1) When the operating activities section of the statement of cash flows is reported using the direct method, the FASB requires:

1. a. The preparation of the statement of cash flows under the indirect method be completed and reported with the statement of cash flows prepared using the direct method.
2. b. A reconciliation of net income to net cash provided or used by operating activities.
3. c. Footnotes to the financial statements disclosing the difference between net income and the cash provided or used by financing activities.
4. d. The income statement to be prepared under the cash basis of accounting.
5. e. Noncash investing and financing activities be included in the statement of cash flows.

2) Castine reports net income of $305,000 for the year ended December 31, Year 2. It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment. Its comparative balance sheet reveals a $40,200 increase in accounts receivable, a $10,200 decrease in prepaid expenses, a $15,200 increase in accounts payable, a $12,500 decrease in wages payable, a $75,000 increase in equipment, and a $100,000 decrease in notes payable. Calculate the increase in cash for Year 2.

1. a. $216,400.
2. b. $281,400.
3. c. $381,400.
4. d. $206,400.
5. e. $406,400.

3) In preparing a company's statement of cash flows for the most recent year, the following information is available:
Loss on the sale of equipment: 14000
Purchase of equipment: 145,000
Proceeds from the sale of equipment: 126000
Repayment of outstanding stock: 87000
Purchase of treasury stock: 62000
Issuance of common stock: 96000
Purchase of Land: 115000
Increase in accounts receivable during the year: 43000
Decrease in accounts payable during the year: 75000
Payment of cash dividends: 35000
Answers:

Net cash flows from investing activities for the year were:
Answer
Question 26 answers

a.$134,000 of net cash used by investing activities.
b. $134,000 of net cash provided by investing activities.

c. $120,000 of net cash used by investing activities.

d. $252,000 of net cash used by investing activities.

e. $221,000 of net cash provided by investing activities.

4) Woodlawn Company is preparing the company's statement of cash flows for the fiscal year just ended. The following information is available:
Retained earnings balance at the beginning of the year $233,000
Cash dividends declared for the year $50,000
Proceeds from the sale of equipment $85,000
Gain on the sale of equipment $4,500
Cash dividends payable at the beginning of the year $22,000
Cash dividends payable at the end of the year $30,000
Net income for the year $110,000
The ending balance in retained earnings is:

1. a. $343,000.
2. b. $213,000.
3. c. $293,000.
4. d. $297,500.
5. e. $301,000.