of cash flows the financial reader would most likely conclude which of the following? A. This decrease indicates that Bombay’s sales increased compared to the previous period.B. This decrease is added to net income in the operating activities section of a statement of cash flows prepared under the indirect method.C. This decrease is deducted from the investing activities section of a statement of cash flows prepared under the indirect method.D. This decrease indicates that Bombay paid more during the period than it recognized as credit purchases.
37. Everest Inc. reported the following information for 2011 and 2012:
2011
2012
Accounts receivable
$50,000
$ 65,000
Inventories
43,000
40,000
Accounts payable
29,000
39,000
Net income
100,000
Depreciation expense
11,000
If Everest Inc. uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2012? A. $ 98,000B. $139,000C. $119,000D. $109,000
38. Penn Corporation reported the following information for 2011 and 2012:
2011
2012
Accounts receivable
$150,000
$120,000
Prepaid expenses
9,000
10,000
Accounts payable
65,000
80,000
Salaries payable
12,000
5,000
Net income
200,000
Depreciation expense
14,000
Gain on sale of equipment
6,000
If Penn uses the indirect method to prepare the operating activities section of the statement of cash flows, what amount will be reported as net cash inflow from operating activities for 2012? A. $232,000B. $215,000C. $245,000D. $247,000
39. The following information is available from the current period financial statements of a company:
Net income
$150,000
Depreciation expense
28,000
Increase in accounts receivable
16,000
Decrease in accounts payable
21,000
The net cash flow from operating activities using the indirect method is: A. $141,000.B. $173,000.C. $117,000.D. $215,000.
40. Using the Direct MethodFor the following question(s), indicate how each transaction described would be classified on a statement of cash flows if the operating activities section is prepared under the direct method. When using the direct method, where is depreciation expense recorded on the statement of cash flows? A. Operating activityB. Investing activityC. Financing activityD. Not reported on the statement of cash flows
