Question 1. On an indirect method statement of cash flows, a gain on the sale of plant assets is:
a. reflected in the investing activities section.
b. added to net income.
c. deducted from net income.
Question 2. Using the indirect method of preparing a statement of cash flows, a loss on the sale of a plant asset is:
a. ignored.
b. added in the operating activities section.
c. subtracted in the operating activities section.
Question 3. The declaration of dividends by the board of directors would be reported on a statement of cash flows as a(an):
a. cash inflow under the financing activities.
b. cash outflow under the investing activities.
c. activity that would not be reported on a statement of cash flows.
Question 4. On January 1, 2004, Santa Fe Accents, Inc., had a balance of $340,000 in the Investments account. During 2004, Santa Fe Accents sold investments for $115,000 cash, resulting in a $13,000 gain. On December 31, 2004, the Investments account showed a balance of $380,000. The investments purchased during 2004 totaled:
a. $75,000.
b. $155,000.
c. $142,000.
Question 5. Retained Earnings had a balance on January 1, 2004, and December 31, 2004, respectively, of $234,500 and $411,000. Net income for the year was $199,500 and the only other event affecting Retained Earnings was the declaration of dividends. If there was no change in the Dividends Payable account during the year, the payments for dividends was:
a. $23,000.
b. $376,000.
c. indeterminable from the information given
Question 6. Which of the following would appear on a direct method statement of cash flows?
a. loss on sale of assets
b. increase in Accounts Receivable
c. cash payments for inventory
Question 7. Del Norte Corporation uses the direct method when preparing its statement of cash flows. Del Norte sold equipment with a book value of $13,000 at a loss of $3,000. The amount to be reported on the statement of cash flows under "proceeds from the sale of plant assets" is:
a. $16,000.
b. $10,000.
c. $3,000.
Question 8. On December 31, 2004, the Bison Bit Company's Retained Earnings account had a balance of $420,000. During 2004, the company incurred a net loss of $85,000, declared stock dividends of $15,000, and paid cash dividends of $10,000. If the Dividends Payable account increased $4,000 during 2002, the January 1, 2004, balance in the Retained Earnings account was:
a. $534,000.
b. $526,000.
c. $306,000.
Question 9. The receipt of interest on loans would be reported on a statement of cash flows under the:
a. operating activities.
b. investing activities.
c. financing activities.
Question 10. The amount founds in the Salaries Payable account for NovaLights Company were $14,500 and $16,000 on December 31, 2003, and December 31, 2004, respectively. Cash paid to employees for the years ended December 31, 2003, and December 31, 2004, were $255,000 and $280,000, respectively. NovaLights Company's Salary Expense for the year ended December 31, 2004, was:
a. $253,500.
b. $281,500.
c. $256,500.
Question 11. On an indirect method statement of cash flows, a decrease in inventory would be:
a. netted against any decreases in accounts payable.
b. reflected in the investing activities section.
c. added to net income.
Question 12. All of the following would be reported in the financing activities section under the direct method statement of cash flows except:
a. issuing a stock dividend.
b. issuing common stock.
c. purchasing treasury stock.