7. The following information is from X, Inc.’s December 31, 2011 annual report:

7.  The following information is from X, Inc.’s December 31, 2011 annual report:

Income statement Balance sheet12/31/11 12/31/10

Sales Revenue $90,000 Unearned revenue        $8,000 $10,000 

Insurance expense $30,000 Prepaid insurance $2,000    $3,000 

Note: X, Inc. does not sell to its customers on account; it collects cash from its customers in advance. Cash paid for insurance on X, Inc.’s statement of cash flows equals ________.

$30,000 

$31,000 

$33,000 

$29,000   

8. The following information is from Z, Inc.’s December 31, 2011 annual report: 

Income statement Balance sheet 12/31/11 12/31/10 

Sales Revenue $800,000 Unearned revenue $8,000 $10,000 

Insurance expense $30,000 Prepaid insurance $1,000 $3,000 

Note: Z, Inc. does not sell to its customers on account; it collects cash from its customers in advance. Cash paid for interest on Z, Inc.’s statement of cash flows equals ________.  

$32,000 

$30,000 

$33,000 

$28,000   

9. The following information is from ABC, Inc.’s December 31, 2011 annual report:

 Income statement Balance sheet 12/31/11 12/31/10 

Sales Revenue $800,000 Unearned revenue $8,000 $10,000 Insurance expense $30,000 Prepaid insurance $1,000 $3,000 

Note: ABC, Inc. does not sell to its customers on account; it collects cash from its customers in advance. Cash paid for interest on ABC, Inc.’s statement of cash flows equals ________. 

 $28,000 

$32,000 

$33,000 

$30,000 

10. During Clean Dirt, Inc.’s first year of business, salary expense was $60,000. At the end of its first year of business, Clean Dirt’s first balance sheet showed $5,000 of salaries payable. How much did Clean Dirt pay in cash for salaries during its first year of business? 

$55,000   

$60,000 

$65,000 

$5,000 

11. Clean Dirt, Inc. had $8,000 of salaries payable at December 31, 2010. During 2011, Clean Dirt’s salary expense was $60,000.  At December 31, 2011, Clean Dirt’s balance sheet showed $5,000 of salaries payable. How much did Clean Dirt pay in cash for salaries during 2011? 

 $65,000 

$60,000 

$57,000 

$63,000   

12. The statement of cash flows is designed to ________. 

reconcile the differences between net income and the ending cash balance

reconcile the differences between the beginning and ending balances in the cash account 

explain the difference between the sources and uses of cash 

explain the changes in assets 

13. To prepare the statement of cash flows using the indirect method ________. 

an increase in accounts receivable is added to net income 

depreciation expense is added to net income

net income is subtracted from cash 

net income is added to cash 

14. To prepare the statement of cash flows using the indirect method, interest income is ________. 

already included in net income 

included as an item in the financing section 

added to net income 

subtracted from net income 

15. The indirect method for the preparation of the statement of cash flows ________. 

is not in conformity with GAAP 

is not in conformity with IFRS 

is the preferred method used by businesses 

is recommended by the FASB 

16. A use of cash for operating activities is ________. 

payment of dividends 

cash used to purchase treasury stock 

payment of an account payable 

cash used to buy equipment 

17. Cash used for investing activities includes cash ________.

paid for interest 

collected from customers 

paid for land 

paid for dividends 

18. Team Shirts, Inc. had net cash from operating activities of $50,000. It paid $40,000 to buy a new computer system by signing a $30,000 note and paying the balance. Net cash from (or used for) investing activities for the period was ________. 

$40,000 

$(10,000)     

$(40,000) 

19. Negative cash flow from investing activities on the statement of cash flows means that a company has________. 

sold additional shares of common stock 

paid a large cash dividend to shareholders

paid more for operating expenses than it collected from customers

bought additional property, plant and equipment 

20. Positive cash flow from operating activities on the statement of cash flows means that a company has________. 

bought additional property, plant and equipment 

paid a large cash dividend to shareholders 

sold additional shares of common stock 

collected more from customers than it paid for operating expenses