1. (7 points) A company's operating section of the cash-flow statement appears as follows: Net income 45 Adjustment to reconcile net income to operating cash flows due to an increase) in receivables (35) Operating cash flow = 10 Which one of the following statements best describes the reason for this adjustment? Assume that there are no bad debts, sales returns, and refunds. oa. The company paid more cash to its customers than it received from them. ob. The company paid less cash to its customers than it received from them. C. The company booked more sales revenue than the cash it received from its customers. d. The company booked less sales revenue than the cash it received from its customers. e. None of the above. 2. (7 points) For simplicity, assume that customers never pay in advance. A company booked $100 in sales revenue in a given year but collected $147 in cash from its customers in that year. Cash collections exceeded sales revenue recognized because some of the cash received was due to collections of cash from sales revenue booked in the prior year. Which one of the following best describes the adjustment to reconcile net income to the operating cash flows? a. $47 to be added due to an increase in receivables of $47, which reflects an excess of revenues over cash collections. ob. $47 to be added due to a decrease in receivables of $47, which reflects an excess of cash collections over revenues. c. $47 to be subtracted due to an increase in receivables of $47, which reflects an excess of revenues over cash collections. d. $47 to be subtracted due to a decrease in receivables of $47, which reflects an excess of cash collections over revenues. e. $147 to be added due to cash collections. 3. (7 points) A company's operating section of the cash-flow statement appears as follows: Net income 79 Adjustment to reconcile net income to operating cash flows due to an increase in deferred revenue (also known as unearned revenue or advance received from customers) during the period 11 Operating cash flow =90 Which one of the following statements best describes the reason for this adjustment? Assume that there are no bad debts, sales returns, and refunds. a. The company paid more cash to its customers than it received from them. ob. The company paid less cash to its customers than it received from them. C. The company booked more sales revenue than the cash it received from its customers. d. The company booked less sales revenue than the cash it received from its customers. oe. None of the above. 4. (7 points) For simplicity, assume that customers always pay in advance. A company booked $50 in sales revenue in a given year but received $35 in cash from its customers in that year. Sales revenue exceeded cash received because some of the advance receipts in the prior year were booked as sales revenue this year. Which one of the following best describes the adjustment to reconcile net income to the operating cash flows? a. $15 to be added due to an increase in advances (aka unearned or deferred revenue) of $15, which reflects an excess of cash collections over revenues. ob. $15 to be added due to a decrease in advances (aka unearned or deferred revenue) of $15, which reflects an excess of revenues over cash collections. c. $15 to be subtracted due to an increase in advances (aka unearned or deferred revenue] of $15, which reflects an excess of cash collections over revenues. od. $15 to be subtracted due to a decrease in advances (aka unearned or deferred revenue) of $15, which reflects an excess of revenues over cash collections. e. $35 to be added due to cash collections. 5. (6 points) A company's operating section of the cash-flow statement appears as follows: Net income 72 Adjustment to reconcile net income to operating cash flows due to the depreciation expense during the period 38 Operating cash flow =110 Suppose the depreciation expense had been $48 instead of $38. Ignore taxes. Which one of the following statements describes the impact of higher depreciation on the operating cash flows? a. The operating cash flow would have been $120 because depreciation is a source of cash and higher depreciation implies a higher operating cash flow. ob. A higher depreciation expense would have lowered net income by $10 to $62. The addback for depreciation would have been $48 leaving the operating cash flow unchanged at $110