Question 1 -

The direct method for the preparation of the operating activities section of the statement of cash flows: Is required by the FASB. Reports adjustments to reconcile net income to net cash provided or used by operating activities in the statement. Reports a different amount of cash flows from operations than if the indirect method is used. Separately lists each major item of operating cash receipts and cash payments. Is required if the company is a merchandiser.

Question 2 -

A company's income statement showed the following: net income, $140,000; depreciation expense, $38,000; and gain on sale of plant assets, $22,000. An examination of the company's current assets and current liabilities showed the following changes as a result of operating activities: accounts receivable decreased $11,000; merchandise inventory increased $26,000; prepaid expenses decreased $7,800; accounts payable increased $5,000. Calculate the net cash provided or used by operating activities.

$175,800.

$158,600.

$151,800.

$153,800.

$179,800.

Question 3 -

Sebring Company reports depreciation expense of $50,000 for Year 2. Also, equipment costing $170,000 was sold for a $6,000 gain in Year 2. The following selected information is available for Sebring Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

At December 31Year 2Year 1  Equipment$ 660,000  $ 830,000    Accumulated Depreciation-Equipment468,000  550,000 

$50,000.

$44,000.

$88,000.

$38,000.

$32,000.

Question 4 -

Use the following information and the indirect method to calculate the net cash provided or used by operating activities:

Net income$ 13,300   Depreciation expense13,000   Payment on mortgage payable16,000   Gain on sale of land7,300   Increase in merchandise inventory3,050   Increase in accounts payable7,150   Proceeds from sale of land8,500

$37,700.

$15,600.

$14,600.

$30,400.

$23,100.