31.Which one of the following would you expect to find as part of cash flows from investing activities?
a. The issuance of common stock in exchange for a factory
b. Cash dividends paid
c. Cash inflows from the proceeds of a sale of a building
d. The write-off of accounts receivable
32.When preparing a statement of cash flows using the indirect method, an increase in inventory will result in an adjustment to reported net income because
a. cost of goods sold on an accrual basis is less than on a cash basis.
b. inventory was paid for with cash, but is still on hand at the end of the period.
c. acquisition of inventory is an investment activity.
d. inventory purchased created smaller cash outflows than cash inflows received from inventory sales.
33.In determining cash flow from operating activities, which of the following adjustments will be made as a result of an increase in accounts receivable during a period?
a.An addition to net income when the direct method is used
b.An addition to net income when the indirect method is used
c.A deduction to net income when the direct method is used
d.A deduction to net income when the indirect method is used
34.In determining net cash flows from operating activities, a decrease in salaries payable during a period
a. means that income on an accrual basis is equal to income on a cash basis.
b. must be added to net income under the indirect method.
c. creates a cash outflow to pay for salaries that were previously accrued.
d. creates a cash inflow from employees.
Use the information that follows concerning Calvin Corporation for the year ending December 31, 2009, to answer questions 35 and 36.
Calvin Company provided the following information during 2009:
Purchase of land by issuing bonds
$ 550,000
Proceeds from issuing long-term debt
300,000
Dividends paid to shareholders
120,000
Proceeds from issuing stock
300,000
Proceeds from sale of building
360,000
Purchases of inventories
800,000
Purchase of treasury stock
430,000
35.How much is ‘net cash provided (used) by investing activities’ during 2009?
a. $790,000
b. $360,000
c. $910,000
d. $(120,000)
36.How much is ‘net cash provided by financing activities’ during 2009?
a. $(500,000)
b. $550,000
c. $50,000
d. $600,000
37.Which of the following is subtracted from income in determining cash flows from operations?
a. Decrease in accounts payable
b. Depreciation
c. Cash dividends declared and distributed
d.Amounts due from customers at yearend
38.Selected information from Hsu Inc. is provided below for the years ending December 31, 2009 and 2008.
2009
2008
Accumulated depreciation
$32,000
$29,000
Equipment
60,000
55,000
During 2009, depreciation expense was recorded. New equipment was acquired for cash. Old equipment which was 70% depreciated with an original cost of $26,000 was sold for a gain of $4,000. For how much was the equipment sold?
$11,800
$5,000
$3,800
$31,000
Use the information that follows concerning Martinez Corporation for the year ending December 31, 2009, to answer questions 39 and 43.
Relevant account balances for Martinez Corporation are:
12/31/09
1/01/09
Accounts receivable
$18,000
$14,000
Inventory
24,000
26,000
Prepaid insurance
1,500
2,100
Accounts payable
25,000
26,000
Income information:
Revenue
$120,000
Cost of goods sold
$60,000
Insurance expense
6,000
Operating expenses
18,000
Depreciation
10,000
94,000
Net income
$ 26,000
39.How much cash was received from customers during 2009?
a.$120,000
b.$116,000
c.$138,000
d.$124,000
40.How much cash was paid to suppliers for inventory during 2009?
a.$2,000
b.$59,000
c.$63,000
d.$61,000
41.How much cash was paid for insurance during 2009?
a.$5,400
b.$6,000
c.$6,600
d.$600
42.How will depreciation appear on Martinez’s statement of cash flows under the direct method?
a.Added in the operating activities section
b.Subtracted in the operating activities section
c.In the investing activities section since it relates to plant assets
d.It will not be reported since it is not a cash flow.
43.How much is Martinez’s cash flows from operations for 2009?
a.$28,400
b.$38,400
c.$23,600
d.$33,600
