7a)

Which of the following statements about cash flows is correct?

Choose the right answer below?

1. Depreciation expense is subtracted from net income in the operating cash flows section of a statement of cash flows prepared using the indirect method.
2. Cash flows from investing activities increase when a company issues more common stock.
3. Cash dividends paid decrease cash flow from financing activities.
4. The sale of equipment increases the cash flows from investing activities only if the sale results in a gain.

7b)

Rice Company has provided the following relevant information pertaining to its most recent year of operations:

• Net income, $120,000
• Depreciation expense was $15,000
• Accounts receivable increased $9,000
• Prepaid insurance decreased $3,000
• Wages payable decreased $7,000

Using the indirect method, how much was Rice's net cash provided by operating activities?

Choose the right answer below?

1. $148,000
2. $92,000
3. $134,000
4. $122,000