Name: accounting problems and mcqs will all solutions
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Under
the direct method of determining net cash provided by operating activities on
the statement of cash flows, the net income figure is adjusted for changes in
current assets and liabilities.

	True
	False

Bennett Company reported sales on its income statement last year
of $420,000. On the company’s statement of cash flows, sales adjusted to a
cash basis were $412,000. (The company uses the direct method to determine
the net cash provided by operating activities.) Bennett Company reported the following
account balances on its comparative balance sheet:

	Ending Balance	Beginning Balance
Accounts receivable	$45,000	?
Prepaid expenses	$38,000	$35,000
Inventory	$45,000	$50,000

Based
on this information, the beginning accounts receivable balance was:

	$37,000
	$42,000
	$53,000
	$39,000

Last year Lawsby Company reported sales of $330,000 on its
income statement. During the year, accounts receivable increased by $34,000
and accounts payable increased by $39,000. 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:

	$325,000
	$335,000
	$296,000
	$291,000

If
accounts receivable increase during a period, then the amount of cash collected
from customers will be greater than the amount of sales reported on the income
statement for the period.

	True
	False

Under
the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in income taxes payable would be
subtracted from income tax expense to convert income tax expense to a cash
basis.

	True
	False

Kelln Corporation’s
most recent comparative balance sheet and income statement appear below:

Kelln Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$37	$35
Accounts receivable	85	75
Inventory	64	77
Property, plant and equipment	898	760
Less accumulated depreciation	331	285
Total assets	$753	$662
Liabilities and stockholders’ equity:
Accounts payable	$84	$50
Bonds payable	463	500
Common stock	30	10
Retained earnings	176	102
Total liabilities and stockholders’ equity	$753	$662

Income Statement
Sales	$750
Cost of goods sold	450
Gross margin	300
Selling and administrative expense	161
Net operating income	139
Income taxes	49
Net income	$90

The company paid a
cash dividend and it did not dispose of any property, plant, and equipment.
The company did not issue any bonds payable or repurchase any of its own
common stock. The company uses the direct method to determine the net cash
provided by operating activities.

The
net cash provided by (used in) operating activities for the year was:

	$83
	$173
	$7
	$139

Free
cash flow is net cash provided by operating activities less dividends.

	True
	False

Under
the direct method of determining the net cash provided by operating activities
on the statement of cash flows, an increase in accounts payable would be added
to cost of goods sold to convert cost of goods sold to a cash basis.

	True
	False

Last year Burford Company’s cash account decreased by $29,000.
Net cash used in investing activities was $8,400. Net cash provided by
financing activities was $26,500. On the statement of cash flows, the net
cash flow provided by (used in) operating activities was:

	$(47,100)
	$(29,000)
	$(10,900)
	$18,100

The
change in the cash balance must equal the changes in all other balance sheet
accounts besides cash.

	True
	False

A newly
formed company with enormous growth prospects would be expected to have
negative free cash flow during its start-up phase.

	True
	False

A
company can increase its net cash flow by increasing the depreciation expense
it records during the period.

	True
	False

Negative
free cash flow suggests that the company did not generate enough cash flow from
its operating activities to fund its capital expenditures and dividend
payments.

	True
	False

A gain
on the sale of equipment would be included as part of a company’s financing
activities on the statement of cash flows.

	True
	False

Last year Cumber Company reported a cost of goods sold of
$74,000. Inventories decreased by $16,000 during the year, and accounts
payable increased by $14,000. 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:

	$60,000
	$104,000
	$44,000
	$58,000

The changes in Tener
Company’s balance sheet account balances for last year appear below:

	Increases (Decreases)
Asset and Contra-Asset Accounts:
Cash	$(8,000)
Accounts receivable	$(5,000)
Inventory	$0
Prepaid expenses	$12,000
Long-term investments	$42,000
Property, plant and equipment	$17,000
Accumulated depreciation	$57,000
Liability and Equity Accounts:
Accounts payable	$5,000
Accrued liabilities	$(15,000)
Income taxes payable	$16,000
Bonds payable	$(20,000)
Common stock	$13,000
Retained earnings	$13,550

The company’s income
statement for the year appears below:

Income Statement
Sales	$770,000
Cost of goods sold	460,000
Gross margin	310,000
Selling and administrative expenses	263,000
Net operating income	47,000
Income taxes	16,450
Net income	$30,550

The company declared and paid $17,000 in cash dividends during
the year. It did not dispose of any property, plant, and equipment during the
year. 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:

	$465,000
	$450,000
	$460,000
	$455,000

Kelln
Corporation’s most recent comparative balance sheet and income statement
appear below:

Kelln Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$41	$39
Accounts receivable	95	79
Inventory	72	81
Property, plant and equipment	958	800
Less accumulated depreciation	339	289
Total assets	$827	$710
Liabilities and stockholders’ equity:
Accounts payable	$97	$54
Bonds payable	499	540
Common stock	69	45
Retained earnings	162	71
Total liabilities and stockholders’ equity	$827	$710

Income Statement
Sales	$790
Cost of goods sold	470
Gross margin	320
Selling and administrative expenses	155
Net operating income	165
Income taxes	58
Net income	$107

The company paid a
cash dividend and it did not dispose of any property, plant, and equipment.
The company did not issue any bonds payable or repurchase any of its own
common stock.

The
net cash provided by (used in) investing activities for the year was:

	$108
	$158
	$(158)
	$(108)

A
company can have a net loss and still generate a positive net cash provided
by operating activities in its statement of cash flows.

	True
	False

Cridman Company’s selling and administrative expenses for last
year totaled $310,000. During the year the company’s prepaid expense
account balance decreased by $27,000 and accrued liabilities increased by
$30,000. Depreciation for the year was $31,000. 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:

	$398,000
	$336,000
	$284,000
	$222,000

Under
the indirect method of determining the net cash provided by operating
activities on the statement of cash flows, a decrease in accounts receivable
is added to net income.

	True
	False

The
investing and financing sections of the statement of cash flows record net
cash flows rather than gross cash flows.

	True
	False

Free
cash flow increases when a company issues common stock for cash.

	True
	False

Kelln
Corporation’s most recent comparative balance sheet and income statement
appear below:

Kelln Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$41	$39
Accounts receivable	95	79
Inventory	72	81
Property, plant and equipment	958	800
Less accumulated depreciation	339	289
Total assets	$827	$710
Liabilities and stockholders’ equity:
Accounts payable	$97	$54
Bonds payable	499	540
Common stock	69	45
Retained earnings	162	71
Total liabilities and stockholders’ equity	$827	$710

Income Statement
Sales	$790
Cost of goods sold	470
Gross margin	320
Selling and administrative expense	155
Net operating income	165
Income taxes	58
Net income	$107

The company paid a
cash dividend and it did not dispose of any property, plant, and equipment.
The company did not issue any bonds payable or repurchase any of its own
common stock.

The
net cash provided by (used in) financing activities for the year was:

	$(16)
	$(41)
	$(33)
	$24

Baldock
Corporation’s balance sheet and income statement appear below:

Baldock Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Asset:
Cash and cash equivalents	$43	$38
Accounts receivable	34	29
Inventory	46	57
Property, plant and equipment	445	330
Less accumulated depreciation	211	189
Total assets	$357	$265
Liabilities and stockholders’ equity:
Accounts payable	$66	$58
Accrued liabilities	22	15
Income taxes payable	38	33
Bonds payable	31	35
Common stock	49	40
Retained earnings	151	84
Total liabilities and stockholders’ equity	$357	$265

Income Statement
Sales	$756
Cost of goods sold	473
Gross margin	283
Selling and administrative expenses	166
Net operating income	117
Gain on sale of plant and equipment	16
Income before taxes	133
Income taxes	48
Net income	$85

Cash dividends were $18. The company sold equipment for $16
that was originally purchased for $12 and that had accumulated depreciation
of $12. The company uses the direct method to determine the net cash
provided by operating activities. The net cash provided by (used in)
operating activities for the year was:

	$151
	$129
	$147
	$117

accounting problems and mcqs will all solutions

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