Test bank managerial accounting by garrison 13e chapter 15

Chapter 15 “How Well Am I Doing?” Statement of Cash Flows True/False Questions 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: Level: Easy 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 Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 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 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 Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium 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 AICPA FN: Reporting LO: 2,3 Level: Medium 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: 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 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 Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium A change in deferred taxes is considered to be an operating activity on the statement of cash flows Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium Lending money to another company would be classified as a financing activity on the statement of cash flows Ans: False AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 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: 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 Ans: True AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 15 LO: Level: Hard 15-6 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 Ans: True AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting Appendix: 15 LO: Level: Hard 14 Accounts receivable is not considered to be a cash equivalent for purposes of preparing the statement of cash flows Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 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 Ans: True AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 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 AICPA FN: Reporting LO: Level: Medium 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 AICPA FN: Reporting LO: Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 15-7 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 AICPA FN: Reporting LO: 2,3 Level: Medium 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 operating activities 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 AICPA FN: Reporting LO: 2,3 Level: Medium 15-8 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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: 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 operating activities 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 AICPA FN: Reporting LO: 2,3 Level: Medium 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 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2,3 Level: Medium 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 AICPA FN: Reporting LO: 2,3 Level: Hard Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 15-9 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 Ans: D AACSB: Analytic AICPA BB: Critical Thinking 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 Ans: B AACSB: Analytic AICPA BB: Critical Thinking 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 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 15-10 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 AICPA FN: Reporting LO: Level: Easy 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: A) an addition to net income of $100,000 in order to arrive at net cash provided by operating activities 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 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 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 Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 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 Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 15-11 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 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 C) an addition of $80,000 under financing activities D) a deduction of $80,000 under financing activities Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium 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 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: 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 BB: Critical Thinking AICPA FN: Reporting Appendix: 15 LO: 3,4 Level: Easy 15-12 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 Ans: D AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 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 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 15-13 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 37 Excerpts from Deblois Corporation's comparative balance sheet appear below: Cash and cash equivalents Accounts payable Accrued wages and salaries payable Ending Balance Beginning Balance $22,000 $28,000 $18,000 $17,000 $34,000 $37,000 Which of the following classifications of changes in balance sheet accounts as sources and uses is correct? 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 Ans: C AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 38 Excerpts from Aultman Corporation's comparative balance sheet appear below: Cash and cash equivalents Property, plant, and equipment Long-term debt Ending Balance Beginning Balance $62,000 $29,000 $371,000 $345,000 $75,000 $73,000 Which of the following classifications of changes in balance sheet accounts as sources and uses is correct? 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 Ans: A AACSB: Analytic AICPA BB: Critical Thinking AICPA FN: Reporting LO: Level: Easy 15-14 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 121 Boscia Corporation's balance sheet appears below: Comparative Balance Sheet Ending Beginning Balance Balance Assets: Cash and cash equivalents Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets $ 44 82 71 537 ( 240) $494 $ 38 69 69 500 ( 201) $475 Liabilities and stockholders’ equity: Accounts payable Wages payable Taxes payable Bonds payable Deferred taxes Common stock Retained earnings Total liabilities and stockholders’ equity $ 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: Prepare a statement of cash flows in good form using the indirect method 15-104 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Ans: Net income Adjustments to convert net income to a cash basis: 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 Investing activities: 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 change in cash and cash equivalents Cash balance, beginning Cash balance, end AACSB: Analytic AICPA BB: Critical Thinking LO: 2,3 Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition $108 39 (13) (2) 10 (3) 143 ( 37) ( 37) (74) ( 28) ( 100) 38 $ 44 AICPA FN: Measurement 15-105 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 122 Fryberger Corporation's balance sheet and income statement appear below: Comparative Balance Sheet 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 Liabilities and stockholders’ equity: 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 $737 454 283 173 110 33 $ 77 Cash dividends were $20 Required: Prepare a statement of cash flows in good form using the indirect method 15-106 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Ans: Net income Adjustments to convert net income to a cash basis: Depreciation charges Increase in accounts receivable Decrease in inventory Decrease in accounts payable Net cash provided by operations Investing activities: Increase in plant and equipment Net cash used for investing activities Financing 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 AACSB: Analytic AICPA BB: Critical Thinking LO: 2,3 Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition $77 (5) ( 10) 72 ( 12) ( 12) ( 41) ( 20) ( 57) 33 $36 AICPA FN: Measurement 15-107 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 123 Solmonson Corporation's balance sheet appears below: Comparative Balance Sheet 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 Liabilities and stockholders’ equity: Accounts payable Long-term debt Common stock Retained earnings Total liabilities and stockholders’ equity $ 28 84 51 177 $340 $ 34 100 50 93 $277 Net income for the year was $105 Cash dividends were $21 Required: Prepare a statement of cash flows in good form using the indirect method 15-108 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Ans: Net income Adjustments to convert net income to a cash basis: Depreciation charges Decrease in accounts receivable Decrease in inventory Decrease in accounts payable Net cash provided by operations Investing activities: Increase in plant and equipment Net cash used for investing activities Financing 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 AACSB: Analytic AICPA BB: Critical Thinking LO: 2,3 Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition $105 32 ( 6) 142 ( 104) ( 104) (16) ( 21) ( 36) 27 $ 29 AICPA FN: Measurement 15-109 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 124 Carman Company's comparative balance sheet and income statement for last year appear below: Statement of Financial Position Ending Beginning Balance Balance Cash $ 70,000 $ 38,000 Accounts receivable 76,000 52,000 Inventory 24,000 42,000 Prepaid expenses 8,000 16,000 Long-term investments 260,000 210,000 Plant and equipment 530,000 510,000 Accumulated depreciation ( 398,000) ( 350,000) Total assets $570,000 $518,000 Accounts payable Accrued liabilities Taxes payable Bonds payable Deferred taxes Common stock Retained earnings Total liabilities and owners’ equity Income Statement Sales Cost of goods sold Gross margin Selling and administrative expense Net operating income Income taxes Net income $ 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 $610,000 310,000 300,000 190,000 110,000 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 15-110 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Ans: Sales Adjustments to a cash basis: Increase in accounts receivable Cost of goods sold Adjustments to a cash basis: Decrease in inventory Decrease in accounts payable Selling and administrative expense Adjustments to a cash basis: Decrease in prepaid expenses Increase in accrued liabilities Depreciation charges Income tax expense Adjustments to a cash basis: Decrease in taxes payable Increase in deferred taxes $610,000 -24,000 $586,000 310,000 -18,000 +22,000 190,000 -8,000 -9,000 -48,000 125,000 33,000 +7,000 -13,000 Net cash provided by operating activities AACSB: Analytic AICPA BB: Critical Thinking Appendix: 15 LO: 2,4 Level: Hard Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition 314,000 27,000 $120,000 AICPA FN: Measurement 15-111 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 125 Boehning Corporation's balance sheet and income statement appear below: Comparative Balance Sheet Ending Beginning Balance Balance Assets: Cash and cash equivalents Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets $ 25 53 50 532 ( 285) $375 $ 22 48 56 430 ( 261) $295 Liabilities and stockholders’ equity: Accounts payable Wages payable Taxes payable Bonds payable Deferred taxes Common stock Retained earnings Total liabilities and stockholders’ equity $ 39 20 10 71 15 82 138 $375 $ 38 24 100 19 80 25 $295 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 $954 606 348 162 186 10 196 59 $137 Cash dividends were $24 The company sold equipment for $10 that was originally purchased for $4 and that had accumulated depreciation of $4 Required: Using the direct method, determine the net cash provided by (used by) operating activities 15-112 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 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 ( 28) 138 Income taxes Increase in taxes payable Decrease in deferred taxes 59 (1) 62 Net cash provided by operating activities AACSB: Analytic AICPA BB: Critical Thinking Appendix: 15 LO: 2,4 Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition $150 AICPA FN: Measurement 15-113 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 126 May Corporation's balance sheet and income statement appear below: Comparative Balance Sheet Ending Beginning Balance Balance Assets: Cash and cash equivalents Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets $ 24 24 32 598 ( 390) $288 $ 22 25 37 580 ( 366) $298 Liabilities and stockholders’ equity: Accounts payable Wages payable Taxes payable Bonds payable Deferred taxes Common stock Retained earnings Total liabilities and stockholders’ equity $ 38 23 12 87 16 63 49 $288 $ 45 25 10 110 17 60 31 $298 Income Statement Sales Cost of goods sold Gross margin Selling and administrative expense Net operating income Income taxes Net income $606 396 210 174 36 11 $ 25 Cash dividends were $7 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 15-114 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Ans: Sales Decrease in accounts receivable $606 $607 Cost of goods sold Decrease in inventory Decrease in accounts payable 396 (5) 398 Selling and administrative expense Decrease in wages payable Depreciation charges 174 ( 24) 152 Income taxes Increase in taxes payable Decrease in deferred taxes 11 (2) 10 Net cash provided by operating activities AACSB: Analytic AICPA BB: Critical Thinking LO: 2,4 Level: Medium Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition $ 47 AICPA FN: Measurement 15-115 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 127 Heckler Corporation's balance sheet and income statement appear below: Comparative Balance Sheet Ending Beginning Balance Balance Assets: Cash and cash equivalents Accounts receivable Inventory Plant and equipment Accumulated depreciation Total assets $ 43 25 67 392 ( 237) $290 $ 35 28 66 360 ( 198) $291 Liabilities and stockholders’ equity: Accounts payable Long-term debt Common stock Retained earnings Total liabilities and stockholders’ equity $ 31 198 74 ( 13) $290 $ 29 240 70 ( 48) $291 Income Statement Sales Cost of goods sold Gross margin Selling and administrative expense Net operating income Income taxes Net income $618 398 220 156 64 19 $ 45 Cash dividends were $10 Required: Prepare the operating activities section of the statement of cash flows in good form using the direct method 15-116 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Ans: Sales Decrease in accounts receivable $618 $621 Cost of goods sold Increase in inventory Increase in accounts payable 398 ( 2) 397 Selling and administrative expense Depreciation charges 156 ( 39) 117 Income taxes 19 Net cash provided by operating activities $ 88 AACSB: Analytic AICPA BB: Critical Thinking LO: 2,4 Level: Easy Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition AICPA FN: Measurement 15-117 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows 15-118 Garrison/Noreen/Brewer, Managerial Accounting, Twelfth Edition ... Critical Thinking AICPA FN: Reporting Appendix: 15 LO: Level: Hard 15- 6 Garrison/ Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows... Critical Thinking AICPA FN: Reporting Appendix: 15 LO: 3,4 Level: Easy 15- 12 Garrison/ Noreen/Brewer, Managerial Accounting, Twelfth Edition Chapter 15 “How Well Am I Doing?” Statement of Cash Flows... BB: Critical Thinking AICPA FN: Reporting LO: Level: Medium Garrison/ Noreen/Brewer, Managerial Accounting, Twelfth Edition 15- 15 Chapter 15 “How Well Am I Doing?” Statement of Cash Flows Solution: