Reference no: EM131000164

The following questions are used in the Kaplan CPA Review Course to study the statement of cash flows while preparing for the CPA examination. Determine the response that best completes the statements or questions.

1. In a statement of cash flows in which operating activities are reported by the direct method, which of the following would increase reported cash flows from operating activities?

a. Gain on sale of land.
b. Interest revenue.
c. Gain on early extinguishment of bonds.
d. Proceeds from sale of equipment.

2. During 2011, TEL Company engaged in the following activities:
Distribution of cash dividends declared in 2010 .... $24
Fair value of shares issued in a stock dividend ..... 110
Payment to retire bonds ............. 226
Proceeds from the sale of treasury stock (cost: $26) ... 30
In TEL's statement of cash flows, what were net cash outflows from financing activities for 2011?

a. $196
b. $220
c. $280
d. $366

3. SOL Company reported net income for 2011 in the amount of $200,000. The company's financial statements also included the following:
Increase in accounts receivable .. $ 40,000
Decrease in inventory ........ 30,000
Increase in accounts payable ..... 100,000
Depreciation expense ....... 52,000
Gain on sale of land ........ 74,000
What is net cash provided by operating activities under the indirect method?

a. $216,000
b. $268,000
c. $290,000
d. $416,000

4. Which of the following does not represent a cash flow relating to operating activities?

a. Dividends paid to stockholders.
b. Cash received from customers.
c. Interest paid to bondholders.
d. Cash paid for salaries.

5. Which of the following would not be a component of cash flows from investing activities?

a. Sale of land.
b. Purchase of securities.
c. Purchase of equipment.
d. Dividends paid.

6. An analyst compiled the following information for Universe, Inc., for the year ended December 31, 2011:

• Net income was $850,000.
• Depreciation expense was $200,000.
• Interest paid was $100,000.
• Income taxes paid were $50,000.
• Common stock was sold for $100,000.
• Preferred stock (8% annual dividend) was sold at par value of $125,000.
• Common stock dividends of $25,000 were paid.
• Preferred stock dividends of $10,000 were paid.
• Equipment with a book value of $50,000 was sold for $100,000.

Using the indirect method, what was Universe, Inc.'s net cash flow from operating activities for the year ended December 31, 2011?

a. $1,000,000
b. $1,015,000
c. $1,040,000
d. $1,050,000