In preparing a statement of cash flows, cash flows from operating activities

a. are always equal to accrual accounting income.

b. are calculated as the difference between revenues and expenses.

c. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do not affect cash.

d. can be calculated by appropriately adding to or deducting from net income those items in the income statement that do affect cash.

Explain in one or two sentences why your answer (for #4 above) is correct?

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5. Free cash flow is calculated as net cash provided by operating activities less

a. capital expenditures.

b. dividends.

c. capital expenditures and dividends.

d. capital expenditures and depreciation.

Explain in one or two sentences why your answer (for #5 above) is correct?

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6. Houghton Company has the following items: common stock, $1,600,000; treasury stock, $210,000; deferred income taxes, $250,000 and retained earnings, $780,000. What total amount should Houghton Company report as stockholders equity?

a. $1,390,000.

b. $2,170,000.

c. $2,420,000.

d. $2,590,000.

Show how you calculated your answer (for #6 above)?