QUESTION: 1697

In a statement of cash flows done using the indirect method all of the following would be included as cash flows from investing activities except for:

purchase of fixed assets.
sale of fixed assets.
all would be included as cash flows from investing activities.
gain on sale of equipment.

Answer(s): D

Explanation:

Gains and losses on the sale of fixed assets are included in cash flows from operating activities. The amount included in the investing activities area is the amount of the asset on the books of the company.

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QUESTION: 1698

A firm has net total sales of 16,000 and administrative cash expense of 4,500. It paid taxes in the amount of 2,300 and had an increase in accounts payable of 400. The depreciation expense was estimated at 1,200.
Then, the firm's operating cash flow was ________.

9,600
8,000
9,200
none of these answers

Answer(s): A

Explanation:

The increase in accounts payable implies that some of the operating expenses were on credit and did not cause a cash outflow. Therefore, this increase must be added to the net sales. Further, depreciation should be ignored since it is a non-cash expense and its effect on taxes is already impounded in the taxes of 2,300.
Hence, the total operating cash flow = 16,000 + 400 - 4,500 - 2,300 = 9,600

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QUESTION: 1699

Which of the following could increase outstanding capital stock?

Conversion of bonds.
All of these answers.
The exercise of stock options.
The exercise of warrants.
The payment of stock dividends.

Answer(s): B

Explanation:

All of these answers would cause a firm's capital stock to increase. While the exercise of stock options or warrants offers a price to the buyer that is more favorable than the firm's current market price, these still result in the issuance of new shares. Likewise, the conversion of bonds to stock swaps debt for equity and the payment of stock dividends means that the firm is issuing new shares.

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QUESTION: 1700

A firm's operating cash flow is overstated by 90. Its non-cash expenses were correctly stated, noncash revenues were overstated by 55 and a total of 35 went into reducing outstanding current debt. The firm's tax rate is 40%. Then, the firm's net income is ________.

overstated by 55
overstated by 20
understated by 55
correctly stated

Answer(s): D

Explanation:

operating cash flow = net income + noncash expenses - non-cash revenues - cash reductions in operating accounts

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QUESTION: 1697

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QUESTION: 1698

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QUESTION: 1699

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QUESTION: 1700

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