Question 1: Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the
a. direct method.
b. indirect method.
c. working capital method.
d. cost-benefit method.
Question 2: Gator Company reported net income of $40,000 for the year ended December 31, 2007. During the year, inventories decreased by $6,000, accounts payable decreased by $9,000, depreciation expense was $10,000 and a loss on disposal of equipment of $4,500 was recorded. Net cash provided by operations in 2007 using the indirect method was
a. $69,500.
b. $42,500.
c. $38,500.
d. $51,500.
Question 3: Which of the following would not be included in the operating activities section of a statement of cash flows?
a. Cash inflows from returns on loans (i.e., interest)
b. Cash inflows from returns on equity securities (i.e., dividends)
c. Cash outflows to governments for taxes
d. Cash outflows to reacquire treasury stock
Question 4: Mower Company reported cost of goods sold of $350,000 for the year ended December 31, 2007. During the year, inventories decreased $6,000 and accounts payable decreased $9,000. The cash payments to suppliers in 2007, using the direct method was
a. $365,000.
b. $347,000.
c. $335,000.
d. $353,000.