Question : 11.The Duke Company rents out a portion of its office : 1257086

 

 

11.The Duke Company rents out a portion of its office space to another company. At the beginning of 2014, the balance in the unearned rent revenue account was $1,200. During 2014, Duke recognized $6,800 of rent revenue. If the ending balance of unearned rent revenue is $700, how much cash was received from the tenant for rent during 2014?   

A. $7,300

 

B. $6,800

 

C. $6,300

 

D. $7,500

 

 

12.Under the indirect method, which of the following items would be subtracted from net income to determine the cash flow from operating activities?   

A. Loss on the sale of equipment.

 

B. Increase in the balance of accounts receivable.

 

C. Increase in accrued interest payable.

 

D. Depreciation expense.

 

 

13.When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment of depreciation expense?   

A. Subtract depreciation expense from net income.

 

B. Add depreciation expense to net income.

 

C. Disregard depreciation expense because it relates to an investing activity.

 

D. Disregard depreciation expense because it is a non-cash expense.

 

 

14.Which method is used by majority of US companies to report cash flows from operating activities?   

A. Accrual method

 

B. Direct method

 

C. Indirect method

 

D. Computational method

 

 

15.When using the indirect method, a decrease in a current asset is:   

A. subtracted from current liabilities in the cash flows from financing activities section.

 

B. subtracted from net income in the cash flows from operating activities section.

 

C. added to net income in the cash flows from operating activities section.

 

D. added in the cash flows from investing activities section.

 

 

16.When using the indirect method, an increase in current liabilities is:   

A. subtracted in the cash flows from financing activities section.

 

B. subtracted from net income in the cash flows from operating activities section.

 

C. added to net income in the cash flows from operating activities section.

 

D. added in the cash flows from investing activities section.

 

 

17.In preparing the statement of cash flows by the indirect method, which of the following is a correct statement of one of the general rules to convert net income to a cash-basis equivalent?   

A. Losses on the sale of long term assets are subtracted from net income.

 

B. All non-cash expenses and losses are subtracted from net income.

 

C. Increases in current assets are subtracted from net income.

 

D. Decreases in current liabilities are added to net income.

 

 

18.In preparing the statement of cash flows by the indirect method, which of the following is an incorrect statement of one of the general rules to convert net income to a cash-basis equivalent?   

A. Increases in current assets are subtracted from net income.

 

B. Non-cash revenue and gains are subtracted from net income.

 

C. Decreases in current assets are added to net income.

 

D. Increases in current liabilities are subtracted from net income.

 

 

19.Which of the following statements best explains the correct handling of depreciation on the statement of cash flows when using the indirect method?   

A. Depreciation is subtracted from net income because it causes a loss when the related plant asset is sold.

 

B. Depreciation expense is a non-cash expense that was subtracted to derive the accrual-basis net income, hence added to net income in the cash flows from operating activities section.

 

C. Depreciation is subtracted in the cash flows from investing activities section because it reduces the book value of the corresponding plant asset.

 

D. Depreciation adds to the company’s cash account to help pay for new equipment.

 

 

20.What is the proper treatment of a loss on disposal of equipment when using the indirect method to complete the cash flows from operating activities section?   

A. Disregard the loss because it relates to an investing activity.

 

B. Disregard the loss because it relates to a financing activity.

 

C. Add the loss to net income.

 

D. Subtract the loss from net income.