Question #1 (2 points) For each of the following activities, indicate if the activity represents:

A. A cash inflow. B. A cash outflow. C. Both a cash inflow and a cash outflow

D. Neither an inflow or outflow.

_____1. Purchased merchandise inventory for cash.

_____2. Paid accounts payable.

_____3. Issued shares of common stock in exchange for equipment.

_____4. Collected an account receivable.

_____5. Recorded depreciation expense.

_____6. Acquired a building paying 10% down and financing the balance.

_____7. Accrued interest expense.

_____8. Declared a dividend on the common stock.

_____9. Exchanged machinery for office furniture.

____10. Paid bond interest.

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Question #2 (2 points) For the following, indicate the adjustment to be made, if any, to net income in the operating section of the cash flow statement prepared on the indirect method:

(A) Increase net income (B) Decrease net income

(C) No adjustment (investing activity). (D) No adjustment (financing activity)

_____1. Accounts receivable increased by $5,000 from last year to this year.

_____2. Depreciation was $30,000.

_____3. Prepaid Expenses decreased $10,000.

_____4. Accounts Payable increased $20,000.

_____5. Merchandise inventory increased by $15,000.

_____6. Office furniture decreased $8,000.

_____7. Sold a building at a gain of $5,000.

_____8. Issued a cash dividend.

_____9. Amortization of intangible assets was $10,000.

_____10. Purchased 100 shares of Apple Computer common stock for $13,000.

Question #3 (2 points) For the following activities, indicate in which section, if any, of the cash flow statement, in they would appear:

A) Operating. B) Investing. (C) Financing.

(D) Non-cash Investing and Financing Activities (E) Would not appear.

_____1. Redeemed bonds payable by issuing preferred stock.

_____2. Purchased treasury stock.

_____3. Collected accounts receivable.

_____4. Made cash sales.

_____5. Acquired machinery for cash.

_____6. Issued preferred stock for cash.

_____7. Borrowed funds from the bank and issued a three-year note.

_____8. Sold office equipment for cash.

_____9. Paid a dividend.

____10. Loss on sale of long-term assets.

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Question #4 (4 points)

The following information is available for the Sydney Company:

Sydney Company

Income Statement

For the Year Ended December 31, 2014

Service Revenue $ 900,000

Operating Expenses 700,000

Net Income before Income Tax $ 200,000

Income Tax Expense 80,000

Net Income $ 120,000

The following balance sheet information is also available for 2014 and 2013

2014 2013

Cash $ 330,000 $ 70,000

Accounts Receivable 120,000 100,000

Merchandise Inventory 40,000 50,000

Prepaid Rent 0 10,000

Accounts Payable 70,000 60,000

Income Taxes Payable 10,000 15,000

In addition the following transactions took place during 2014:

1. Common stock was issued for $100,000 cash.

2. Long-term investments were sold for $50,000.

3. Cash dividends of $80,000 were paid.

4. Operating expenses included a $25,000 loss on the sale of investments and $30,000 depreciation.

Required:

Prepare in good form for Sydney Company, a cash flow statement for 2014 using the indirect method.