Ch13

Student: ___________________________________________________________________________

1. Under the indirect method of determining the net cash provided by operating activities on the statement
of cash flows, increases in current liabilities such as accounts payable are added to net income.
True False
2. Under the indirect method of determining the net cash provided by operating activities on the statement
of cash flows, dividends are added to net income.
True False
3. The net cash provided by operating activities on the statement of cash flows would include interest paid
to creditors and dividends paid to the company's own shareholders.
True False
4. A change in deferred taxes is considered to be an operating activity on the statement of cash flows.
True False
5. Lending money to another company would be classified as a financing activity on the statement of cash
flows.
True False
6. (Appendix) Under the direct method of determining the net cash provided by operations on the statement
of cash flows, the cost of goods sold is converted to a cash basis by adjusting it for changes in
inventories and changes in accounts payable during the period.
True False
7. Accounts receivable is not considered to be a cash equivalent for purposes of preparing the statement of
cash flows.
True False
8. Which of the following would be considered a "use" of cash for purposes of constructing a statement of
cash flows?
A. a decrease in accounts receivable.
B. an increase in accounts payable.
C. an increase in common stock.
D. a decrease in bonds payable.
9. Which of the following would be considered a "source" of cash for purposes of constructing a statement
of cash flows?
A. an increase in accounts payable.
B. dividends paid to the company's own shareholders.
C. a decrease in accrued liabilities.
D. an increase in accounts receivable.

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10. Under the indirect method, which item would be deducted from net income as part of the process of
arriving at cash provided by operating activities on the statement of cash flows?
A. Patent amortization expense
B. Increase in accounts payable
C. Increase in prepaid expenses
D. Decrease in accounts receivable
11. A decrease in the prepaid expenses account of $1,000 over the course of a year would be shown on the
company's statement of cash flows prepared under the indirect method as:
A. an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
B. a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
C. an addition of $1,000 under financing activities.
D. a deduction of $1,000 under financing activities.
12. An increase in the taxes payable account of $1,000 over the course of a year would be shown on the
company's statement of cash flows prepared under the indirect method as:
A. an addition to net income of $1,000 in order to arrive at net cash provided by operating activities.
B. a deduction from net income of $1,000 in order to arrive at net cash provided by operating activities.
C. an addition of $1,000 under financing activities.
D. a deduction of $1,000 under financing activities.
13. Luella Corporation prepares its statement of cash flows using the indirect method. Which of the
following would be added to net income in the operating activities section of the statement?

A.
B.
C.
D.
14. (Appendix) Olaf Corporation prepares its statement of cash flows using the direct method. The following
items were listed on Olaf's income statement. Which of these items would also be listed in the operating
activities section of Olaf's statement of cash flows?

A.
B.
C.
D.
15. In a statement of cash flows, all of the following would be classified as operating activities except:
A. interest paid to creditors.
B. dividends received on stock in another company held as an investment.
C. dividends paid to the company's own common stockholders.
D. interest received on a long-term note receivable.

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16. A decrease in the plant and equipment account of $100,000 over the course of a year would be shown on
the company's statement of cash flows prepared under the indirect method as:
A. an addition to net income of $100,000 in order to arrive at net cash provided by operating activities.
B. a deduction from net income of $100,000 in order to arrive at net cash provided by operating
activities.
C. an addition of $100,000 under investing activities.
D. a deduction of $100,000 under investing activities.
17. Which of the following should be classified as an investing activity on a statement of cash flows?
A. cash paid for income taxes.
B. cash paid for dividends to stockholders.
C. cash paid to employees for services rendered.
D. None of these
18. A company declared and paid a cash dividend. The dividend would appear on the company's statement
of cash flows as:
A. an addition to net income in order to arrive at net cash provided by operating activities under the
indirect method.
B. a deduction from net income in order to arrive at net cash provided by operating activities under the
indirect method.
C. a deduction under investing activities.
D. a deduction under financing activities.
19. Dividends paid to a company's own stockholders of $80,000 would be shown on the company's
statement of cash flows prepared under the indirect method as:
A. an addition of $80,000 under investing activities.
B. a deduction of $80,000 under investing activities.
C. an addition of $80,000 under financing activities.
D. a deduction of $80,000 under financing activities.

3
20. Swinger Corporation's comparative balance sheet appears below:

The company's net income (loss) for the year was $10,000 and its cash dividends were $4,000. The total
dollar amount of all of the items that would be classified as sources when compiling a simplified
statement of cash flows is:
A. $29,000
B. $16,000
C. $45,000
D. $25,000

4
21. Illies Corporation's comparative balance sheet appears below:

The company's net income (loss) for the year was $5,000 and its cash dividends were $4,000. The total
dollar amount of all of the items that would be classified as uses when compiling a simplified statement
of cash flows is:
A. $7,000
B. $40,000
C. $29,000
D. $33,000
22. The following information relates to Penha, Inc. for last year:

What is Penha's net cash provided by operating activities for last year on the statement of cash flows?
(Assume that current liabilities do not contain any notes payable.)
A. $108,000
B. $116,000
C. $136,000
D. $139,000

5
23. Norlund Company's net income last year was $21,000. Changes in selected balance sheet accounts for
the year appear below:

Based solely on this information, the net cash provided by operations under the indirect method on the
statement of cash flows would be:
A. $63,000
B. $36,000
C. $7,000
D. $35,000
24. Alaric Corporation recently sold equipment for $16,000. The equipment was purchased five years ago
for $100,000. The accumulated depreciation on the equipment on the date of sale was $75,000. Alaric
uses the indirect method to prepare its statement of cash flows. What net effect will this sale have on the
investing activities section of Alaric's statement of cash flows for the current year?
A. no effect
B. $7,000 increase
C. $9,000 decrease
D. $16,000 increase

6
25. Roble Corporation's balance sheet and income statement appear below:

Cash dividends were $62. The company sold equipment for $19 that was originally purchased for $5 and
that had accumulated depreciation of $5. The net cash provided by (used by) operations for the year
was:
A. $255
B. $236
C. $324
D. $298

7
26. Ivory Corporation's balance sheet and income statement appear below:

Cash dividends were $1. The company sold equipment for $19 that was originally purchased for $15 and
that had accumulated depreciation of $4. The net cash provided by (used by) investing activities for the
year was:
A. ($18)
B. ($1)
C. $1
D. $19

8
27. Daubenspeck Corporation's balance sheet and income statement appear below:

Cash dividends were $45. The company sold equipment for $20 that was originally purchased for $12
and that had accumulated depreciation of $12. The net cash provided by (used by) financing activities
for the year was:
A. ($74)
B. ($33)
C. ($45)
D. $4

9
28. The most recent balance sheet and income statement of Helle Corporation appear below:

Cash dividends were $9. The net cash provided by (used by) operations for the year was:
A. $46
B. $71
C. $54
D. $4
29. (Appendix) Last year Cummins Company reported a cost of goods sold of $50,000. Inventories
increased by $10,000 during the year, and accounts payable increased by $2,000. The company uses the
direct method to determine the net cash provided by operating activities on the statement of cash flows.
The cost of goods sold adjusted to a cash basis would be:
A. $42,000
B. $58,000
C. $48,000
D. $60,000
30. (Appendix) Cridge Company's selling and administrative expenses for last year totaled $170,000. During
the year the company's prepaid expense account balance increased by $9,000 and accrued liabilities
decreased by $13,000. Depreciation charges for the year were $15,000. Based on this information,
selling and administrative expenses adjusted to a cash basis under the direct method on the statement of
cash flows would be:
A. $177,000
B. $207,000
C. $133,000
D. $163,000

10
31. (Appendix) Pietras Corporation's balance sheet and income statement appear below:

Cash dividends were $57. The company sold equipment for $18 that was originally purchased for $11
and that had accumulated depreciation of $6. The net cash provided by (used by) operations for the year
was:
A. $213
B. $257
C. $284
D. $200

11
32. (Appendix) The most recent balance sheet and income statement of Ganim Corporation appear below:

Cash dividends were $20. The net cash provided by (used by) operations for the year was:
A. $125
B. $95
C. $15
D. $157
33. Last year Burdic Company's cash account decreased by $4,000. Net cash provided by investing activities
was $31,000. Net cash used in financing activities was $38,000. On the statement of cash flows, the net
cash flow provided by (used in) operating activities was:
A. $(4,000)
B. $(11,000)
C. $(7,000)
D. $3,000

12
 Krech Corporation's comparative balance sheet appears below:

The company's net income (loss) for the year was ($3,000) and its cash dividends were $3,000.
34. The total dollar amount of all of the items that would be classified as sources when compiling a
simplified statement of cash flows is:
A. $34,000
B. $3,000
C. $28,000
D. $37,000
35. The total dollar amount of all of the items that would be classified as uses when compiling a simplified
statement of cash flows is:
A. $34,000
B. $3,000
C. $37,000
D. $28,000

13
 Hirshberg Corporation's comparative balance sheet appears below:

The company's net income (loss) for the year was $11,000 and its cash dividends were $4,000.
36. The total dollar amount of all of the items that would be classified as sources when compiling a
simplified statement of cash flows is:
A. $11,000
B. $39,000
C. $43,000
D. $54,000
37. The total dollar amount of all of the items that would be classified as uses when compiling a simplified
statement of cash flows is:
A. $11,000
B. $39,000
C. $54,000
D. $43,000

14
 Waite Company's comparative balance sheet and income statement for last year appear below:

Income Statement

The company declared and paid $24,000 in cash dividends during the year. The following questions
pertain to the company's statement of cash flows.
38. The net cash provided by (used in) operating activities last year was:
A. $56,000
B. $79,000
C. $86,000
D. $33,000
39. The net cash provided by (used in) investing activities last year was:
A. $(40,000)
B. $40,000
C. $(30,000)
D. $30,000

15
40. The net cash provided by (used in) financing activities last year was:
A. $10,000
B. $(10,000)
C. $(34,000)
D. $34,000
Meganas Company's net income last year was $183,000. Changes in the company's balance sheet
accounts for the year appear below:

The company declared and paid cash dividends of $117,000 last year. The following questions pertain to
the company's statement of cash flows.
41. The net cash provided by (used in) operating activities last year was:
A. $258,000
B. $183,000
C. $239,000
D. $202,000
42. The net cash provided by (used in) investing activities last year was:
A. $(105,000)
B. $105,000
C. $(85,000)
D. $85,000
43. The net cash provided by (used in) financing activities last year was:
A. $40,000
B. $(40,000)
C. $157,000
D. $(157,000)

16
 Bebout Corporation's balance sheet and income statement appear below:

Cash dividends were $40. The company sold equipment for $14 that was originally purchased for $9 and
that had accumulated depreciation of $7.
44. The net cash provided by (used by) operations for the year was:
A. $180
B. $168
C. $208
D. $221
45. The net cash provided by (used by) investing activities for the year was:
A. ($88)
B. $14
C. ($74)
D. $74
46. The net cash provided by (used by) financing activities for the year was:
A. $1
B. ($40)
C. ($50)
D. ($89)

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 The most recent balance sheet and income statement of Cowger Corporation appear below:

Cash dividends were $9.

47. The net cash provided by (used by) operations for the year was:
A. $71
B. $65
C. $35
D. $15
48. The net cash provided by (used by) investing activities for the year was:
A. ($8)
B. $8
C. $28
D. ($28)
49. The net cash provided by (used by) financing activities for the year was:
A. ($36)
B. ($32)
C. $5
D. ($9)

18
 (Appendix) Cliburn Corporation's balance sheet and income statement appear below:

Cash dividends were $15. The company sold equipment for $11 that was originally purchased for $3 and
that had accumulated depreciation of $1.
50. The net cash provided by (used by) operations for the year was:
A. $73
B. $84
C. $64
D. $79
51. The net cash provided by (used by) investing activities for the year was:
A. ($56)
B. $11
C. ($67)
D. $56
52. The net cash provided by (used by) financing activities for the year was:
A. $3
B. $4
C. ($15)
D. ($8)

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 (Appendix) The most recent balance sheet and income statement of Spadafino Corporation appear
below:

Cash dividends were $21.

53. The net cash provided by (used by) operations for the year was:
A. $28
B. $111
C. $106
D. $50
54. The net cash provided by (used by) investing activities for the year was:
A. ($34)
B. $48
C. ($48)
D. $34
55. The net cash provided by (used by) financing activities for the year was:
A. ($50)
B. ($34)
C. $5
D. ($21)

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56. Burch Company's net income last year was $119,000. Changes in the company's balance sheet accounts
for the year appear below:

The company declared and paid cash dividends of $45,000 last year.
Required:
a. Construct in good form the operating activities section of the company's statement of cash flows for
the year. (Use the indirect method.)
b. Construct in good form the investing activities section of the company's statement of cash flows for
the year.
c. Construct in good form the financing activities section of the company's statement of cash flows for
the year.

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57. Biven Corporation's balance sheet and income statement appear below:

Cash dividends were $31. The company sold equipment for $20 that was originally purchased for $14
and that had accumulated depreciation of $14.
Required:
Prepare a statement of cash flows for the year using the indirect method.

22
58. Danford Corporation's balance sheet and income statement appear below:

Cash dividends were $8. The company sold equipment for $12 that was originally purchased for $9 and
that had accumulated depreciation of $5.
Required:
Determine the net cash provided by (used by) operating activities for the year using the indirect
method.

23
59. Sary Corporation's balance sheet and income statement appear below:

Cash dividends were $28.

Required:
Prepare a statement of cash flows in good form using the indirect method.

24
60. Fryberger Corporation's balance sheet and income statement appear below:

Cash dividends were $20.

Required:
Prepare a statement of cash flows in good form using the indirect method.

25
61. (Appendix) Boehning Corporation's balance sheet and income statement appear below:

Cash dividends were $24. The company sold equipment for $10 that was originally purchased for $4 and
that had accumulated depreciation of $4.
Required:
Using the direct method, determine the net cash provided by (used by) operating activities.

26
62. May Corporation's balance sheet and income statement appear below:

Cash dividends were $7.

Required:
Prepare the operating activities section of the statement of cash flows using the direct method. In other
words, determine the net cash provided by or used by operating activities using the direct method.

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 Ch13 Key
1. TRUE

2. FALSE

3. FALSE

4. TRUE

5. FALSE

6. TRUE

7. TRUE

8. D

9. A

10. C

11. A

12. A

13. A

14. D

15. C

16. C

17. D

18. D

19. D

20. C

21. D

22. C

23. D

24. D

25. B

26. C

27. A

28. C

29. B

30. A

1
31. D

32. A

33. D

34. D

35. A

36. D

37. D

38. B

39. A

40. C

41. A

42. A

43. D

44. B

45. C

46. D

47. B

48. D

49. A

50. C

51. A

52. D

53. C

54. C

55. A

2
56.

57.

3
58.

59.

60.

4
61.

62.

5
 Ch13 Summary
Category # of Questions
AACSB: Analytic 51
AACSB: Analytic 51
AACSB: Reflective Thinking 11
AACSB: Reflective Thinking 11
AICPA BB: Critical Thinking 62
AICPA BB: Critical Thinking 62
AICPA FN: Measurement 6
AICPA FN: Measurement 6
AICPA FN: Reporting 62
AICPA FN: Reporting 62
Brewer - Chapter 013 70
Brewer - Chapter 013 70
Learning Objective: 1 8
Learning Objective: 1 8
Learning Objective: 2 51
Learning Objective: 2 51
Learning Objective: 3 31
Learning Objective: 3 31
Learning Objective: 4 14
Learning Objective: 4 14
Learning Objective: 5 1
Learning Objective: 5 1
Level: Medium 62
Level: Medium 62