Question 1

Paxson Mining Co. has recently decided to go public and has hired you as an independent CPA. One statement that the enterprise is anxious to have prepared is a statement of cash flows. Financial statements of Paxson Mining Co. for 2009 and 2008 are provided below.
   The following additional data were provided:
1) Dividends for the year 2009 were $96,000.
2) During the year, equipment was sold for $120,000. This equipment cost $176,000 originally and had a book value of $144,000 at the time of sale. The loss on sale was incorrectly charged to cost of sales.
3) All depreciation expense is in the selling expense category.
 relate to a statement of cash flows for the year ended December 31, 2009, for Paxson Mining Company.
-The net cash provided (used) by financing activities is
A) $(120,000).
B) $24,000.
C) $(216,000).
D) $96,000.

Accepted Answer

($96,000) - ($120,000) = ($216,000).

Question 2

Cashman Company reported net income after taxes of $85,000 for the year ended 12/31/08. Included in the computation of net income were: depreciation expense, $15,000; amortization of a patent, $8,000; and a gain on sale of investments, $3,000. Cashman also paid a $20,000 dividend during the year. The net cash provided by operating activities would be reported at
A) $45,000.
B) $85,000.
C) $89,000.
D) $105,000.

Accepted Answer

$85,000 + $15,000 + $8,000 - $3,000 = $105,000.

Question 3

Tobin Company sold some of its plant assets during 2008. The original cost of the plant assets was $750,000 and the accumulated depreciation at date of sale was $700,000. The proceeds from the sale of the plant assets were $105,000. The information concerning the sale of the plant assets should be shown on Tobin's statement of cash flows for the year ended December 31, 2008, as a(n)
A) subtraction from net income of $55,000 and a $50,000 increase in cash flows from financing activities.
B) addition to net income of $55,000 and a $105,000 increase in cash flows from investing activities.
C) subtraction from net income of $55,000 and a $105,000 increase in cash flows from investing activities.
D) addition of $105,000 to net income.

Accepted Answer

$105,000 - ($750,000 - $700,000) = $55,000, $105,000 (proceeds).

Question 4

An analysis of the machinery accounts of Doonan Company for 2008 is as follows:
 The information concerning Doonan's machinery accounts should be shown in Doonan's statement of cash flows for the year ended December 31, 2008, as a(n)
A) subtraction from net income of $100,000 and a $200,000 decrease in cash flows from financing activities.
B) addition to net income of $100,000 and a $200,000 decrease in cash flows from investing activities.
C) $100,000 increase in cash flows from financing activities.
D) $200,000 decrease in cash flows from investing activities.

Accepted Answer

The answer of An analysis of the machinery accounts of...

Question 5

Equipment which cost $213,000 and had accumulated depreciation of $114,000 was sold for $111,000. This transaction should be shown on the statement of cash flows as a(n)
A) addition to net income of $12,000 and a $111,000 cash inflow from financing activities.
B) deduction from net income of $12,000 and a $99,000 cash inflow from investing activities.
C) deduction from net income of $12,000 and a $111,000 cash inflow from investing activities.
D) addition to net income of $12,000 and a $99,000 cash inflow from financing activities.

Accepted Answer

$111,000 - ($213,000 - $114,000) = $12,000, $111,000 (proceeds).

Question 6

During 2009, equipment was sold for $156,000. The equipment cost $252,000 and had a book value of $144,000. Accumulated Depreciation-Equipment was $687,000 at 12/31/08 and $735,000 at 12/31/09. Depreciation expense for 2009 was
A) $60,000.
B) $96,000.
C) $156,000.
D) $192,000.

Accepted Answer

$735,000 - $687,000 + ($252,000 - $144,000) = $156,000.

Question 7

Equipment that cost $300,000 and had a book value of $156,000 was sold for $180,000. Data from the comparative balance sheets are:
 
-Depreciation expense for 2009 was
A) $258,000.
B) $234,000.
C) $54,000.
D) $36,000.

Accepted Answer

$660,000 - $570,000 + ($300,000 - $156,000) = $234,000.

Question 8

Financial statements for Rogan Company are given below:
   Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000.
-When the equipment was sold, the Buildings and Equipment account received a credit of
A) $96,000.
B) $208,000.
C) $160,000.
D) $112,000.

Accepted Answer

$96,000 - $48,000 = $48,000 (BV); $48,000 + $112,000 = $160,000.

Question 9

Financial statements for Rogan Company are given below:
   Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000.
-The book value of the buildings and equipment at December 31, 2008 was
A) $1,016,000.
B) $1,040,000.
C) $1,424,000.
D) $1,176,000.

Accepted Answer

($1,200,000 - $400,000) - $48,000 + $384,000 - $120,000 = $1,016,000.

Question 10

Financial statements for Rogan Company are given below:
   Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000.
-The accounts payable at December 31, 2008 were
A) $88,000.
B) $216,000.
C) $64,000.
D) $296,000.

Accepted Answer

$152,000 + $64,000 = $216,000.

Question 11

Financial statements for Rogan Company are given below:
   Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000.
-The balance in the Retained Earnings account at December 31, 2008 was
A) $360,000.
B) $880,000.
C) $760,000.
D) $1,000,000.

Accepted Answer

$480,000 + $400,000 - $120,000 = $760,000.

Question 12

Financial statements for Rogan Company are given below:
   Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000.
-Capital stock (plus any additional paid-in capital) at December 31, 2008 was
A) $800,000.
B) $920,000.
C) $520,000.
D) $1,240,000.

Accepted Answer

$920,000 + $320,000 = $1,240,000.

Question 13

The balance in retained earnings at December 31, 2008 was $720,000 and at December 31, 2009 was $582,000. Net income for 2009 was $500,000. A stock dividend was declared and distributed which increased common stock $200,000 and paid-in capital $110,000. A cash dividend was declared and paid.
-The amount of the cash dividend was
A) $248,000.
B) $328,000.
C) $442,000.
D) $638,000.

Accepted Answer

$720,000 + $500,000 - ($200,000 + $110,000) - X = $582,000 X = $328,000.

Question 14

The following information was taken from the 2008 financial statements of Sawyer Corporation:
 During 2008
• A $450,000 payment was made to retire bonds payable with a face amount of $500,000.
• Bonds payable with a face amount of $200,000 were issued in exchange for equipment.
In its statement of cash flows for the year ended December 31, 2008, what amount should Sawyer report as proceeds from issuance of bonds payable?
A) $1,500,000
B) $1,750,000
C) $1,800,000
D) $2,200,000

Accepted Answer

$2,000,000 - $500,000 + $500,000 - $200,000 = $1,800,000.

Question 15

Richman Corporation had net income for 2008 of $3,000,000. Additional information is as follows:
 Richman's net cash provided by operating activities for 2008 was
A) $4,560,000.
B) $4,440,000.
C) $4,320,000.
D) $1,680,000.

Accepted Answer

$3,000,000 + $1,200,000 - $240,000 + $420,000 + $540,000 = $4,560,000.

Question 16

Net cash flow from operating activities for 2008 for Fordham Corporation was $300,000. The following items are reported on the financial statements for 2008:
 Based on the information above, Fordham's net income for 2008 was
A) $312,000.
B) $296,000.
C) $264,000.
D) $256,000.

Accepted Answer

X + $12,000 - $24,000 = $300,000; X = $312,000.

Question 17

During 2008, Hogan Company earned net income of $384,000 which included deprecia-tion expense of $78,000. In addition, the company experienced the following changes in the account balances listed below:
 Based upon this information, what amount will be shown for net cash provided by operating activities for 2008?
A) $492,000
B) $465,000
C) $285,000
D) $267,000

Accepted Answer

$384,000 + $78,000 + $45,000 - $36,000 + $12,000 - $24,000 + $33,000 = $492,000.

Question 18

Robley Company reported net income of $340,000 for the year ended 12/31/08. Included in the computation of net income were: depreciation expense, $60,000; amortization of a patent, $32,000; and a loss on sale of equipment, $12,000. Robley also paid an $80,000 dividend during the year. The net cash provided by operating activities would be reported at
A) $444,000.
B) $420,000.
C) $236,000.
D) $156,000.

Accepted Answer

$340,000 + $60,000 + $32,000 - $48,000 + $12,000 = $396,000.

Question 19

Joe Novak Corporation reports the following information:
 
-Joe Novak's current cash debt coverage ratio is
A) 0.86.
B) 1.43.
C) 2.15.
D) 4.78.

Accepted Answer

$215,000 ÷ $150,000 = 1.43.

Question 20

Joe Novak Corporation reports the following information:
 
-Joe Novak's free cash flow is
A) $10,000.
B) $45,000.
C) $105,000.
D) $155,000.

Accepted Answer

$215,000 - $60,000 - $110,000 = $45,000.

Quiz 6: Statement of Cash Flows

An analysis of the machinery accounts of Doonan Company for 2008 is as follows: The information concerning Doonan's machinery accounts should be shown in Doonan's statement of cash flows for the year ended December 31, 2008, as a(n)

Equipment which cost $213,000 and had accumulated depreciation of $114,000 was sold for $111,000. This transaction should be shown on the statement of cash flows as a(n)

During 2009, equipment was sold for $156,000. The equipment cost $252,000 and had a book value of $144,000. Accumulated Depreciation-Equipment was $687,000 at 12/31/08 and $735,000 at 12/31/09. Depreciation expense for 2009 was

Equipment that cost $300,000 and had a book value of $156,000 was sold for $180,000. Data from the comparative balance sheets are: -Depreciation expense for 2009 was

Financial statements for Rogan Company are given below: Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000. -When the equipment was sold, the Buildings and Equipment account received a credit of

Financial statements for Rogan Company are given below: Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000. -The book value of the buildings and equipment at December 31, 2008 was

Financial statements for Rogan Company are given below: Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000. -The accounts payable at December 31, 2008 were

Financial statements for Rogan Company are given below: Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000. -The balance in the Retained Earnings account at December 31, 2008 was

Financial statements for Rogan Company are given below: Total assets on the balance sheet at December 31, 2008 are $2,216,000. Accumulated deprecia-tion on the equipment sold was $112,000. -Capital stock (plus any additional paid-in capital) at December 31, 2008 was

Richman Corporation had net income for 2008 of $3,000,000. Additional information is as follows: Richman's net cash provided by operating activities for 2008 was

Net cash flow from operating activities for 2008 for Fordham Corporation was $300,000. The following items are reported on the financial statements for 2008: Based on the information above, Fordham's net income for 2008 was

Joe Novak Corporation reports the following information: -Joe Novak's current cash debt coverage ratio is

Joe Novak Corporation reports the following information: -Joe Novak's free cash flow is