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Exam 31: the Direct Method of Determining the Net Cash Provided by Operating Activities

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Question 31

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(Appendix 14A) Last year, Knox Corporation reported on its income statement sales of $375,000 and cost of goods sold of $140,000. During the year, the balance in accounts receivable increased $30,000, the balance in accounts payable decreased $25,000, and the balance in inventory increased $10,000. The company uses the direct method to determine the net cash provided by (used in) operating activities on its statement of cash flows. -Under the direct method,sales adjusted to a cash basis would be:

A) $295,000
B) $345,000
C) $405,000
D) $355,000

E) None of the above
F) C) and D)

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Question 32

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Under the direct method of determining the net cash provided by (used in)operating activities on the statement of cash flows,a decrease in prepaid expenses would be added to selling and administrative expenses to convert selling and administrative expenses to a cash basis.

A) True
B) False

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Question 33

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Harkey Corporation's balance sheet and income statement appear below: Cash dividends were $29.The company sold equipment for $15 that was originally purchased for $6 and that had accumulated depreciation of $2. Required: Using the direct method,determine the net cash provided by (used in)operating activities.

Last year Anderson Corporation reported a cost of goods sold of $100,000.The company's inventory at the beginning of the year was $11,000,and its inventory at the end of the year was $19,000.The prepaid expense account increased by $2,000 between the beginning and end of the year,and the accounts payable account decreased by $4,000.Cost of goods sold adjusted to the cash basis under the direct method would be:

Carr Corporation's comparative balance sheet and income statement for last year appear below: The company declared and paid $47,000 in cash dividends during the year.It did not dispose of any property,plant,and equipment during the year. Required: Construct in good form the operating activities section of the company's statement of cash flows for the year using the direct method.

The net cash provided by (used in) financing activities for the year was:

(Appendix 14A) The changes in Northrup Corporation's balance sheet account balances for last year appear below: The company's income statement for the year appears below: The company declared and paid $28,000 in cash dividends during the year. It did not dispose of any property, plant, and equipment during the year. The company uses the direct method to determine the net cash provided by (used in) operating activities. -On the statement of cash flows,the selling and administrative expense adjusted to a cash basis would be:

Last year Lawn Corporation reported sales of $115,000 on its income statement.During the year,accounts receivable decreased by $10,000 and accounts payable increased by $15,000.The company uses the direct method to determine the net cash provided by (used in) operating activities on the statement of cash flows.The sales revenue adjusted to a cash basis for the year would be:

LFM Corporation reported cost of goods sold on its income statement of $15,000.The following account balances appeared on the company's comparative balance sheet for the same year: The company uses the direct method to determine the net cash provided by (used in) operating activities.The cost of goods sold,adjusted to a cash basis,on the company's statement of cash flows for the year would be:

Reven Corporation prepares its statement of cash flows using the direct method.Last year,Reven reported Income Tax Expense of $25,000.At the beginning of last year,Reven had a $5,000 balance in the Income Taxes Payable account.At the end of last year,Reven had a $9,000 balance in the account.On its statement of cash flows for last year,what amount should Reven have shown for its Income Tax Expense adjusted to a cash basis (i.e.,income taxes paid) ?

If accounts receivable increase during a period,then the amount of cash collected from customers will be less than the amount of sales reported on the income statement for the period.

(Appendix 14A) The change in each of Kendall Corporation's balance sheet accounts last year follows: Kendall Corporation's income statement for the year was: There were no sales or retirements of property, plant, and equipment and no dividends paid during the year. The company pays no income taxes and it did not purchase any long-term investments, issue any bonds payable, or repurchase any of its own common stock. The net cash provided by (used in) operating activities on the statement of cash flows is determined using the direct method. -Using the direct method,sales adjusted to a cash basis would be:

During the year the balance in the Prepaid Expenses account increased by $6,000.In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows,it would be necessary to:

Digby Corporation's balance sheet and income statement appear below: Cash dividends were $29.The company did not dispose of any property,plant,and equipment during the year. Required: Prepare the operating activities section of the statement of cash flows in good form using the direct method.

The net cash provided by (used in) investing activities for the year was:

During the year the balance in the Accounts Receivable account increased by $6,000.In order to adjust the company's net income to a cash basis using the direct method on the statement of cash flows,it would be necessary to: