Choose the alternative that BEST answers each of the following When a company buys a truck for cash it is a (an) Operating inflow Investing outflow Financing outflow Operating outflow When a company collects accounts receivable it is a (an) Financing inflow Operating inflow Investing inflow A non cash event When a company sells shares of stock for cash it is a (an) A) Operating inflow B) Investing inflow C) Financing inflow D) Operating outflow When a company declares and distributes a stock dividend it is a (an) Operating outflow Non cash event Financing outflow Investing outflow When a company redeems (pays off) bonds it is a (an) Operating outflow Investing outflow Financing inflow Financing outflow When a company borrows cash on a 6 month note it is a (an) Financing inflow Operating inflow Investing inflow Financing outflow When a company issues shares of stock upon conversion of convertible bonds It is a (an) Financing outflow Investing outflow Investing inflow Non cash event When a company purchases inventory for cash it is a (an) Financing outflow Operating outflow Investing outflow Operating inflow When a company borrows cash on a 5 year note it is a (an) Investing inflow Financing inflow Financing outflow Operating inflow When a company sells land for cash it is a (an) Investing inflow Investing outflow Financing inflow Operating inflow Questions 11 through 20 use the flowing information for Donner Co The indirect method is used to calculate net cash inflow or outflow from operating activities Net income $30,000 Increase in accounts receivable $40,000 Increase in 10 year bonds payable $100,000 Decrease in inventory $70,000 Decrease in common stock $100,000 Decrease in prepaid insurance $5,000 Depreciation expense $20,000 Decrease in accounts payable $30,000 Loss on sale of equipment $5,000 Increase in salaries payable $10,000 Using the indirect method, Donners cash from operating activities was $70,000 net outflow $80,000 net inflow $70,000 net inflow $90,000 net outflow Using the indirect method the depreciation expense is Subtracted from net income Added to net income Not used, it is non cash Not used, it is investing Using the indirect method the loss on sale of equipment is A) Subtracted from net income B) Added to net income C) Not used, it is non cash D) Not used, it is investing Using the indirect method the increase in accounts receivable Is added to net income, it Is an inflow and brings more cash Is subtracted from net income, the inflow of cash has not happened yet Is not used at all Is used twice Using the indirect method the decrease in inventory Is added to net income, it Is an inflow and brings more cash Is subtracted from net income, the inflow of cash has not happened yet Is not used at all Is used twice Using the indirect method the decrease in accounts payable Is subtracted from net income, it is an outflow to pay them off Is added to net income, the flow of cash has not happened yet Is not used at all Is used three times Using the indirect method, the cash paid to repurchase the common stock Is not used, it is a financing activity Is subtracted from net income Is added to net income Is a non cash event Using the indirect method, the increase in salaries payable is Added to net income, the outflow to pay them has not happened yet Subtracted from net income Not used at all Is used now and also in the next period The loss on sale of equipment is added to net income because The loss is reducing net income and the inflow from the sale is also reduced in investing The loss is increasing net income and the inflow from sale is also increased in investing The loss has no effect at all Losses are better than gains Had Donner Co experienced a net loss instead of a net income The indirect method would be used in the same way, just starting with a negative amount They would go out of business immediately and would not have to calculate cash flow Their bank accounts would all empty at the same time It would just be too bad

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Choose the alternative that BEST answers each of the following When a company buys a truck for cash it is a (an) Operating inflow Investing

Choose the alternative that BEST answers each of the following

When a company buys a truck for cash it is a (an)

Operating inflow
Investing outflow
Financing outflow
Operating outflow

When a company collects accounts receivable it is a (an)

Financing inflow
Operating inflow
Investing inflow
A non-cash event

When a company sells shares of stock for cash it is a (an)

A) Operating inflow

B) Investing inflow

C) Financing inflow

D) Operating outflow

When a company declares and distributes a stock dividend it is a (an)

Operating outflow
Non-cash event
Financing outflow
Investing outflow

When a company redeems (pays off) bonds it is a (an)

Operating outflow
Investing outflow
Financing inflow
Financing outflow

When a company borrows cash on a 6-month note it is a (an)

Financing inflow
Operating inflow
Investing inflow
Financing outflow

When a company issues shares of stock upon conversion of convertible bonds

It is a (an)

Financing outflow
Investing outflow
Investing inflow
Non- cash event

When a company purchases inventory for cash it is a (an)

Financing outflow
Operating outflow
Investing outflow
Operating inflow

When a company borrows cash on a 5-year note it is a (an)

Investing inflow
Financing inflow
Financing outflow
Operating inflow

When a company sells land for cash it is a (an)

Investing inflow
Investing outflow
Financing inflow
Operating inflow

Questions 11 through 20 use the flowing information for Donner Co. The indirect method is used to calculate net cash inflow or outflow from operating activities

Net income $30,000 Increase in accounts receivable $40,000

Increase in 10 year bonds payable $100,000 Decrease in inventory $70,000

Decrease in common stock $100,000 Decrease in prepaid insurance $5,000

Depreciation expense $20,000 Decrease in accounts payable $30,000

Loss on sale of equipment $5,000 Increase in salaries payable $10,000

Using the indirect method, Donners cash from operating activities was

$70,000 net outflow
$80,000 net inflow
$70,000 net inflow
$90,000 net outflow

Using the indirect method the depreciation expense is

Subtracted from net income
Added to net income
Not used, it is non-cash
Not used, it is investing

Using the indirect method the loss on sale of equipment is

A) Subtracted from net income

B) Added to net income

C) Not used, it is non-cash

D) Not used, it is investing

Using the indirect method the increase in accounts receivable

Is added to net income, it Is an inflow and brings more cash
Is subtracted from net income, the inflow of cash has not happened yet
Is not used at all
Is used twice

Using the indirect method the decrease in inventory

Is added to net income, it Is an inflow and brings more cash
Is subtracted from net income, the inflow of cash has not happened yet
Is not used at all
Is used twice

Using the indirect method the decrease in accounts payable

Is subtracted from net income, it is an outflow to pay them off
Is added to net income, the flow of cash has not happened yet
Is not used at all
Is used three times

Using the indirect method, the cash paid to repurchase the common stock

Is not used, it is a financing activity
Is subtracted from net income
Is added to net income
Is a non-cash event

Using the indirect method, the increase in salaries payable is

Added to net income, the outflow to pay them has not happened yet
Subtracted from net income
Not used at all
Is used now and also in the next period

The loss on sale of equipment is added to net income because

The loss is reducing net income and the inflow from the sale is also reduced in investing
The loss is increasing net income and the inflow from sale is also increased in investing
The loss has no effect at all
Losses are better than gains

Had Donner Co. experienced a net loss instead of a net income

The indirect method would be used in the same way, just starting with a negative amount
They would go out of business immediately and would not have to calculate cash flow
Their bank accounts would all empty at the same time
It would just be too bad