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Exam 12: The Statement of Cash Flows

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Question 111

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Pound Co.reported the following information at the end of 2016 and 2017: $\begin{array} {l r r } &\underline { \mathbf { 2 0 1 6 } } & \underline { \mathbf { 2 0 1 7 } } \\ \text { Land}&\$ 35,000 & \$ 100,000 \\ \text { Common stock}&200,000 & 265,000 \end{array}$ An analysis of Pound's records indicated that there were no cash flow effects resulting from the changes in the two accounts presented above.How should Pound report the changes in these accounts on a statement of cash flows?

A) Pound should report $65,000 for the acquisition of land as an investing activity and $65,000 for the issuance of stock as a financing activity.
B) Pound should report $65,000 as a noncash investing and financing activity for the acquisition of land by issuing common stock.
C) Pound should report the issuance of common stock to acquire land in the financing activity section with a net cash flow effect of zero.
D) Pound should report the acquisition of land by issuing common stock in the investing activity section with a net cash flow effect of zero

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Question 112

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When using the indirect method, how is the decrease in accounts payable shown on the statement of cash flows?

A) Operating activity
B) Investing activity
C) Financing activity
D) Noncash investing and financing activity

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Question 113

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Use the information below for Shorter Inc.for 2016 and 2017 to answer the following question. $\begin{array} { l r } \text { Equipment, December 31,2016 } & \$ 65,000 \\\text { Equipment, December } 31,2017 & 72,000 \\\text { Accumulated depreciation, December 31,2016 } & 39,000 \\\text { Accumulated depreciation, December 31,2017 } & 30,000\end{array}$ During 2017, Shorter Inc.sold equipment with a cost of $30,000 and accumulated depreciation of $25,000.A gain of $3,000 was recognized on the sale of the equipment This was the only equipment sale during the year. Assume that all purchases of equipment were paid with cash.How much cash was paid by Shorter for the purchase of equipment during 2017?

Flannery Company uses a worksheet to prepare its statement of cash flows.The company also uses the indirect method for the Operating Activities section of its statement.For each of the following changes in the balance sheet, indicate what activity it affects and whether it is an addition or deduction. -Accounts payable decreased

If the balance of wages payable increases during the year, then the _________________________ for the period will be greater than the actual cash wages paid in the period.