6. RedCo. reported cash paid for interest of $55,000 in its statement of cash fl

Question

6. RedCo. reported cash paid for interest of $55,000 in its statement of cash flows for the current year. Red did not capitalize any interest during the current year. The following changes on their balance sheet occurred: accrued interest payable decreased by $13,000 along with a decrease in prepaid interest of $21,500. What amount should Red report as interest expense in its current year statement of income?

Multiple Choice

$89,500

$63,500

$76,500

$68,000

7. BlueCo. prepares its statement of cash flows using the indirect method. Blue’s bad debt allowance increased by $18,000 during the year and no accounts were written off. How should Blue report the change in its bad debt allowance in the statement of cash flows?

Multiple Choice

As a financing cash outflow.

As an addition to net income in the operating activities section.

As an investing cash outflow.

As a subtraction from net income in the operating activities section.

8. Red, Inc. had the following activities during 2018:

Acquired a bond investment for $40,000, which Red intends to hold to maturity.

Sold equipment to another corporation for $24,000 when the carrying value was $22,000.

Acquired a stock investment for $8,500, which Red intends to hold for trading.

Made a loan to an employee for $12,500.

Collected interest on a bond investment of $2,500.

In Red’s 2018 statement of cash flows, net cash used in investing activities should be

Multiple Choice

$28,500

$39,500

$37,000

$56,500

9. Bell Co. prepares its statement of cash flows using the indirect method. Selected items pertaining to its cash flow are listed below. What amount should Bell Co. report as net cash provided by financing activities in its statement of cash flows for the year?

Multiple Choice

$52,000

$63,000

$28,000

$90,000

Bonds issued $ 90,000 Treasury stock repurchased $ 23,000 Trading securities purchased $ 35,000 Cash dividends paid $ 15,000 Gain on available-for-sale investment $ 11,000

Explanation / Answer

6-

interest expense paid in cash

55000

less adjusted for accrued interest payable

13000

add prepaid interest adjusted

21500

interest expense in its current year statement of income

63500

7-

As an addition to net income in the operating activities section.

because it is a non cash expenditure so it would be included into net income under cash flow from operating activity

8-

net cash used in investing activity

acquired in bond investment

-40000

sold equipment

24000

Made a loan to an employee

-12500

net cash used in investing activity

-28500

9-

cash flow from financing activities

bond issued

90000

treasury stock repurchased

-23000

cash dividend paid

-15000

cash flow from financing activities

52000

6-

interest expense paid in cash

55000

less adjusted for accrued interest payable

13000

add prepaid interest adjusted

21500

interest expense in its current year statement of income

63500

7-

As an addition to net income in the operating activities section.

because it is a non cash expenditure so it would be included into net income under cash flow from operating activity

8-

net cash used in investing activity

acquired in bond investment

-40000

sold equipment

24000

Made a loan to an employee

-12500

net cash used in investing activity

-28500

9-

cash flow from financing activities

bond issued

90000

treasury stock repurchased

-23000

cash dividend paid

-15000

cash flow from financing activities

52000

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