This assignment is part of the instructor designated points. A hardcopy must be submitted at the
beginning of your class. Late submissions will not be accepted. The assignment is late (1) after the
assignment is collected, (2) your professor asks if there are any more submissions, and (3) no one
offers a submission. No assignment will be accepted by email or any electronic method. This
assignment is due on Monday (April 21, 2014). Circle the letter of the best answer. This assignment is
worth eight (8) points. GIVING OR RECEIVING ANY ASSISTANCE ON THIS ASSIGNMENT IS CHEATING.
1.
Which of the following would not create a cash flow?
a.
Amortization of a patent.
b.
Sale of equipment at book value.
c.
A company purchased some of its own stock from a stockholder.
d.
Payment of a cash dividend.
Correct answer is A.
The journal entry to record amortization of a patent is:
Amortization Expense
Patent
XXXX
XXXX
Cash is neither debited nor credited. Therefore no cash flow results.
Each of the other three choices creates a cash flow.
The journal entry for B would be:
Accumulated Depreciation-Equipment
Cash
Equipment
XXXX
XXXX
XXXX
The journal entry for C would be:
Treasury Stock
Cash
XXXX
XXXX
The journal entry for D would be:
Dividends Payable
Cash
2.
XXXX
XXXX
Which of the following would not create a cash flow from operating activities?
a.
Paying employee salaries.
b.
Paying income taxes.
c.
Paying interest.
1
d.
e.
Paying a supplier.
Paying a cash dividend.
Correct Answer is E.
Paying a cash dividend is a financing activity.
The other four choices are all operating activities.
3.
DMG Company provided the following information pertaining to its 2014 operations.
Net Income
Accounts receivable decreased
Prepaid insurance increased
Depreciation expense was
Wages payable decreased
Unearned revenue increased
$100,000
30,000
2,000
5,000
4,000
10,000
DMG Company’s net cash inflow from operating activities is
a.
b.
c.
d.
e.
$ 61,000.
$129,000.
$139,000.
$147,000.
$151,000.
Correct Answer is C.
Net Income
Plus decrease in accounts receivable
Minus increase in prepaid insurance
Plus depreciation expense
Minus decrease in wages payable
Plus increase in unearned revenue
Net Cash Inflow from Operating Activities
4.
$100,000
30,000
(2,000)
5,000
(4,000)
10,000
$139,000
DMG Company provided the following information for its 2014 operations:
Cash inflow from operating activities
Accounts receivable decreased
Prepaid insurance increased
Depreciation expense was
Wages payable decreased
Unearned revenue increased
$100,000
30,000
2,000
5,000
4,000
10,000
2
What was DMG Company’s net income for 2014?
a.
b.
c.
d.
e.
$ 61,000.
$129,000.
$139,000.
$147,000.
$151,000.
Correct Answer is A.
Net Income
Plus decrease in accounts receivable
Minus increase in prepaid insurance
Plus depreciation expense
Minus decrease in wages payable
Plus increase in unearned revenue
Net Cash Inflow from Operating Activities
??????
30,000
(2,000)
5,000
(4,000)
10,000
$100,000
Therefore Net Income = Net Cash Inflow from Operating Activities minus increase in unearned
revenue plus decrease in wages payable minus depreciation expense plus increase in prepaid
insurance minus decrease in accounts receivable.
Net Income = $100,000 - $10,000 + $4,000 - $5,000 + $2,000 - $30,000
Net Income = $61,000
5.
DMG Company had a balance in Accounts Receivable of $100,000 on January 1, 2014 and
$90,000 on December 31, 2014. During 2014 DMG Company had total sales of $1,000,000.
$800,000 of the sales were credit sales and $200,000 were cash sales. How much cash did DMG
Company collect from customers during 2014?
a.
$ 790,000.
b.
$ 810,000.
c.
$ 990,000.
d.
$1,010,000.
Correct answer is D.
Cash collected from customers from credit sales = Credit Sales plus decrease in accounts
receivable
Cash collected from customers from credit sales = $800,000 + $10,000 = $810,000
3
Total cash collected from customers = Cash collected from customers from credit sales plus
cash collected from customers for cash sales
Total cash collected from customers = $810,000 + $200,000 = $1,010,000.
6.
DMG Company had operating expenses (selling, general, and administrative expenses) of
$1,000,000 in 2014. DMG Company’s balance sheet reported accrued liabilities of $1,000,000
and $1,300,000 for 2014 and 2013, respectively. DMG Company paid $400,000 in prepaid
expenses during 2014. How much total cash was paid to employees and suppliers of services
during 2014?
a.
$1,000,000.
b.
$1,100,000.
c.
$1,400,000.
d.
$1,700,000.
Correct Answer is D.
Cash paid to suppliers = Operating expenses plus the decrease in accrued liabilities plus cash
paid for prepaid expenses
Cash paid to suppliers = $1,000,000 + $300,000 + $400,000 = $1,700,000
7.
DMG Company provided the following information for 2014 (all transactions are cash
transactions).
Purchase of Land
Proceeds from Issuing Bonds Payable
Inventory purchases
Treasury stock purchases
Dividends paid to preferred stockholders
Proceeds from issuance of preferred stock
Proceeds from sale of equipment
Equipment purchases
$300,000
400,000
900,000
50,000
100,000
800,000
700,000
900,000
The net cash provided (used) by investing activities in 2014 is
a.
$ (500,000).
b.
$ 500,000.
c.
$(1,050,000).
d.
$ 1,050,000.
Correct Answer is A.
Purchase of Land
Proceeds from Issuing Bonds Payable
$300,000
400,000
4
Investing
Financing
Inventory purchases
Treasury stock purchases
Dividends paid to preferred stockholders
Proceeds from issuance of preferred stock
Proceeds from sale of equipment
Equipment purchases
900,000
50,000
100,000
800,000
700,000
900,000
Operating
Financing
Financing
Financing
Investing
Investing
Purchase of Land is an outflow
(300,000)
Proceeds from sale of equipment is an inflow 700,000
Equipment purchases is an outflow
(900,000)
Net Cash Outflow from Investing Activities
$500,000
8.
DMG Company provided the following information for 2014 (all transactions are cash
transactions).
Purchase of Land
Proceeds from Issuing Bonds Payable
Inventory purchases
Treasury stock purchases
Dividends paid to preferred stockholders
Proceeds from issuance of preferred stock
Proceeds from sale of equipment
Equipment purchases
$300,000
400,000
900,000
50,000
100,000
800,000
700,000
900,000
The net cash provided (used) by financing activities in 2014 is
a.
$ (500,000).
b.
$ 500,000.
c.
$(1,050,000).
d.
$ 1,050,000.
Correct Answer is D.
Purchase of Land
Proceeds from Issuing Bonds Payable
Inventory purchases
Treasury stock purchases
Dividends paid to preferred stockholders
Proceeds from issuance of preferred stock
Proceeds from sale of equipment
Equipment purchases
$300,000
400,000
900,000
50,000
100,000
800,000
700,000
900,000
5
Investing
Financing
Operating
Financing
Financing
Financing
Investing
Investing
Proceeds from Issuing Bonds Payable is a cash inflow
Treasury Stock purchases is a cash outflow
Dividends paid to preferred stockholders is an outflow
Proceeds from issuance of preferred stock is an inflow
Net Cash Inflow from Investing Activities
6
$ 400,000
(50,000)
(100,000)
800,000
$1,050,000