first ten questions

Under the direct method of determining net cash provided by operating activities on the statement of cash flows, the net income figure is adjusted for changes in current assets and liabilities.

[removed]	True
[removed]	False

Bennett Company reported sales on its income statement last year of $420,000. On the company's statement of cash flows, sales adjusted to a cash basis were $412,000. (The company uses the direct method to determine the net cash provided by operating activities.) Bennett Company reported the following account balances on its comparative balance sheet:

	Ending Balance	Beginning Balance
Accounts receivable	$45,000	?
Prepaid expenses	$38,000	$35,000
Inventory	$45,000	$50,000

Based on this information, the beginning accounts receivable balance was:

[removed]	$37,000
[removed]	$42,000
[removed]	$53,000
[removed]	$39,000

Last year Lawsby Company reported sales of $330,000 on its income statement. During the year, accounts receivable increased by $34,000 and accounts payable increased by $39,000. The company uses the direct method to determine the net cash provided by operating activities on the statement of cash flows. The sales revenue adjusted to a cash basis for the year would be:

[removed]	$325,000
[removed]	$335,000
[removed]	$296,000
[removed]	$291,000

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

[removed]	True
[removed]	False

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in income taxes payable would be subtracted from income tax expense to convert income tax expense to a cash basis.

[removed]	True
[removed]	False

Kelln Corporation's most recent comparative balance sheet and income statement appear below:

Kelln Corporation Comparative Balance Sheet
	Ending Balance	Beginning Balance
Assets:
Cash and cash equivalents	$37	$35
Accounts receivable	85	75
Inventory	64	77
Property, plant and equipment	898	760
Less accumulated depreciation	331	285
Total assets	$753	$662
Liabilities and stockholders' equity:
Accounts payable	$84	$50
Bonds payable	463	500
Common stock	30	10
Retained earnings	176	102
Total liabilities and stockholders' equity	$753	$662

Income Statement
Sales	$750
Cost of goods sold	450
Gross margin	300
Selling and administrative expense	161
Net operating income	139
Income taxes	49
Net income	$90

The company paid a cash dividend and it did not dispose of any property, plant, and equipment. The company did not issue any bonds payable or repurchase any of its own common stock. The company uses the direct method to determine the net cash provided by operating activities.

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

[removed]	$83
[removed]	$173
[removed]	$7
[removed]	$139

Free cash flow is net cash provided by operating activities less dividends.

[removed]	True
[removed]	False

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in accounts payable would be added to cost of goods sold to convert cost of goods sold to a cash basis.

[removed]	True
[removed]	False

Last year Burford Company's cash account decreased by $29,000. Net cash used in investing activities was $8,400. Net cash provided by financing activities was $26,500. On the statement of cash flows, the net cash flow provided by (used in) operating activities was:

[removed]	$(47,100)
[removed]	$(29,000)
[removed]	$(10,900)
[removed]	$18,100

The change in the cash balance must equal the changes in all other balance sheet accounts besides cash.

[removed]	True
[removed]	False

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