Chapter 15

Chapter 15 How Well Am I Doing?
--Statement of Cash Flows

True/False Questions
1. An increase in inventory is classified as a use of cash for purposes of constructing
the statement of cash flows.
Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 1 Level: Easy
2. In the statement of cash flows, dividend payments to the company's stockholders are
treated as a use rather than as a source of cash.
3. Under the indirect method of determining the net cash flow from operating activities
on the statement of cash flows, a gain on the sale of equipment would be added to net
income.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 2,3 Level: Hard
4. 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.
AICPA FN: Reporting LO: 2,3 Level: Medium
5. 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.
Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking
6. Interest paid on borrowed funds would be included as part of a company's financing
activities on the statement of cash flows.
Ans: False AACSB: Analytic
AICPA FN: Reporting LO: 2
AICPA BB: Critical Thinking

Level: Hard
Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition
15-5
Chapter 15 How Well Am I Doing?--Statement of Cash Flows

7. 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.
AICPA FN: Reporting LO: 2 Level: Medium
8. A change in deferred taxes is considered to be an operating activity on the statement of
cash flows.
9. Lending money to another company would be classified as a financing activity on the
statement of cash flows.
10. The direct method of preparing the statement of cash flows will usually show a greater
total increase in cash than the indirect method.
Ans: False AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting LO: 3,4 Level: Easy
11. 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.
Ans: True AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 15 LO: 4 Level: Medium
12. Under the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in inventory would be added to cost of
goods sold to convert cost of goods sold to a cash basis.
AICPA FN: Reporting Appendix: 15 LO: 4 Level: Hard
15-6

13. Under the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in prepaid expenses would be added to
selling and administrative expenses to convert selling and administrative expenses to a
cash basis.
AICPA FN: Reporting Appendix: 15 LO: 4 Level: Hard
14. Accounts receivable is not considered to be a cash equivalent for purposes of
preparing the statement of cash flows.
15. The Financial Accounting Standards Board (FASB) recommends that companies use
the direct method rather than the indirect method in preparing their statement of cash
flows.
Multiple Choice Questions
16. 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.
Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking
17. 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.
Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking
15-7

18. Evita Corporation prepares its statement of cash flows using the indirect method.
Evita's statement showed Net cash provided by operating activities to be $46,000.
Under the direct method, this number would have been:
A) $0.
B) $46,000.
C) greater than $46,000.
D) less than $46,000 but greater than $0.
Ans: B AACSB: Analytic AICPA BB: Critical Thinking
AICPA FN: Reporting Appendix: 15 LO: 2,3,4 Level: Easy
19. 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
Ans: C AACSB: Analytic AICPA BB: Critical Thinking
20. 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
C) an addition of $1,000 under financing activities.
D) a deduction of $1,000 under financing activities.
Ans: A AACSB: Analytic AICPA BB: Critical Thinking
15-8

21. 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:
B) a deduction from net income of $1,000 in order to arrive at net cash provided by
22. 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)
Depreciation Loss on Sale

Expense
of Equipment
Yes
Yes
Yes
No
No
Yes
No
No

23. Gioja Corporation prepares its statement of cash flows using the indirect method.
Which of the following would be deducted from net income in the operating activities
section of the statement?
A)
B)
C)
D)
Increase in Taxes Payable Increase in Dividends Payable

Yes
Yes
Yes
No
No
Yes
No
No
Ans: D AACSB: Analytic AICPA BB: Critical Thinking

15-9

24. 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)
Depreciation Expense Gain on Sale of Equipment

Yes
Yes
Yes
No
No
Yes
No
No

AICPA FN: Reporting Appendix: 15 LO: 2,4 Level: Medium
25. During the year the balance in the prepaid expenses account increased by $6,000. In
order to adjust the company's net income to a cash basis using the direct method on the
statement of cash flows, it would be necessary to:
A) deduct the $6,000 from the operating expenses reported on the income
statement.
B) add the $6,000 to the operating expenses reported on the income statement.
C) deduct the $6,000 from the cost of goods sold reported on the income statement.
D) add the $6,000 to the cost of goods sold reported on the income statement.
AICPA FN: Reporting Appendix: 15 LO: 2,4 Level: Hard
26. 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.
15-10

27. In a statement of cash flows, a change in accounts payable account would be classified
as:
A) an operating activity.
B) a financing activity.
C) an investing activity.
D) a noncash item that need not appear on the statement of cash flows.
Ans: A AACSB: Reflective Thinking AICPA BB: Critical Thinking
28. 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:
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.
29. Which of the following should be classified as an investing activity on a statement of
cash flows?
A) cash received from the sale of office equipment that was sold at a loss.
B) cash used to purchase a long-term investment in bonds of another corporation.
C) cash received from the issuance of Iguato Corporation common stock.
D) both A and B above
E)
all of the above
30. 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 the above
15-11

31. 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.
32. 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.
33. Which of the following should be classified as a financing activity on a statement of
cash flows?
A) cash used to retire bonds payable.
B) an increase in deferred income taxes.
C) cash dividends received on an investment in stock.
D) both A and C above
E)
none of the above
AICPA FN: Reporting LO: 2 Level: Hard
34. Which of the following sections of the statement of cash flows will be prepared
differently if the direct method is used instead of the indirect method?
A) operating activities section
B) investing activities section
C) financing activities section
D) all of the above
Ans: A AACSB: Reflective Thinking
AICPA FN: Reporting Appendix: 15
15-12
AICPA BB: Critical Thinking

LO: 3,4 Level: Easy

35. In the statement of cash flows, the sum total of the net cash provided by operating
activities, investing activities, and financing activities would be equal to:
A) zero.
B) the beginning balance of cash and cash equivalents.
C) the ending balance of cash and cash equivalents.
D) the increase or decrease in cash and cash equivalents.
36. Excerpts from Neuwirth Corporation's comparative balance sheet appear below:
Cash and cash equivalents.............
Accounts receivable.......................
Inventory........................................
Ending Balance Beginning Balance

$37,000
$27,000
$24,000
$28,000
$65,000
$68,000
Which of the following classifications of changes in balance sheet accounts as sources

and uses is correct?
A) The change in Accounts Receivable is a source; The change in Inventory is a
source.
B) The change in Accounts Receivable is a use; The change in Inventory is a use.
C) The change in Accounts Receivable is a source; The change in Inventory is a
use.
D) The change in Accounts Receivable is a use; The change in Inventory is a
source.
15-13

37. Excerpts from Deblois Corporation's comparative balance sheet appear below:
Cash and cash equivalents...................
Accounts payable.................................
Accrued wages and salaries payable....

$22,000
$28,000
$18,000
$17,000
$34,000
$37,000

A) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a source.
B) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a source.
C) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a use.
D) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a use.
38. Excerpts from Aultman Corporation's comparative balance sheet appear below:
Cash and cash equivalents...................
Property, plant, and equipment............
Long-term debt.....................................

$62,000
$29,000
$371,000
$345,000
$75,000
$73,000

A) The change in Property, Plant, and Equipment is a use; The change in LongTerm Debt is a source.
B) The change in Property, Plant, and Equipment is a source; The change in LongTerm Debt is a use.
C) The change in Property, Plant, and Equipment is a use; The change in LongTerm Debt is a use.
D) The change in Property, Plant, and Equipment is a source; The change in LongTerm Debt is a source.
15-14

39. Swinger Corporation's comparative balance sheet appears below:
Ending
Balance
Assets:
Current assets:
Cash and cash equivalents.........................
Accounts receivable...................................
Inventory....................................................
Total current assets.......................................
Property, plant, and equipment.....................
Less accumulated depreciation..................
Net property, plant, and equipment..............
Total assets...................................................
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable.......................................
Accrued wages and salaries payable.........
Accrued income taxes payable..................
Notes payable............................................
Total current liabilities..................................
Long-term debt.............................................
Deferred income taxes..................................
Total liabilities..............................................
Stockholders equity:
Common stock...........................................
Retained earnings......................................
Total stockholders equity............................
Total liabilities and stockholders equity......
Beginning
Balance
$ 47,000
23,000
66,000
136,000
356,000
184,000
172,000
$308,000
$ 31,000
22,000
64,000
117,000
338,000
161,000
177,000
$294,000
$ 17,000
32,000
25,000
11,000
85,000
83,000
38,000
206,000
$ 16,000
31,000
27,000
13,000
87,000
80,000
34,000
201,000
27,000
75,000
102,000
$308,000
24,000
69,000
93,000
$294,000
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
15-15

Solution:
Sources
Net income.............................................................
Increases in liabilities (and contra asset accounts):
Increase in accumulated depreciation.................
Increase in accounts payable...............................
Increase in accrued wages and salaries payable..
Increase in long-term debt...................................
Increase in deferred income taxes.......................
Increases in capital stock accounts:
Increase in common stock...................................
Total sources..........................................................
15-16
$10,000
23,000
1,000
1,000
3,000
4,000
3,000
$45,000

40. Illies Corporation's comparative balance sheet appears below:
Ending
Balance
Assets:
Current assets:
Inventory....................................................
Total assets...................................................
Notes payable............................................
Long-term debt.............................................
Common stock...........................................
Beginning
Balance
$ 40,000
19,000
67,000
126,000
358,000
156,000
202,000
$328,000
$ 33,000
21,000
69,000
123,000
339,000
132,000
207,000
$330,000
$ 18,000
35,000
23,000
19,000
95,000
82,000
25,000
202,000
$ 19,000
37,000
19,000
22,000
97,000
86,000
23,000
206,000
23,000
103,000
126,000
$328,000
22,000
102,000
124,000
$330,000
$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
15-17

Solution:
Uses
Increases in noncash assets:
Increase in property, plant, and equipment..........
Decreases in liabilities:
Decrease in accounts payable...............................
Decrease in accrued wages and salaries payable..
Decrease in notes payable....................................
Decrease in long-term debt...................................
Dividends paid.........................................................
Total uses.................................................................
15-18
$19,000
1,000
2,000
3,000
4,000
4,000
$33,000

41. The following information relates to Penha, Inc. for last year:
Net income.............................................................
Net increase in all current assets except cash........
Net increase in current liabilities...........................
Dividends paid on common stock..........................
Depreciation expense.............................................
Gain on sale of investments...................................
$117,00
0
$31,000
$45,000
$20,000
$8,000
$3,000
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
Solution:
Net income............................................................................
Adjustments needed to convert net income to a cash basis:
Depreciation charges..........................................................
Add (deduct) changes in current asset accounts affecting
revenue or expense:
Increase in all current assets except cash...........................
Add (deduct) changes in current liability accounts affecting
revenue or expense:
Increase in current liabilities..............................................
Add (deduct) gains or losses on sale of assets:
Gain on sale of investments...............................................
Net cash provided by operating activities.............................
$117,000
8,000
(
31,000)
45,000
3,000)
$136,000
15-19

42. Morey Company's net income last year was $27,000 and cash dividends declared and
paid to the company's stockholders totaled $13,000. Changes in selected balance sheet
accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable.................
Inventory..................................
Prepaid expenses......................
Credit balances:
Accumulated depreciation.......
Accounts payable.....................
Taxes payable..........................
Bonds payable..........................
$8,000
$(3,000)
$4,000
$18,000
$6,000
$(4,000)
$10,000
Based solely on this information, the net cash provided by operations under the
indirect method on the statement of cash flows would be:
A) $16,000
B) $45,000
C) $38,000
D) $25,000
Solution:
Net income.........................................................................
Adjustments needed to convert net income to cash basis:
Depreciation charges.......................................................
Add (deduct) changes in current asset accounts
affecting revenue or expense:
Increase in accounts receivable...................................
Decrease in inventory..................................................
Increase in prepaid expenses.......................................
Add (deduct) changes in current liability accounts
Increase in accounts payable.......................................
Decrease in taxes payable............................................
Net cash provided by operating activities..........................
15-20
$27,000
18,000
(
(
8,000)
3,000
4,000)
6,000
4,000)
$38,000

43. Norlund Company's net income last year was $21,000. Changes in selected balance
sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Accounts receivable.................
Inventory..................................
Prepaid expenses......................
Credit balances:
Accumulated depreciation.......
Accounts payable.....................
Accrued liabilities....................
Taxes payable..........................
Deferred taxes..........................
$8,000
$9,000
$(3,000)
$15,000
$(5,000)
$11,000
$7,000
$0
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
15-21

Solution:
Net income.........................................................................
Depreciation charges.......................................................
Add (deduct) changes in current asset accounts
Increase in accounts receivable...................................
Increase in inventory....................................................
Decrease in prepaid expenses......................................
Add (deduct) changes in current liability accounts
Decrease in accounts payable......................................
Increase in accrued liabilities.......................................
Increase in taxes payable.............................................
Net cash provided by operating activities..........................
$21,000
15,000
(
(
8,000)
9,000)
3,000
5,000)
11,000
7,000
$35,000
44. 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
15-22

45. Roble Corporation's balance sheet and income statement appear below:
Comparative Balance Sheet
Ending Beginning
Balance
Balance
Assets:
$ 28
$ 22
65
61
Inventory....................................................
45
47
Plant and equipment...................................
658
520
Accumulated depreciation.........................
( 296)
( 288)
Total assets.................................................
$500
$362
Liabilities and stockholders equity:
Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
Retained earnings.......................................
Total liabilities and stockholders equity...
$ 28
22
28
151
16
55
200
$500
$ 29
20
24
200
17
50
22
$362
Income Statement
Sales...........................................................
Cost of goods sold......................................
Gross margin..............................................
Selling and administrative expense............
Net operating income.................................
Gain on sale of plant and equipment..........
Income before taxes...................................
Income taxes..............................................
Net income.................................................
$1,48
5
989
496
172
324
19
343
103
$ 240
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
15-23

Solution:
Net income..................................................................................
Depreciation charges................................................................
Add (deduct) changes in current asset accounts affecting
revenue or expense:
Increase in accounts receivable............................................
Decrease in inventory...........................................................
Add (deduct) changes in current liability accounts affecting
revenue or expense:
Decrease in accounts payable...............................................
Increase in wages payable....................................................
Increase in taxes payable......................................................
Add (deduct) gains or losses on sales of assets:
Gain on sale of plant and equipment....................................
Add (deduct) changes in the Deferred Income Taxes account:
Decreases in deferred taxes liability.....................................
Net cash provided by operating activities...................................
15-24
$240
13
(
4)
2
1)
2
4
19)
1)
$236

46. Ivory Corporation's balance sheet and income statement appear below:
Ending Beginning
Balance
Balance
Assets:
$ 37
$ 40
44
42
Inventory....................................................
63
53
443
440
( 268)
( 230)
Total assets.................................................
$319
$345
Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$ 41
26
16
127
18
63
28
$319
$ 45
25
17
120
19
60
59
$345
$386
239
147
185
( 38)
8
(30)
0
($ 30)
by (used by) investing activities for the year was:
A) ($18)
B) ($1)
C) $1
D) $19
15-25

Solution:
Additions to plant and equipment..............
Proceeds from sale of equipment...............
Net cash provided by investing activities. .
($18) *
19
$ 1
*$443 + $15 $440 = $18

47. Daubenspeck Corporation's balance sheet and income statement appear below:
Ending
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 42
65
65
666
( 258)
$580
$ 38
56
57
530
( 230)
$451

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 33
16
14
167
25
64
261
$580
$ 40
17
12
200
24
60
98
$451
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
15-26
Beginning
Balance
$1,093
671
422
145
277
20
297
89
$ 208

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
Solution:
Financing Activities
Decrease in bonds payable.........................
Increase in common stock..........................
Cash dividends paid...................................
Net cash used in financing activities..........
($33)
4
( 45)
($74)
15-27

48. The most recent balance sheet and income statement of Helle Corporation appear
below:
Ending Beginning
Balance
Balance
Assets:
$ 21
$ 22
56
54
Inventory....................................................
66
58
459
420
( 225)
( 202)
Total assets.................................................
$377
$352
Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 46
22
18
22
17
61
191
$377
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$532
324
208
137
71
21
$ 50
$ 55
20
21
30
16
60
150
$352
Cash dividends were $9. The net cash provided by (used by) operations for the year
was:
A) $46
B) $71
C) $54
D) $4
15-28

Solution:
Net income.............................................................
Adjustments to convert net income to cash basis:
Depreciation charges..........................................
Increase in accounts receivable..........................
Increase in inventory..........................................
Decrease in accounts payable.............................
Increase in wages payable..................................
Decrease in taxes payable...................................
Increase in deferred taxes liability......................
Net cash provided by operating activities..............
$50
23
2)
8)
9)
2
( 3)
1
$54
(
(
(
15-29

49. Guzzi Corporation's most recent balance sheet appears below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 22
79
69
543
( 202)
$511
$ 20
74
65
420
( 175)
$404

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 65
17
19
11
14
64
321
$511
$ 59
19
18
10
19
60
219
$404
Net income for the year was $129. Cash dividends were $27. The net cash provided by
(used by) operations for the year was:
A) $184
B) $147
C) $111
D) $18
15-30

Solution:
Net income.............................................................
Increase in accounts payable..............................
Decrease in wages payable.................................
Increase in taxes payable....................................
Decrease in deferred taxes liability....................
$129
27
5)
4)
6
(
2)
1
(
5)
$147
(
(
50. Isenberg Corporation's most recent balance sheet appears below:

Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 24
33
75
689
( 314)
$507
$ 22
35
66
530
( 268)
$385

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 45
19
10
26
21
71
315
$507
$ 46
20
9
30
20
70
190
$385
The net income for the year was $159. Cash dividends were $34. The net cash
provided by (used by) investing activities for the year was:
A) ($159)
B) ($113)
C) $159
D) $113
15-31

Solution:
Investing Activities
Net cash used by investing activities.........
($159)
($159)
*$689 $530
51. Minshall Corporation's most recent balance sheet appears below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 22
32
50
573
( 297)
$380
$ 20
36
62
510
( 275)
$353

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 46
12
9
132
19
42
120
$380
$ 45
15
8
120
25
40
100
$353
The net income for the year was $26. Cash dividends were $6. The net cash provided
by (used by) financing activities for the year was:
A) $2
B) $8
C) $12
D) ($6)
15-32

Solution:
Increase in bonds payable..........................
$12
2
( 6)
$ 8
52. Chain Corporation's most recent balance sheet appears below:

Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 37
27
45
602
( 262)
$449
$ 32
28
51
530
( 257)
$384

Long-term debt...........................................
Common stock...........................................
$ 51
77
22
299
$449
$ 46
110
20
208
$384
The net income for the year was $121. Cash dividends were $30. The net cash
provided by (used by) operations for the year was:
A) $173
B) $138
C) $17
D) $104
15-33

Solution:
Net income.............................................................
Decrease in accounts receivable.........................
Decrease in inventory.........................................
$121
5
1
6
5
$138
53. La Corporation's most recent balance sheet appears below:

Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 26
32
55
552
( 324)
$341
$ 22
27
56
490
( 288)
$307

Long-term debt...........................................
Common stock...........................................
$ 48
214
32
47
$341
$ 47
250
30
( 20)
$307
by (used by) investing activities for the year was:
A) $26
B) $62
C) ($26)
D) ($62)
15-34

Solution:
($62)
($62)
*$552 $490
54. Hanna Corporation's most recent balance sheet appears below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 31
44
68
626
( 340)
$429
$ 32
45
69
510
( 303)
$353

Long-term debt...........................................
Common stock...........................................
$ 39
311
61
18
$429
$ 38
300
60
( 45)
$353
by (used by) financing activities for the year was:
A) ($9)
B) $1
C) ($21)
D) $11
15-35

Solution:
Increase in long-term debt.........................
Net cash used by financing activities.........
$11
1
( 21)
($ 9)
55. 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
Solution:
Cost of goods sold (as reported)................ $50,000
Adjustments to a cash basis:
Increase in inventory...............................
10,000
Increase in accounts payable................... ( 2,000)
Cost of goods sold (adjusted)..................... $58,000
15-36

56. Last year Lawmond Company reported sales of $120,000 on its income statement.
During the year, accounts receivable increased by $20,000 and accounts payable
decreased by $10,000. The company uses the direct method to determine the net cash
provided by operating activities on the statement of cash flows. The sales revenue
adjusted to a cash basis for the year would be:
A) $100,000
B) $90,000
C) $130,000
D) $150,000
AICPA FN: Reporting Appendix: 15 LO: 2,4 Level: Hard
Solution:
Sales revenue (as reported)......................
Increase in accounts receivable.............
Sales revenue (adjusted)...........................
$120,000
( 20,000)
$100,000
57. 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
15-37

Solution:
Selling and administrative expenses
(as reported).........................................
Increase in prepaid expenses................
Decrease in accrued liabilities.............
Periods depreciation charges..............
Selling and administration expenses
(adjusted).............................................
15-38
$170,000
9,000
13,000
15,000)
$177,000

58. Pietras Corporation's balance sheet and income statement appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 23
51
55
720
( 297)
$552
$ 22
52
49
570
( 291)
$402

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 36
14
11
66
19
35
371
$552
$ 34
15
12
70
21
30
220
$402
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$1,264
828
436
152
284
13
297
89
$ 208
15-39

by (used by) operations for the year was:
A) $213
B) $257
C) $284
D) $200
Solution:
Sales revenue (as reported)....................................
Decrease in accounts receivable......................
Total.......................................................................
$1,264
Cost of goods sold (as reported)............................

Increase in inventory........................................
Increase in accounts payable...........................
Total.......................................................................
828
Selling and administrative expenses (as reported)

Decrease in accrued wages payable.................
Periods depreciation charges..........................
Total.......................................................................
Income tax expense................................................
Decrease in accrued taxes payable..................
Decrease in deferred income taxes..................
Total.......................................................................
15-40
1
$1,265
6
2)
832
152
1
12)
141
89
1
2
92
$ 200

59. The most recent balance sheet and income statement of Ganim Corporation appear
below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 35
73
54
438
( 212)
$388
$ 34
75
63
360
( 199)
$333

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$61
20
14
80
11
24
178
$388
$63
21
16
110
15
20
88
$333
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$920
606
314
157
157
47
$110
was:
A) $125
B) $95
C) $15
D) $157
15-41

Solution:
Total.......................................................................
$920

Decrease in inventory......................................
Decrease in accounts payable..........................
Total.......................................................................
606

Decrease in accrued wages payable................
Periods depreciation charges..........................
Total.......................................................................
Income tax expense...............................................
Decrease in accrued taxes payable..................
Decrease in deferred income taxes..................
Total.......................................................................
15-42
2
$922
9)
2
599
157
1
13)
145
47
2
4
53
$125

60. Ostiguy Corporation's most recent comparative balance sheet and income statement
appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 38
55
44
584
( 327)
$394
$ 32
59
46
480
( 278)
$339

Long-term debt...........................................
Common stock...........................................
$ 28
293
55
18
$394
$ 27
320
50
( 58)
$339
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$883
580
303
164
139
42
$ 97
was:
A) $139
B) $153
C) $41
D) $56
AICPA FN: Reporting Appendix: 15 LO: 2,4 Level: Easy
15-43

Solution:
Sales revenue (as reported).......................................
Total..........................................................................
$883
Cost of goods sold (as reported)...............................

Total..........................................................................
580

Total..........................................................................
4
$887
(
(
2)
1)
577
164
49)
115
Income tax expense (as reported).............................
42
Net cash provided by operating activities.................
$153
61. Last year Martson Company sold equipment with a net book value of $110,000 for
$130,000 in cash. This equipment was originally purchased for $200,000. What will
be the net effect of this transaction on the net cash provided by investing activities on
the statement of cash flows?
A) A net deduction of $70,000 from cash.
B) A net addition of $70,000 to cash.
C) A net deduction of $20,000 from cash.
D) A net addition of $20,000 to cash.
Solution:
Disposal of equipment..............................
Proceeds from sale of equipment.............
Net cash used in investing activities........
15-44
($200,000)
130,000
($ 70,000)

62. The following transactions occurred last year at Jobb Company:
Issuance of shares of the companys own common stock................
Dividends paid to the companys own shareholders.........................
Dividends received from investments in other companies shares...
Interest paid on the companys own bonds.......................................
Repayment of principal on the companys own bonds.....................
Proceeds from sale of the companys used equipment.....................
Purchase of land................................................................................
$100,00
0
$7,000
$2,000
$25,000
$90,000
$9,000
$120,00
0
Based solely on the above information, the net cash provided by financing activities
for the year on the statement of cash flows would be:
A) $3,000
B) $(131,000)
C) $(22,000)
D) $353,000
Solution:
Increase in common stock........................
Cash dividends paid.................................
Decrease in bonds payable.......................
Net cash provided by financing activities
$100,000
(
7,000)
( 90,000)
$ 3,000
63. 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
15-45

Solution:
Decrease in cash..................................................
Less: Net cash provided by investing activities. .
Add: Net cash used in financing activities..........
Net cash provided by operating activities...........
($ 4,000)
( 31,000)
38,000
$ 3,000
Use the following to answer questions 64-68:

Krech Corporation's comparative balance sheet appears below:
Ending Beginning
Balance
Balance
Assets:
Current assets:
Cash and cash equivalents........................
Accounts receivable.................................
Inventory..................................................
Total current assets......................................
Property, plant, and equipment....................
Less accumulated depreciation.................
Net property, plant, and equipment.............
Total assets..................................................
Accounts payable.....................................
Accrued wages and salaries payable........
Accrued income taxes payable.................
Notes payable...........................................
Total current liabilities................................
Long-term debt............................................
Deferred income taxes.................................
Total liabilities.............................................
Stockholders equity:...................................
Common stock..........................................
Retained earnings.....................................
Total stockholders equity...........................
Total liabilities and stockholders equity....
15-46
$ 31,000
18,000
70,000
119,000
374,000
190,000
184,000
$303,00
0
$ 28,000
20,000
66,000
114,000
354,000
165,000
189,000
$303,000
$ 13,000
31,000
28,000
21,000
93,000
76,000
39,000
208,000
$ 9,000
33,000
29,000
20,000
91,000
73,000
40,000
204,000
28,000
67,000
95,00
0
$303,00
0
26,000
73,000
99,000
$303,000

The company's net income (loss) for the year was ($3,000) and its cash dividends were
$3,000.
15-47

64. Which of the following classifications of changes in balance sheet accounts as sources
source
B) The change in Accounts Receivable is a source; The change in Inventory is a
use
C) The change in Accounts Receivable is a use; The change in Inventory is a use
D) The change in Accounts Receivable is a use; The change in Inventory is a
source
A) The change in Accounts Payable is a use; The change in Accrued Wages and
Salaries payable is a source
B) The change in Accounts Payable is a source; The change in Accrued Wages and
Salaries payable is a use
A) The change in Property, Plant, and Equipment is a source; The change in LongTerm Debt is a source
B) The change in Property, Plant, and Equipment is a use; The change in LongTerm Debt is a use
C) The change in Property, Plant, and Equipment is a source; The change in LongTerm Debt is a use
D) The change in Property, Plant, and Equipment is a use; The change in LongTerm Debt is a source
15-48

67. 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
Solution:
Sources
Decreases in noncash assets:
Decrease in accounts receivable............................
Increase in accumulated depreciation....................
Increase in accounts payable.................................
Increase in notes payable.......................................
Increase in long-term debt.....................................
Increases in capital stock accounts:
Increase in common stock.....................................
Total sources.............................................................
$ 2,000
25,000
4,000
1,000
3,000
2,000
$37,000
68. The total dollar amount of all of the items that would be classified as uses when
A) $34,000
B) $3,000
C) $37,000
D) $28,000
15-49

Solution:
Uses
Net loss
Increase in inventory..............................................
Increase in property, plant, and equipment............
Decrease in accrued wages and salaries payable...
Decrease in accrued income taxes payable............
Decrease in deferred income taxes........................
Dividends..................................................................
Total uses..................................................................
$ 3,000
4,000
20,000
2,000
1,000
1,000
3,000
$34,000

The most recent comparative balance sheet of Giacomelli Corporation appears below:
Ending
Balance
Assets:
Current assets:
Inventory....................................................
Total assets...................................................
15-50
$ 37,000
20,000
70,000
127,000
424,000
231,000
193,000
$320,000
Beginning
Balance
$ 29,000
24,000
68,000
121,000
399,000
200,000
199,000
$320,000

Notes payable............................................
Long-term debt.............................................
Common stock...........................................
$ 19,000
36,000
21,000
22,000
98,000
77,000
26,000
201,000
$ 17,000
33,000
18,000
18,000
86,000
80,000
24,000
190,000
31,000
88,000
119,000
$320,000
30,000
100,000
130,000
$320,000
source
B) The change in Accounts Receivable is a source; The change in Inventory is a
use
C) The change in Accounts Receivable is a use; The change in Inventory is a
source
D) The change in Accounts Receivable is a use; The change in Inventory is a use
A) The change in Accounts Payable is a source; The change in Accrued Wages and
B) The change in Accounts Payable is a use; The change in Accrued Wages and
15-51

A) The change in Property, Plant, and Equipment is a use; The change in LongTerm Debt is a source
B) The change in Property, Plant, and Equipment is a source; The change in LongTerm Debt is a source
C) The change in Property, Plant, and Equipment is a use; The change in LongTerm Debt is a use
D) The change in Property, Plant, and Equipment is a source; The change in LongTerm Debt is a use
15-52

Hirshberg Corporation's comparative balance sheet appears below:
Ending
Balance
Assets:
Current assets:
Inventory....................................................
Total assets...................................................
Notes payable............................................
Long-term debt.............................................
Common stock...........................................
Beginning
Balance
$ 42,000
22,000
66,000
130,000
401,000
207,000
194,000
$324,000
$ 31,000
18,000
70,000
119,000
377,000
177,000
200,000
$319,000
$ 15,000
33,000
24,000
12,000
84,000
83,000
29,000
196,000
$ 17,000
29,000
28,000
9,000
83,000
81,000
33,000
197,000
27,000
101,000
128,000
$324,000
28,000
94,000
122,000
$319,000
$4,000.
15-53

72. The total dollar amount of all of the items that would be classified as sources when
A) $11,000
B) $39,000
C) $43,000
D) $54,000
Solution:
Sources
Net income
Decreases in noncash assets:
Decrease in inventory............................................
Increase in accumulated depreciation....................
Increase in wages and salaries payable..................
Increase in notes payable.......................................
Increase in long-term debt.....................................
Total sources................................................................
$11,000
4,000
30,000
4,000
3,000
2,000
$54,000
73. The total dollar amount of all of the items that would be classified as uses when
A) $11,000
B) $39,000
C) $54,000
D) $43,000
15-54

Solution:
Uses
Increase in accounts receivable.................................
Increase in property, plant, and equipment...............
Decrease in accounts payable...................................
Decrease in accrued income taxes payable...............
Decrease in deferred income taxes...........................
Decrease in capital stock accounts:
Decrease in common stock.......................................
Dividends.....................................................................
Total uses.....................................................................
$ 4,000
24,000
2,000
4,000
4,000
1,000
4,000
$43,000
15-55

Waite Company's comparative balance sheet and income statement for last year appear below:
Statement of Financial Position
Accumulated depreciation...................
Total assets...........................................
Beginning
Balance
$ 22,000
60,000
36,000
11,000
230,000
440,000
( 276,000
( 306,000)
)
$549,000 $523,000
Accounts payable.................................
Accrued liabilities................................
Taxes payable.......................................
Bonds payable......................................
Deferred taxes......................................
Common stock.....................................
Retained earnings.................................
Total liabilities and owners equity......
$ 43,000
20,000
6,000
130,000
22,000
120,000
208,000
$549,000
Cash......................................................
Accounts receivable.............................
Inventory..............................................
Prepaid expenses..................................
Long-term investments........................
Plant and equipment.............................
Ending
Balance
$ 27,000
56,000
48,000
14,000
270,000
440,000
$ 33,000
25,000
9,000
150,000
20,000
110,000
176,000
$523,000
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$510,00
0
280,000
230,000
150,000
80,000
24,000
$ 56,000
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.
15-56

74. The net cash provided by (used in) operating activities last year was:
A) $56,000
B) $79,000
C) $86,000
D) $33,000
Solution:
Operating Activities
Net income................................................................
Adjustments to convert net income to a cash basis:
Depreciation charges.............................................
Decrease in accounts receivable............................
Increase in inventory.............................................
Increase in prepaid expenses.................................
Decrease in accrued liabilities...............................
Decrease in taxes payable......................................
Increase in deferred taxes......................................
$56,000
$30,000
4,000
( 12,000)
( 3,000)
10,000
( 5,000)
( 3,000)
2,000
23,000
$79,000
75. The net cash provided by (used in) investing activities last year was:
A) $(40,000)
B) $40,000
C) $(30,000)
D) $30,000
Solution:
Increase in long-term investments.............
Net cash used in investing..........................
($40,000
)
($40,000
)
15-57

76. The net cash provided by (used in) financing activities last year was:
A) $10,000
B) $(10,000)
C) $(34,000)
D) $34,000
Solution:
Net cash used in financing activities........
15-58
($20,000)
10,000
( 24,000)
($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:
Increases
(Decreases)
Debit balances:
Cash............................................
Accounts receivable....................
Inventory.....................................
Prepaid expenses.........................
Long-term investments...............
Plant and equipment....................
$(4,000)
$(8,000)
$13,000
$(9,000)
$60,000
$45,000
Credit balances:
Accumulated depreciation..........
Accounts payable........................
Accrued liabilities.......................
Taxes payable.............................
Bonds payable.............................
Deferred taxes.............................
Common stock............................
Retained earnings........................
$56,000
$3,000
$8,000
$(2,000)
$(60,000)
$6,000
$20,000
$66,000
The company declared and paid cash dividends of $117,000 last year. The following
questions pertain to the company's statement of cash flows.
77. The net cash provided by (used in) operating activities last year was:
A) $258,000
B) $183,000
C) $239,000
D) $202,000
15-59

Solution:
Net income.............................................................
Depreciation charges...........................................
Increase in inventory...........................................
Decrease in prepaid expenses.............................
Increase in accounts payable...............................
Increase in accrued liabilities..............................
Increase in deferred income taxes.......................
$183,000
$56,000
8,000
( 13,000)
9,000
3,000
8,000
( 2,000)
6,000
75,000
$258,000
78. The net cash provided by (used in) investing activities last year was:
A) $(105,000)
B) $105,000
C) $(85,000)
D) $85,000
Solution:
Additions to plant and equipment............
Additions to long-term investments.........
Net cash used by investing activities.......
15-60
($ 45,000)
( 60,000)
($105,000)

79. The net cash provided by (used in) financing activities last year was:
A) $40,000
B) $(40,000)
C) $157,000
D) $(157,000)
Solution:
Net cash used in financing activities........
($ 60,000)
20,000
( 117,000)
($157,000)

Sparks Company recorded the following events last year:
Issuance of shares of the companys own common stock.............
Purchase of bonds issued by other companies...............................
Dividends paid to the companys own shareholders.....................
Dividends received from investments in other companies shares
Repayment of principal on the companys own bonds..................
Interest paid on the companys own bonds...................................
Collection of the principal amount of a loan made to another
company.....................................................................................
Purchase of equipment...................................................................
$170,00
0
$90,000
$33,000
$13,000
$370,00
0
$5,000
$210,00
0
$430,00
0
On the statement of cash flows, some of these events are classified as operating activities,
some are classified as investing activities, and some are classified as financing activities.
15-61

80. Based solely on the information above, the net cash provided by (used in) financing
activities on the statement of cash flows would be:
A) $(39,000)
B) $1,321,000
C) $(233,000)
D) $(238,000)
Solution:
Issuance of common stock.......................
Repayment of bonds.................................
Net cash used by financing activities.......
$170,000
( 33,000)
( 370,000)
($233,000)
81. Based solely on the information above, the net cash provided by (used in) investing
activities on the statement of cash flows would be:
A) $(310,000)
B) $(1,321,000)
C) $(520,000)
D) $(890,000)
Solution:
Purchase of bonds....................................
Collection of loan.....................................
Purchase of equipment.............................
15-62
($ 90,000)
210,000
( 430,000)
($310,000)

Bebout Corporation's balance sheet and income statement appear below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 36
82
40
619
( 321)
$456
$ 31
74
49
540
( 303)
$391

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 35
20
13
150
18
31
189
$456
$ 32
24
15
200
24
30
66
$391
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$1,19
6
786
410
189
221
12
233
70
$ 163
Cash dividends were $40. The company sold equipment for $14 that was originally purchased
for $9 and that had accumulated depreciation of $7.
15-63

82. The net cash provided by (used by) operations for the year was:
A) $180
B) $168
C) $208
D) $221
Solution:
Net income.............................................................
Decrease in wages payable.................................
Decrease in deferred income taxes.....................
Gain on sale of plant and equipment..................
$163
$25
( 8)
9
3
( 4)
( 2)
( 6)
( 12)
5
$168
83. The net cash provided by (used by) investing activities for the year was:
A) ($88)
B) $14
C) ($74)
D) $74
Solution:
Proceeds from sale of equipment...............
Purchase of plant and equipment...............
$14
( 88) *
($74)
*$619 ($540 $9) = $619 $531 = $88
15-64

84. The net cash provided by (used by) financing activities for the year was:
A) $1
B) ($40)
C) ($50)
D) ($89)
Solution:
Decrease in bonds payable........................
Increase in common stock.........................
Net cash used by financing activities........
($50)
1
( 40)
($89)
15-65

The most recent balance sheet and income statement of Cowger Corporation appear below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 28
22
60
528
( 366)
$272
$ 27
25
54
500
( 346)
$260

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 29
18
10
98
27
35
55
$272
$ 36
16
9
130
25
30
14
$260
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$677
431
246
175
71
21
$ 50
Cash dividends were $9.

A) $71
B) $65
C) $35
D) $15
15-66

Solution:
Net income...............................................................
Depreciation charges............................................
Decrease in accounts receivable..........................
Increase in inventory............................................
Decrease in accounts payable..............................
Increase in wages payable....................................
Increase in income taxes payable.........................
Increase in deferred income taxes payable..........
Net cash provided by operating activities...............
$50
$20
3
( 6)
( 7)
2
1
2
15
$65
A) ($8)
B) $8
C) $28
D) ($28)
Solution:
($28
)
($28
)
A) ($36)
B) ($32)
C) $5
D) ($9)
15-67

Solution:
($32)
5
( 9)
($36)

Karner Corporation's most recent balance sheet appears below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 33
74
63
439
( 199)
$410
$ 28
64
56
380
( 167)
$361

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 41
24
8
64
18
61
194
$410
$ 48
25
9
60
22
60
137
$361
Net income for the year was $76. Cash dividends were $19.
15-68

A) $78
B) $109
C) $2
D) $74
Solution:
Net income................................................................
Increase in accounts receivable.............................
Increase in inventory.............................................
Decrease in accounts payable...............................
Decrease in wages payable...................................
Decrease in income taxes payable........................
Decrease in deferred income taxes payable..........
$76
$32
( 10)
( 7)
( 7)
( 1)
( 1)
( 4)
2
$78
A) ($27)
B) $27
C) $59
D) ($59)
Solution:
($59
)
($59
)
15-69

A) ($14)
B) $4
C) ($19)
D) $1
Solution:
Increase in bonds payable........................
15-70
$ 4
1
( 19)
($14)

Financial statements of Casagrande Corporation follow:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 40
73
33
529
( 296)
$379
$ 38
66
35
460
( 267)
$332

Long-term debt...........................................
Common stock...........................................
$ 31
112
82
154
$379
$ 26
150
80
76
$332
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$941
598
343
193
150
45
$105

A) $134
B) $29
C) $76
D) $150
15-71

Solution:
Net income................................................................
Increase in accounts receivable.............................
$105
$29
( 7)
2
5
29
$134
A) $40
B) ($40)
C) ($69)
D) $69
Solution:
($69
)
($69
)
A) ($63)
B) ($27)
C) ($38)
D) $2
Solution:
Decrease in long-term debt......................
15-72
($38)
2
( 27)

($63)
15-73

Kozusko Corporation's most recent comparative balance sheet appears below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 33
74
51
639
( 418)
$379
$ 28
66
52
550
( 349)
$347

Long-term debt...........................................
Common stock...........................................
$ 48
48
51
232
$379
$ 40
50
50
207
$347
A) $44
B) ($39)
C) $101
D) $70
15-74

Solution:
Net income.............................................................
$31
$69
( 8)
1
8
70
$101
A) $89
B) ($89)
C) $20
D) ($20)
Solution:
($89
)
($89
)
A) ($2)
B) $1
C) ($6)
D) ($7)
Solution:
Decrease in long-term debt......................
($2)
1
( 6)
15-75

15-76
($7)

(Appendix) Van Wyck Company's comparative balance sheet and income statement for last
year appear below:
Ending
Beginning
Balance
Balance
Cash............................................................
$ 63,000
$ 30,000
91,000
68,000
Inventory....................................................
26,000
44,000
Prepaid expenses........................................
13,000
19,000
Long-term investments..............................
260,000
190,000
460,000
460,000
Accumulated depreciation......................... ( 298,000) ( 260,000)
Total assets.................................................
$615,000
$551,000
Accrued liabilities......................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
Total liabilities and owners equity............
$ 35,000
25,000
12,000
110,000
36,000
100,000
297,000
$615,000
$ 57,000
17,000
19,000
150,000
19,000
70,000
219,000
$551,000
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$900,00
0
490,000
410,000
270,000
140,000
42,000
$ 98,000
The company declared and paid $20,000 in cash dividends during the year. The company uses
the direct method to determine the net cash provided by operating activities.
15-77

97. On the statement of cash flows, the sales revenue adjusted to a cash basis would be:
A) $900,000
B) $877,000
C) $923,000
D) $859,000
Solution:
Sales revenue (as reported)........................
Increase in accounts receivable..............
Sales revenue (adjusted)............................
$900,000
( 23,000)
$877,000
98. On the statement of cash flows, the cost of goods sold adjusted to a cash basis would
be:
A) $494,000
B) $490,000
C) $486,000
D) $512,000
Solution:
Cost of goods sold (as reported)...............
Decrease in inventory............................
Decrease in accounts payable................
Cost of goods sold (adjusted)....................
15-78
$490,000
(
18,000)
22,000
$494,000

99. On the statement of cash flows, the operating expenses adjusted to a cash basis would
be:
A) $270,000
B) $218,000
C) $256,000
D) $322,000
Solution:
Operating expenses (as reported)..............
Decrease in prepaid expenses................
Increase in accrued liabilities................
Periods depreciation charges...............
Total..........................................................
$270,000
(
6,000)
(
8,000)
( 38,000)
$218,000
100. On the statement of cash flows, the income tax expense adjusted to a cash basis would
be:
A) $42,000
B) $36,000
C) $49,000
D) $32,000
Solution:
Income tax expense (as reported).............
Decrease in accrued taxes payable........
Decrease in deferred income taxes........
Income tax expense (adjusted)..................
$42,000
7,000
( 17,000)
$32,000
15-79

(Appendix) The changes in Tencate Company's balance sheet account balances for last year
appear below:
Increases
(Decreases)
Debit balances:
Cash............................................
$8,000
Accounts receivable....................
$(6,000)
Inventory.....................................
$2,000
Prepaid expenses.........................
$(13,000)
Long-term investments...............
$70,000
Plant and equipment....................
$55,000
Credit balances:
Accumulated depreciation..........
Accounts payable........................
Accrued liabilities.......................
Taxes payable.............................
Bonds payable.............................
Deferred taxes.............................
Common stock............................
Retained earnings........................
$67,000
$(14,000)
$2,000
$7,000
$(60,000)
$(7,000)
$20,000
$101,000
The companys income statement for the year appears below:

Sales.....................................................
Cost of goods sold................................
Gross margin........................................
Selling and administrative expense......
Net operating income...........................
Income taxes........................................
Net income...........................................
$970,00
0
530,000
440,000
290,000
150,000
45,00
0
$105,00
0
The company declared and paid $4,000 in cash dividends during the year. The company uses
the direct method to determine the net cash provided by operating activities.
15-80

101. On the statement of cash flows, the sales revenue adjusted to a cash basis would be:
A) $978,000
B) $976,000
C) $970,000
D) $964,000
Solution:
Sales revenue (as reported)........................
Decrease in accounts receivable.............
Sales revenue (adjusted)............................
$970,000
6,000
$976,000
102. On the statement of cash flows, the cost of goods sold adjusted to a cash basis would
be:
A) $514,000
B) $544,000
C) $546,000
D) $530,000
Solution:
Cost of goods sold (as reported)...............
Increase in inventory.............................
Decrease in accounts payable................
Cost of goods sold (adjusted)....................
$530,000
2,000
14,000
$546,000
15-81

103. On the statement of cash flows, the operating expenses adjusted to a cash basis would
be:
A) $290,000
B) $372,000
C) $275,000
D) $208,000
Solution:
Operating expenses (as reported)..............
Decrease in prepaid expenses................
Increase in accrued liabilities................
Periods depreciation charges...............
Total..........................................................
$290,000
( 13,000)
(
2,000)
( 67,000)
$208,000
104. On the statement of cash flows, the income tax expense adjusted to a cash basis would
be:
A) $40,000
B) $42,000
C) $45,000
D) $46,000
Solution:
Income tax expense (as reported).............
Increase in accrued taxes payable.........
Decrease in deferred income taxes........
Income tax expense (adjusted)..................
15-82
$45,000
(
7,000)
7,000
$45,000

(Appendix) Cliburn Corporation's balance sheet and income statement appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 27
30
64
564
( 217)
$468
$ 27
28
59
500
( 208)
$406

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 50
27
20
184
21
83
83
$468
$ 43
24
22
180
24
80
33
$406
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$69
0
456
234
150
84
9
93
28
$ 65
Cash dividends were $15. The company sold equipment for $11 that was originally purchased
for $3 and that had accumulated depreciation of $1.
15-83

A) $73
B) $84
C) $64
D) $79
Solution:
Total.......................................................................
Total.......................................................................
Increase in wages payable..................................
Periods depreciation charges.............................
Total.......................................................................
Income tax expense................................................
Decrease in accrued taxes payable.....................
Decrease in deferred income taxes.....................
Total.......................................................................
15-84
$690
(
2)
$688
456
5
7)
454
150
(
(
3)
10)
137
28
2
3
33
$ 64

A) ($56)
B) $11
C) ($67)
D) $56
Solution:
Additions to plant and equipment............
Proceeds from sale of equipment.............
($67)
11
($56)
*($564 + $3) $500

A) $3
B) $4
C) ($15)
D) ($8)
Solution:
Increase in bonds payable..........................
$ 4
3
( 15)
($ 8)
15-85

(Appendix) The most recent balance sheet and income statement of Spadafino Corporation
appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 48
61
59
398
( 160)
$406
$ 40
60
70
350
( 146)
$374

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 64
22
16
176
16
45
67
$406
$ 65
19
15
210
15
40
10
$374
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$72
2
465
257
146
111
33
$ 78
15-86

A) $28
B) $111
C) $106
D) $50
Solution:
Sales revenue (as reported)...................................
Increase in accounts receivable.........................
Total......................................................................
Cost of goods sold (as reported)...........................
Decrease in inventory.......................................
Decrease in accounts payable...........................
Total......................................................................
Increase in wages payable.................................
Periods depreciation charges...........................
Total......................................................................
Income tax expense..............................................
Increase in accrued taxes payable.....................
Increase in deferred income taxes.....................
Total......................................................................
Net cash provided by operating activities............
$722
(
1)
$721
465
11)
1
455
146
(
(
3)
14)
129
33
(
(
1)
1)
31
$106
15-87

A) ($34)
B) $48
C) ($48)
D) $34
Solution:
($48
)
($48
)
A) ($50)
B) ($34)
C) $5
D) ($21)
Solution:
15-88
($34)
5
( 21)
($50)

(Appendix) Karpinski Corporation's most recent comparative balance sheet and income
statement appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 32
55
57
574
( 293)
$425
$ 25
46
59
450
( 251)
$329

Long-term debt...........................................
Common stock...........................................
$ 55
15
74
281
$425
$ 56
20
70
183
$329
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$1,087
724
363
179
184
55
$ 129

A) $34
B) $184
C) $95
D) $163
15-89

Solution:
Sales revenue (as reported)...................................
Increase in accounts receivable.........................
Total......................................................................
Cost of goods sold (as reported)...........................
Decrease in inventory.......................................
Decrease in accounts payable...........................
Total......................................................................
Periods depreciation charges...........................
Total......................................................................
$1,087
(
9)
$1,078
724
2)
1
723
179
42)
137
Income tax expense..............................................
55
Net cash provided by operating activities............
$ 163
A) $82
B) ($124)
C) ($82)
D) $124
Solution:
15-90
($124
)
($124
)

A) ($32)
B) ($31)
C) $4
D) ($5)
Solution:
($ 5)
4
( 31)
($32)
15-91

Essay Questions
114. Manila Corporation's comparative balance sheet appears below:
Ending
Balance
Assets:
Current assets:
Cash and cash equivalents......................
Accounts receivable................................
Inventory.................................................
Total current assets....................................
Property, plant, and equipment..................
Less accumulated depreciation...............
Net property, plant, and equipment............
Total assets.................................................
Accounts payable....................................
Wages and salaries payable....................
Income taxes payable..............................
Notes payable..........................................
Total current liabilities...............................
Long-term debt...........................................
Deferred income taxes...............................
Total liabilities...........................................
Common stock........................................
Retained earnings....................................
Total stockholders equity..........................
Beginning
Balance
$ 42,000
22,000
77,000
141,000
340,000
218,000
122,000
$263,000
$ 26,000
26,000
75,000
127,000
315,000
187,000
128,000
$255,000
$ 13,000
32,000
28,000
16,000
89,000
77,000
28,000
194,000
$ 14,000
33,000
30,000
15,000
92,000
78,000
25,000
195,000
28,000
41,000
69,000
$263,000
24,000
36,000
60,000
$255,000
$2,000.
Required:
Classify the change for the year in each balance sheet account as a source, use, or
neither a source nor a use. (Do this only for the individual accounts-not for totals or
subtotals.)
15-92

Ans:
Cash and cash equivalents...........
Accounts receivable.....................
Inventory......................................
Property, plant, and equipment....
Less accumulated depreciation....
Accounts payable.........................
Wages and salaries payable.........
Income taxes payable...................
Notes payable...............................
Long-term debt.............................
Deferred income taxes.................
Common stock.............................
Retained earnings.........................
Ending
Beginning
Balance
Balance
Change
42,000
26,000 +16,000 Neither
22,000
26,000
-4,000 Source
77,000
75,000 +2,000
Use
340,000
315,000 +25,000
Use
218,000
187,000 +31,000 Source
13,000
32,000
28,000
16,000
77,000
28,000
28,000
41,000
14,000
33,000
30,000
15,000
78,000
25,000
24,000
36,000
-1,000
-1,000
-2,000
+1,000
-1,000
+3,000
+4,000
+5,000
Use
Use
Use
Source
Use
Source
Source
*
*The change in retained earnings consists of two elements: net income (loss) and
dividends. The net income of $7,000 is classified as a source and the dividends of
$2,000 are classified as a use.
AACSB: Analytic AICPA BB: Critical Thinking
LO: 1 Level: Easy
AICPA FN: Reporting
15-93

115. The ending and beginning balances of Diogo Corporation's balance sheet accounts for
the most recent year are listed below:
Ending
Beginning
Balance
Balance
Assets & Contra-Assets:
$40,000
$28,000
$17,000
$14,000
Inventory....................................................
$60,000
$62,000
Property and buildings............................... $406,000
$383,000
Accumulated depreciation......................... $234,000
$205,000
Wages and salaries payable.......................
Income taxes payable.................................
Notes payable.............................................
Long-term debt...........................................
Deferred income taxes...............................
Common stock...........................................
$15,000
$35,000
$22,000
$28,000
$81,000
$27,000
$39,000
$42,000
$12,000
$38,000
$18,000
$24,000
$85,000
$24,000
$36,000
$45,000
$4,000.
Required:
Classify the change for the year in each balance sheet account as a source, use, or
neither a source nor a use.
15-94

Ans:
Cash and cash equivalents.....
Accounts receivable...............
Inventory................................
Property and buildings...........
Accumulated depreciation.....
Accounts payable...................
Wages and salaries payable. . .
Income taxes payable.............
Notes payable.........................
Long-term debt.......................
Deferred income taxes...........
Common stock.......................
Retained earnings...................
Ending
Beginning
Balance
Balance
Change
40,000
28,000 +12,000 Neither
17,000
14,000 +3,000
Use
60,000
62,000
-2,000 Source
406,000
383,000 +23,000
Use
234,000
205,000 +29,000 Source
15,000
35,000
22,000
28,000
81,000
27,000
39,000
42,000
12,000
38,000
18,000
24,000
85,000
24,000
36,000
45,000
+3,000
-3,000
+4,000
+4,000
-4,000
+3,000
+3,000
-3,000
Source
Use
Source
Source
Use
Source
Source
*
*The change in retained earnings consists of two elements: net income (loss) and
dividends. The net income of $1,000 is classified as a source and the dividends of
$4,000 are classified as a use.
LO: 1 Level: Easy
AICPA FN: Reporting
15-95

116. Burch Company's net income last year was $119,000. Changes in the company's
balance sheet accounts for the year appear below:
Increases
(Decreases)
Debit balances:
Cash......................................
Accounts receivable..............
Inventory...............................
Prepaid expenses...................
Long-term investments.........
Plant and equipment..............
$29,000
$(21,000)
$12,000
$(8,000)
$80,000
$10,000
Credit balances:
Accumulated depreciation....
Accounts payable..................
Accrued liabilities.................
Taxes payable.......................
Bonds payable.......................
Deferred taxes.......................
Common stock......................
Retained earnings..................
$26,000
$23,000
$14,000
$(9,000)
$(50,000)
$4,000
$20,000
$74,000
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
15-96

Ans:
a. Operating activities
Net income....................................................
Adjustments:
Depreciation charges..................................
Decrease in accounts receivable................
Increase in inventory..................................
Decrease in prepaid expenses....................
Increase in accounts payable......................
Increase in accrued liabilities.....................
Decrease in taxes payable..........................
Increase in deferred taxes..........................
Net cash provided by operating activities.....
$119,000
$26,000
21,000
(12,000)
8,000
23,000
14,000
(9,000)
4,000
75,000
$194,000
b. Investing activities:
Increase in long-term investments................
Increase in plant & equipment......................
Net cash used for investing activities............
$(80,000
)
(10,000)
$(90,000
)
c. Financing activities:
Decrease in bonds payable............................
Increase in common stock.............................
Cash dividends..............................................
Net cash used in financing activities.............
LO: 2,3 Level: Medium
$(50,000
)
20,000
(45,000)
$(75,000
)
AICPA FN: Measurement
15-97

117. Biven Corporation's balance sheet and income statement appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 35
54
67
580
( 316)
$420
$ 30
49
58
530
( 313)
$354

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 51
26
11
77
25
33
197
$420
$ 57
24
10
90
24
30
119
$354
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$620
381
239
103
136
20
156
47
$109
purchased for $14 and that had accumulated depreciation of $14.
Required:
Prepare a statement of cash flows for the year using the indirect method.
15-98

Ans:
Net income......................................................................
Depreciation charges....................................................
Increase in accounts receivable....................................
Increase in inventory....................................................
Decrease in accounts payable......................................
Increase in wages payable............................................
Increase in taxes payable.............................................
Increase in deferred taxes............................................
Gain on sale of plant and equipment...........................
Net cash provided by operations.....................................
Investing activities:
Proceeds from sale of plant and equipment.................
Increase in plant and equipment..................................
Net cash used for investing activities..............................
Financing activities:
Decrease in bonds payable...........................................
Increase in common stock............................................
Cash dividends.............................................................
Net cash used by financing activities..............................
Net increase (decrease) in cash and cash equivalents.....
Cash balance, beginning.................................................
Cash balance, end............................................................
$109
17
(5)
(9)
(6)
2
1
1
(20)
90
20
(64)
(44)
(13)
3
(31)
(41)
5
30
$35
15-99

118. Danford Corporation's balance sheet and income statement appear below:
Ending
Balance
Beginning
Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 27
43
40
467
( 264)
$313
$ 25
48
49
410
( 221)
$311

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 49
14
25
100
16
74
35
$313
$ 61
16
22
120
19
70
3
$311
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$546
363
183
134
49
8
57
17
$ 40
Required:
Determine the net cash provided by (used by) operating activities for the year using
the indirect method.
15-100

Ans:
Net income.......................................................................
Depreciation charges....................................................
Decrease in accounts receivable...................................
Decrease in inventory...................................................
Decrease in accounts payable.......................................
Decrease in wages payable...........................................
Increase in taxes payable..............................................
Decrease in deferred taxes............................................
Gain on sale of plant and equipment............................
Net cash provided by operations.....................................
$40
48
5
9
(12)
(2)
3
(3)
( 8)
$80
AICPA FN: Reporting
15-101

119. NOTES TO THE INSTRUCTOR:
* The problem requirement does not indicate whether the indirect or direct method
must be used to determine the net cash provided by operating activities. You can, if
you choose, specify that either (or even both) methods be used. The solution contains
solutions for both methods.
* Due to the length of the problem, you may want to eliminate one or more of the
requirements.
--------------------------------------------------------------------Dano Company's comparative balance sheet and income statement for last year appear
below:
Ending
Beginning
Balance
Balance
Cash............................................................
$ 41,000
$ 20,000
43,000
57,000
Inventory....................................................
66,000
53,000
14,000
11,000
310,000
240,000
580,000
580,000
Total assets.................................................
$685,000
$621,000
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 45,000
14,000
32,000
70,000
29,000
90,000
405,000
$685,000
$ 27,000
19,000
15,000
110,000
25,000
70,000
355,000
$621,000
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
15-102
$540,00
0
220,000
320,000
200,000
120,000
36,000
$ 84,000

The company declared and paid $34,000 in cash dividends during the year.
Required:
a. Construct in good form the operating activities section of the company's statement
b. Construct in good form the investing activities section of the company's statement
c. Construct in good form the financing activities section of the company's statement
Ans:
a. Operating activities
INDIRECT METHOD
Net income.....................................................
Adjustments:
Depreciation charges...................................
Decrease in accounts receivable.................
Increase in inventory...................................
Increase in prepaid expenses.......................
Increase in accounts payable.......................
Decrease in accrued liabilities....................
Increase in taxes payable............................
$29,000
14,000
(13,000)
(3,000)
18,000
(5,000)
17,000
Increase in deferred taxes...........................
4,000
Net cash provided by operating activities......
$84,000
61,00
0
$145,00
0
15-103

DIRECT METHOD
Sales...............................................................
$540,00
0
Decrease in accounts receivable.................
+14,000
Cost of goods sold..........................................

Increase in inventory...................................
Increase in accounts payable.......................
220,000
+13,000
-18,000
Selling and administrative expense................

Increase in prepaid expenses.......................
Decrease in accrued liabilities....................
Depreciation charges...................................
200,000
Income tax expense........................................

Increase in taxes payable............................
Increase in deferred taxes...........................
36,000
+3,000
+5,000
-29,000
-17,000
-4,000
$554,00
0
215,000
179,000
15,000
$145,00
0
Net cash provided by operating activities......

b. Investing activities:
$(70,000
)
Increase in long-term investments.............
$(70,000
)
Net cash used for investing activities.........

c. Financing activities:
Cash dividends...........................................
$(40,000
)
20,000
( 34,000)

LO: 2,3 Level: Hard
15-104
$(54,000
)

120. Sary Corporation's balance sheet and income statement appear below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 27
57
62
685
( 404)
$427
$ 26
53
55
580
( 355)
$359

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 37
21
15
171
18
32
133
$427
$ 46
25
18
170
22
30
48
$359
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$89
5
557
338
177
161
4
8
$11
3

Required:
Prepare a statement of cash flows in good form using the indirect method.
15-105

Ans:
Net income....................................................................
Depreciation charges..................................................
Increase in accounts receivable..................................
Increase in inventory..................................................
Decrease in accounts payable....................................
Decrease in wages payable........................................
Decrease in taxes payable..........................................
Decrease in deferred taxes.........................................
Net cash provided by operations...................................
Increase in plant and equipment................................
Net cash used for investing activities............................
Increase in bonds payable..........................................
Increase in common stock..........................................
Cash dividends...........................................................
Net cash used by financing activities............................
Net change in cash and cash equivalents......................
Cash balance, beginning...............................................
Cash balance, end..........................................................
15-106
$113
49
(4)
(7)
(9)
(4)
(3)
( 4)
131
( 105)
( 105)
1
2
( 28)
( 25)
1
26
$ 27

121. Boscia Corporation's balance sheet appears below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 44
82
71
537
( 240)
$494
$ 38
69
69
500
( 201)
$475

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 70
24
19
226
19
22
114
$494
$ 60
21
22
300
18
20
34
$475
The net income for the year was $108. Cash dividends were $28.
Required:
15-107

Ans:
Net income...................................................................
Depreciation charges................................................
Increase in accounts receivable................................
Increase in inventory................................................
Increase in accounts payable....................................
Increase in wages payable........................................
Decrease in taxes payable.........................................
Increase in deferred taxes.........................................
Net cash provided by operations..................................
Increase in plant and equipment...............................
Net cash used for investing activities..........................
Decrease in bonds payable.......................................
Increase in common stock........................................
Cash dividends..........................................................
Net cash used by financing activities...........................
Net change in cash and cash equivalents.....................
Cash balance, beginning..............................................
Cash balance, end........................................................
LO: 2,3 Level: Easy
15-108
$108
39
(13)
(2)
10
3
(3)
1
143
( 37)
( 37)
(74)
2
( 28)
( 100)
6
38
$ 44

122. Fryberger Corporation's balance sheet and income statement appear below:
Ending
Balance
Beginning
Balance
Assets:
Cash and cash equivalents.............................
Accounts receivable.......................................
Inventory........................................................
Plant and equipment.......................................
Accumulated depreciation.............................
Total assets.....................................................
$ 36
46
53
472
( 218)
$389
$ 33
41
59
460
( 214)
$379

Accounts payable...........................................
Long-term debt...............................................
Common stock...............................................
Retained earnings...........................................
Total liabilities and stockholders equity.......
$ 52
289
84
( 36)
$389
$ 62
330
80
( 93)
$379
Income Statement
Sales...............................................................
Cost of goods sold..........................................
Gross margin..................................................
Selling and administrative expense................
Net operating income.....................................
Income taxes..................................................
Net income.....................................................
$73
7
454
283
173
110
33
$ 77

Required:
15-109

Ans:
Net income................................................................
Depreciation charges..............................................
Increase in accounts receivable..............................
Decrease in accounts payable................................
Net cash provided by operations...............................
Increase in plant and equipment............................
Net cash used for investing activities........................
Decrease in long-term debt....................................
Increase in common stock......................................
Cash dividends.......................................................
Net cash used by financing activities........................
Net cash flow............................................................
Cash balance, beginning...........................................
Cash balance, end......................................................
15-110
$77
4
(5)
6
( 10)
72
( 12)
( 12)
( 41)
4
( 20)
( 57)
3
33
$36

123. Solmonson Corporation's balance sheet appears below:
Ending
Balance
Beginning
Balance
Assets:
Cash and cash equivalents.............................
Accounts receivable.......................................
Inventory........................................................
Plant and equipment.......................................
Accumulated depreciation.............................
Total assets.....................................................
$ 29
21
49
524
( 283)
$340
$ 27
25
56
420
( 251)
$277

Accounts payable...........................................
Long-term debt...............................................
Common stock...............................................
Retained earnings...........................................
Total liabilities and stockholders equity.......
$ 28
84
51
177
$340
$ 34
100
50
93
$277
Required:
15-111

Ans:
Net income.....................................................................
Depreciation charges..................................................
Decrease in accounts receivable.................................
Decrease in inventory.................................................
Decrease in accounts payable.....................................
Net cash provided by operations...................................
Increase in plant and equipment.................................
Net cash used for investing activities............................
Decrease in long-term debt.........................................
Increase in common stock..........................................
Cash dividends...........................................................
Net cash used by financing activities............................
Net cash flow.................................................................
Cash balance, beginning................................................
Cash balance, end..........................................................
LO: 2,3 Level: Easy
15-112
$105
32
4
7
( 6)
142
( 104)
( 104)
(16)
1
( 21)
( 36)
2
27
$ 29

124. Carman Company's comparative balance sheet and income statement for last year
appear below:
Ending
Beginning
Balance
Balance
Cash............................................................
$ 70,000
$ 38,000
76,000
52,000
Inventory....................................................
24,000
42,000
8,000
16,000
260,000
210,000
530,000
510,000
Total assets.................................................
$570,000
$518,000
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 32,000
34,000
4,000
160,000
38,000
150,000
152,000
$570,000
$ 54,000
25,000
11,000
200,000
25,000
120,000
83,000
$518,000
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$610,00
0
310,000
300,000
190,000
110,000
33,000
$ 77,000
The company declared and paid $8,000 in cash dividends during the year.
Required:
Construct in good form the operating activities section of the company's statement of
cash flows for the year using the direct method.
15-113

Ans:
Sales.................................................................
$610,00
0
Increase in accounts receivable........................
-24,000
Cost of goods sold

Decrease in inventory
Decrease in accounts payable
310,000
Selling and administrative expense

Decrease in prepaid expenses
Increase in accrued liabilities
Depreciation charges
Income tax expense
Decrease in taxes payable
Increase in deferred taxes
-18,000
+22,000
314,000
190,000
-8,000
-9,000
-48,000
125,000
33,000
+7,000
-13,000
Net cash provided by operating activities

Appendix: 15 LO: 2,4 Level: Hard
15-114
$586,00
0
27,000
$120,00
0

125. Boehning Corporation's balance sheet and income statement appear below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 25
53
50
532
( 285)
$375
$ 22
48
56
430
( 261)
$295

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 39
20
10
71
15
82
138
$375
$ 38
24
9
100
19
80
25
$295
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$954
606
348
162
186
10
196
59
$137
Required:
Using the direct method, determine the net cash provided by (used by) operating
activities.
15-115

Ans:
Sales..............................................................
Increase in accounts receivable.....................
$954
( 5)
$949
Cost of sales..................................................
Decrease in inventory...................................
Increase in accounts payable.........................
606
(6)
( 1)
599
Selling and administrative expense...............

Decrease in wages payable...........................
Depreciation charges.....................................
162
4
( 28)
138
Income taxes.................................................
Increase in taxes payable..............................
Decrease in deferred taxes............................
59
(1)
4
62

Appendix: 15 LO: 2,4 Level: Medium
15-116
$150

126. May Corporation's balance sheet and income statement appear below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 24
24
32
598
( 390)
$288
$ 22
25
37
580
( 366)
$298

Wages payable...........................................
Taxes payable.............................................
Bonds payable............................................
Deferred taxes............................................
Common stock...........................................
$ 38
23
12
87
16
63
49
$288
$ 45
25
10
110
17
60
31
$298
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$606
396
210
174
36
11
$ 25

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.
15-117

Ans:
Sales.................................................................
$606
1
$607
Cost of goods sold............................................

Decrease in inventory......................................
Decrease in accounts payable..........................
396
(5)
7
398
Selling and administrative expense..................

Decrease in wages payable..............................
Depreciation charges........................................
174
2
( 24)
152
Income taxes....................................................
Increase in taxes payable.................................
Decrease in deferred taxes...............................
11
(2)
1
10
Net cash provided by operating activities........

15-118
$ 47

127. Heckler Corporation's balance sheet and income statement appear below:
Ending Beginning
Balance Balance
Assets:
Inventory....................................................
Total assets.................................................
$ 43
25
67
392
( 237)
$290
$ 35
28
66
360
( 198)
$291

Long-term debt...........................................
Common stock...........................................
$ 31
198
74
( 13)
$290
$ 29
240
70
( 48)
$291
Income Statement
Sales...........................................................
Gross margin..............................................
Income taxes..............................................
Net income.................................................
$618
398
220
156
64
19
$ 45

Required:
Prepare the operating activities section of the statement of cash flows in good form
using the direct method.
15-119

Ans:
Sales..............................................................
$61
8
Decrease in accounts receivable...................
$62
1
Cost of goods sold.........................................

Increase in inventory.....................................
Increase in accounts payable.........................
398
1
( 2)
397
Selling and administrative expense...............

Depreciation charges.....................................
156
( 39)
117
Income taxes.................................................
19
$ 88

LO: 2,4 Level: Easy
15-120
15-121

Chapter 15

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Chapter 15

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Chapter 15 How Well Am I Doing?

--Statement of Cash Flows

AICPA BB: Critical Thinking

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Depreciation Loss on Sale

Ans: A AACSB: Analytic AICPA BB: Critical Thinking

Increase in Taxes Payable Increase in Dividends Payable

Ans: D AACSB: Analytic AICPA BB: Critical Thinking

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Depreciation Expense Gain on Sale of Equipment

Ans: D AACSB: Analytic AICPA BB: Critical Thinking

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

AICPA BB: Critical Thinking

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Ending Balance Beginning Balance

Which of the following classifications of changes in balance sheet accounts as sources

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Ending Balance Beginning Balance

Which of the following classifications of changes in balance sheet accounts as sources

Ending Balance Beginning Balance

Which of the following classifications of changes in balance sheet accounts as sources

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

*$443 + $15 $440 = $18

Liabilities and stockholders equity:

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition

Chapter 15 How Well Am I Doing?--Statement of Cash Flows

Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition