Question 9 4 pts The choice between the direct and indirect method for reporting cash flows from operating activities O generally results in different amounts being reported for cash flows from operations. affects all three sections of the statement of cash flows. is determined by the industry in which the company operates. affects only the operating activities section of the statement of cash flows. Question 11 4 pts Which of the following describes the reasoning behind the treatment of depreciation expense when preparing the statement of cash flows using the indirect method? Since depreciation expense is added to determine net income.it should be subtracted when adjusting net income under the indirect method. Depreciation expense represents cash received and therefore should be added to net income. Depreciation expense represents cash saved for future purchases of equipment and therefore it must be subtracted from net income under the indirect method. Depreciation expense is initially subtracted from revenues to determine accrual basis net income, but does not affect cash. It is added back to net income in order to convert net income to its cash basis. LLLLL 4 pts Jack Straw Landscaping is trying to decide whether to lease or purchase a piece of equipment needed for the next five years. The equipment would cost $100,000 to purchase and maintenance costs would be $10,000 per year. After five years, Jack Straw Landscaping estimates it could sell the equipment for $30,000. If Jack Straw Landscaping leases the equipment, it would pay! $30,000 each year. If the discount rate for Jack Straw Landscaping is 12%, they should: lease the equipment, as the net present value cost is about $11,000 less. buy the equipment, as the net present value of cost is about $11,000 less. lease the equipment, as the net present value of cost is about $28,000 less. I buy the equipment, as net present value of cost is about $30,000 less Question 25 4 pts The Michael Scott Paper Company's net cash provided by operating activities was $115,000. The company reported net income of $95,000, capital expenditures of $65,000, and paid dividends of $17,000. The company's free cash flow was $292,000 $13,000 O $33,000 $128,000 RUGSLUIT 24 4 pts Which of the following would be classified as a financing activity on the statement of cash flows? O Paying suppliers for inventory purchases. O Interest paid to lenders. O Lending money to another company. Issuing long-term bonds. Question 23 4 pts Eyes of the World Lens Company is considering investing in a new machine that costs $84,900 and has an estimated useful life of 12 years and no salvage value. The machine will generate $15,000 annually in net cash inflows. The internal rate of return is O 8% 10% O 12% 14% Question 22 4 pts Which of the following describes the reasoning behind the treatment of an increase in accounts receivable when adjusting net income under the indirect method when preparing the operating activities section of the statement of cash flows? O An increase in accounts receivable means that accounts payable exceeds accounts receivable. An increase in accounts receivable means that sales revenue was greater cash collected. An increase in accounts receivable means that sales revenue was less than cash collected. An increase in accounts receivable means that cash collected was greater than what was expected based on estimated bad debts. Question 20 4 pts Misty Mountain Shop is considering purchasing a new piece of equipment that would be used for 6 years. The cost savings from the equipment would result in an annual increase in cash flow of $200,000. The equipment will have an initial cost of $900,000 and a salvage value of $100,000 at the end of its useful life. If the discount rate is 8%, what is the approximate net present value of purchasing this new piece of equipment? O $87,600 $703,985 O ($900,000) $24,580 4 pts 4 pts Which of the following describes the reasoning behind the treatment of depreciation expense when preparing the statement of cash flows using the indirect method? Since depreciation expense is added to determine net income, it! should be subtracted when adjusting net income under the indirect method. O Depreciation expense represents cash received and therefore should be added to net income. Depreciation expense represents cash saved for future purchases of equipment and therefore it must be subtracted from net income under the indirect method. Depreciation expense is initially subtracted from revenues to determine accrual basis net income, but does not affect cash. It is added back to net income in order to convert net income to its cash basis
