Multiple Choice Questions

1. Which item is added to net income when computing cash flows from operating activities?

a. Gain on the sale of property, plant, and equipment

b. Increase in wages payable

c. Increase in inventory

d. Increase in prepaid rent

2. Cornett Company reported the following information: cash received from the issuance of common stock, $125,400; cash received from the sale of equipment, $23,700; cash paid to purchase an investment, $13,500; cash paid to retire a note payable, $50,000; cash collected from sales to customers, $248,000. What amount should Cornett report on its statement of cash flows as net cash flows from investing activities?

a. $10,200

b. $75,400

c. $85,600

d. None of the above

3. Use the same information as in Multiple-Choice Exercise 11-9. What amount should Cornett report on its statement of cash flows as net cash flows from financing activities?

a. $10,200

b. $75,400

c. $85,600

d. None of the above

4. Chasse Building Supply Inc. reported net cash provided by operating activities of $256,000, capital expenditures of $124,900, cash dividends of $33,200, and average maturities of long-term debt over the next five years of $134,300. What is Chasse’s free cash flow and cash flow adequacy ratio?

a. $97,900 and 0.73, respectively

b. $97,900 and 1.91, respectively

c. $131,100 and 0.98, respectively

d. $164,300 and 1.22, respectively

5. Smoltz Company reported the following information for the current year: cost of goods sold, $347,000; increase in inventory, $14,700; and increase in accounts payable, $8,200. What is the amount of cash paid to suppliers that Smoltz would report on its statement of cash flows under the direct method?

a. $324,100

b. $340,500

c. $353,500

d. $369,900

6. Romo Inc. reported the following information for the current year: operating expenses, $210,000; decrease in prepaid expenses, $4,900; and increase in accrued liabilities, $6,100. What is the amount of cash paid for operating expenses that Romo would report on its statement of cash flows under the direct method?

a. $199,000

b. $208,800

c. $211,200

d. $221,000