The following are four items that may appear in operational activities prepared under the indirect method. For each, type "A" if the item is added to net income and enter "B" if the item is subtracted from net income. Type "C" if it does not affect operational activities.

6. Increase in dividends payable.

7. The cost of goods sold during the year amounted to $120,000. The initial inventory was $22,000 and the final inventory was $17,500. The balance of accounts payable at the beginning of the year is $29,000 and at the end of the year it was $31,000. The cash paid to suppliers was:

a. $113,500 

b. $115,500 

c. $120,000 

d. $126,500

8. A company made the followingjornal entries during the year:

1. To record the purchase of an investment in common shares

Investment in common stock 300,000

Cash 300,000

2. To recognize investment income during the year

Investment in common stock 60,000

Investment revenue 60,000

3. To score dividends collected on investment

Cash 20,000

Investment in common stock 20,000

The company will present its EFE using the indirect method for operational activities. The effect of these transactions on operational activities shall be:

1. None; will not appear in EFE's operational activities
2. Dividends received $20,000 are added
3. Excess recognized income on dividends received is subtracted, $40,000
4. Subtract $280,000 ($300,000 - $20,000)

9. If the undertaking of the previous question will submit its EFE using the direct method for operational activities. The effect of these transactions on operational activities shall be:

1. None; will not appear in EFE's operational activities
2. Dividends received $20,000 are added
3. Excess recognized income on dividends received is subtracted, $40,000
4. Subtract $280,000 ($300,000 - $20,000)

10. The following two items appear in an undertaking's income and expense statement, including:

• Depreciation expense for the year $75,000
• Loss on sale of equipment 25,000

How are these two items presented in the operational activities of the company's EFE (SCF), which uses the indirect method?

1. These two games DO NOT affect cash. Therefore, they are not presented in the EFE.
2. They do not affect operational activities but investment activities.
3. $100,000 is added to net income or net loss.
4. Add $50,000 to net income or net loss.

Answer rating: 100% (QA)

2 Option C 100000 is added to net income of net loss Depreciation is a non cash expense Hence it is ... View the full answer