2. A building with a book value of $ 46,000 is sold for $51,000 cash Using the i

Question

2. A building with a book value of $ 46,000 is sold for $51,000 cash Using the indirect method, this transaction should be shown on the statement of cash flows as follows:
a. an increase of $46,000 from investing activities and an addition to net income of $5,000

b. an increase of $51,000 from investing activities and a deduction from net income of $5,000

c. an increase of $46,000 from investing activities

d. an increase of $51,000 from investing activities

8. Which of the following is a noncash investing and financing activity?

a. issuance of common stock to acquire land

b. purchase of merchandise inventory on account

c. payment of a six-month note payable

d. payment of a cash dividend
13. On the statement of cash flows prepared by the indirect method, a $50,000 gain on the sale of investments would be

a. added to net income in converting the net income reported on the income statement to cash flows from operating activities

b. deducted from net income in converting the net income reported on the income statement to cash flows from operating activities

c. added to dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends

d. deducted from dividends declared in converting the dividends declared to the cash flows from financing activities related to dividends



14. On the statement of cash flows, the cash flows from operating activities section would include

a. payments for cash dividends

b. payments for the acquisition of investments

c. payment for interest on short-term notes payable

d. receipts from the issuance of capital stock

16. If land costing $145,000 was sold for $205,000, the $60,000 gain on the sale would be added to net income in of the operating activities section of the statement of cash flows (prepared by the indirect method).



a. False

b. True


17. The direct method of preparing the operating activities section of the statement of cash flows reports major classes of gross cash receipts and gross cash payments.



a. False

b. True

19. The Investing and Financing sections for the indirect and direct statement of cash flows are the same for the same period of the same company.



a. False

b. True

Explanation / Answer

2. a 8. a 13. a 14. c 16. b 17. a 18. a

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