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Multiple choice relating to Statement of Cash Flows

1. Newby Corporation's 2000 net income is smaller than net cash flow
from operating activities. Which of the following would not be an
explanation of why net income is smaller than net cash flow from
operating activities?
a. Newby paid dividends to shareholders during 2000.
b. Newby's accounts payable increased during 2000.
c. Newby recognized depreciation expense in 2000.
d. Newby sold machinery at a loss in 2000.
2. Rent expense in Lailani Company's 2001 income statement is
$360,000. If Prepaid Rent was $45,000 at December 31, 2000, and is
$70,000 at December 31, 2001, the cash paid for rent during 2001 is:
a. $360,000
b. $385,000
c. $335,000
d. $430,000
Use the following to answer questions 28-31:
An analysis of Clifton Corporation's Investment in Marketable
Securities account during 2000 disclosed the following:
Debit entries $375,000
Credit entries 200,000
Clifton's 2000 income statement included a $20,000 loss on sale of
marketable securities and $15,000 dividend income from marketable
securities. All payments and proceeds relating to marketable
securities transactions were in cash.
3. Refer to the above data. The amount of cash paid by Clifton
Corporation in 2000 for the purchase of marketable securities was:
a. $395,000
b. $375,000
c. $355,000
d. $360,000
4. Refer to the above data. The cash proceeds received by Clifton
Corporation in 2000 for the sale of marketable securities was:
a. $220,000
b. $200,000
c. $195,000
d. $180,000
5. Refer to the above data. How should the transactions involving
marketable securities be classified in Clifton's statement of cash
flows for 2000?
a. The purchase of marketable securities, sales of marketable
securities, and receipt of dividends are all classified as investing
activities.
b. The purchase and the sale of marketable securities are classified
as investing activities; the receipt of dividends is classified as an
operating activity.
c. The purchase of marketable securities is classified as an
investing activity; the sale of marketable securities is classified
as a financing activity; the receipt of dividends is classified as an
operating activity.
d. The purchase and the sale of marketable securities are classified
as investing activities; the receipt of dividends is classified as a
financing activity.

Solution Preview

1. To answer this question we have to look at transactions that affect the net income and cash flow and that which do not affect. Here a c and d affect either the netincome or the cash flow. But b, changes in accounts payable does not have any effect on ...

Solution Summary

The solution explains how to calculate the cash flow impact given the changes in the balance sheet and the income statement.

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