Question : 126.Indicate whether each of the following items will be added : 1302928

 

126.Indicate whether each of the following items will be added to or deducted from net income to arrive at net cash provided/(used) from operating activities under the indirect method.

 

A.Gain on sale of an asset

B.Decrease in accrued wages payable

C.Increase in accounts receivable

D.Increase in accounts payable

E.Depreciation expense

 

 

127.The following data were included in a recent annual report of Reward Shopping:

 

Year 1Year 2Year 3

Net income              $ 5,200,000              $ 5,900,000              $ 11,700,000

Net cash flow from operating activities              6,300,000              11,100,000              15,400,000

Net cash flow from investing activities              (7,900,000)              (37,600,000)              (31,850,000)

Net cash flow from financing activities              15,200,000              19,590,000              16,090,000

 

a.Why is a company’s net income typically less than its net cash flow provided/(used) by operating activities?

b.Why do most companies, including Reward Shopping, typically have negative cash flows from investing activities?

c.Over the three-year period, what type of activity was the largest source of funds for Reward Shopping? For what purpose were these funds used?

 

 

128. The following information concerning property, plant, and equipment appeared in Quick Wash Laundry’s 2014 balance sheet:

 

December 31January 1

Equipment$228,000$211,000

Accumulated depreciation(48,900)     (42,600)

Net property, plant, and equipment$179,100     $168,400

 

During 2014, Quick Wash sold equipment that had an original cost of $23,000 and a current book value of $3,500 for a loss of $2,100. In addition, the company purchased a new machine by making a down payment of $6,000 and financing the balance by issuing a long-term note payable. Net income for 2014 was $89,000.

 

a.How much depreciation expense did Quick Wash Laundry record during 2014?

b.Prepare the investing activities section of the statement of cash flows for Quick Wash Laundry for 2014.

c.Show how the effects of the transactions related to the accounts of the Quick Wash Laundry presented will be reported in the operating activities section of the statement of cash flows for 2014.

 

 

 

129.The income statement for Roofer’s Supply House for 2014 is as follows:

 

Roofer’s Supply House

Income Statement

For the Year Ended December 31, 2014

Sales              $1,025,000

Cost of goods sold   620,000

Gross profit405,000

Less:

Depreciation expense$70,000

Amortization of patent6,500

Wages expense61,000

Insurance expense 12,000                 149,500

Income before taxes              255,500

Less income taxes     91,175

Net income$  164,325

 

Other information is as follows:

a.Accounts receivable decreased by $20,000 during the year.

b.Accounts payable increased by $7,500.

c.Wages payable had a balance of $0 at the beginning of the year; at the end of the year, the balance was $4,500.

d.Prepaid insurance increased by $9,500 during the year.

 

Prepare the operating activities section of the statement of cash flows for 2014 for Roofer’s Supply House using the indirect method.

 

 

 

 

130.Walsh Company uses the indirect method to prepare the operating activities section of the statement of cash flows. Indicate the proper treatment of each item in the statement of cash flows by writing the respective letter of the treatment in the blank adjacent to each item appearing in A through I.  

AAdded to net income

D Deducted from net income

NNot reported in the operating activities section of the statement of cash flows prepared using the indirect method

 

A.Proceeds from the sale of old warehouse ______

 

B.Decrease in accounts payable ______

 

C.Increase in prepaid insurance ______

 

D.Depreciation expense ______

 

E.Decrease in inventory ______

 

F.Amortization of patents ______

 

G.Gain on the retirement of bonds ______

 

H.Loss on the sale of a used delivery truck ______

 

I.Bad debt expense ______