21) The records of Ashley Boutique showed Net Loss, $25,000; Depreciation Expense, $35,000; and increase in Supplies on Hand, $8,000. The amount of Net Cash Flow from Operating Activities using the indirect method is:

A) $18,000.

B) $ 2,000.

C) ($18,000).

D) ($2,000).

 

22) Accounts Receivable amounted to $215,000 at the beginning of the year and $245,000 at the end of the year. Income reported on the income statement for the year was $300,000. The cash flow from operating activities on the cash flow statement using the indirect method is:

A) $300,000.

B) $330,000.

C) $270,000.

D) None of these answers are correct.

23) The net income reported on the income statement for the current year was $60,000. Depreciation recorded on fixed assets was $31,000. What is the cash flow from operations that would appear on a cash flow statement using the indirect method?

A) $29,000

B) $60,000

C) $31,000

D) $91,000

 

24) Of the following, which has a positive effect on the computation of cash flow from operations using the indirect method?

A) Increase in Inventory

B) Decrease in Accounts Payable

C) Increase in Accounts Receivable

D) Decrease in Prepaid Insurance

 

25) Even though the cost of fuel oil is rising, management is considering using up the business’s reserves and not ordering any more this period. How will this decision affect the period’s cash flows from operations—indirect method?

A) It will increase this period’s cash flows from operations.

B) It will decrease this period’s cash flows from operations.

C) It will not affect this period’s cash flows from operations.

D) This does not affect cash flows from operations.

 

26) Management has authorized the purchase of a large quantity of inventory for early December. The purchase will have credit terms of 2/10, n/30, they will authorize payment by the discount date. How will this decision affect the period’s cash flows from operations—indirect method?

A) It will increase this period’s cash flows from operations.

B) It will decrease this period’s cash flows from operations.

C) It will not affect this period’s cash flows from operations.

D) This does not affect cash flows from operations.

27) Of the following, which has a negative effect on the computation of cash flow from operations using the indirect method?

A) Increase in Accounts Payable

B) Increase in Inventory

C) Increase in Notes Payable

D) Depreciation Expense

 

28) Which is not a cash outflow from an operating activity?

A) Payment for interest on a loan

B) Payment to the government for taxes

C) Payment to buy merchandise inventory

D) Paying dividends to stockholders

29) Which of the following adjustments would be in error if made to net income when computing cash from operations using the indirect method?

A) Add an increase in Accounts Payable

B) Add Depreciation Expense

C) Add an increase in Accounts Receivable

D) None of the above

 

30) There was a utility bill received but not paid. How would this nonpayment affect the statement of cash flows operations section—indirect method?

A) It is already included in the net income.

B) It would affect the operations section positively.

C) It would affect the operations section negatively.

D) Does not affect the cash flow from operations.

 

 



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