1-A

An accountant for Southern Manufacturing Companies (SMC) computed the following information by making comparisons between SMCs Year 1 and Year 2 balance sheets. Further information was determined by examining the companys Year 2 income statement. Required For each item described in the list below, indicate whether the amount should be added to or subtracted from the amount of net income when determining the amount of net cash flow from operating activities using the indirect method. Also identify any items that do not affect net cash flow from operating activities because they are reported as investing or financing activities.1-B

Shim Company presents its statement of cash flows using the indirect method. The following accounts and corresponding balances were drawn from Shims Year 2 and Year 1 year-end balance sheets.

Account TitleYear 2Year 1Accounts receivable$31,859$38,231Prepaid rent1,5301,339Interest receivable547438Accounts payable10,07712,092Salaries payable2,7713,167Unearned revenue3,1774,236

The income statement reported a $1,260 gain on the sale of equipment, an $940 loss on the sale of land, and $3,300 of depreciation expense. Net income for the period was $51,220. Required Prepare the operating activities section of the statement of cash flows. (Amounts to be deducted should be indicated with a minus sign.)

1. The amount of cash dividends paid to the stockholders. 2. The amount of a decrease in the balance of an Unearned Revenue account. 3. The amount of an increase in the balance of an Inventory account. 4. The amount of an increase in the balance of a Land account. 5. The amount of a decrease in the balance of a Prepaid Rent account. 6. The amount of an increase in the balance of a Treasury Stock account. 7. The amount of an increase in the balance of the Accounts Receivable account. 8. The amount of a loss arising from the sale of land. 9. The amount of an increase in the balance of the Other Operating Expenses Payable account. 10. The amount of a decrease in the balance of the Bonds Payable account. 11. The amount of depreciation expense shown on the income statement. \begin{tabular}{|l|} \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \\ \hline \end{tabular} Cash flows from operating activities