Expert Answers

Which of the following are the activities that are included in the operating activities section of the statement of cash flows?
Activities that obtain the cash needed to launch and sustain the business are included in the operating activities section.
Activities that create revenue or expenses in the entity’s major line of business are included in the operating activities section.
Activities that increase or decrease long-term assets are included in the operating activities section.
Activities that pertain to construction of new facilities are included in the operating activities section.

Avatar Company uses the indirect method to prepare the statement of cash flows. Please refer to the following section of the comparative balance sheet:

2014
2013
Increase/decrease
Cash
$ 33,000
$ 18,000
$15,000
Accounts receivable
22,000
35,000
(13,000)
Inventory
170,000
115,000
55,000
Total assets
$225,000
$168,000
$57,000

The change in inventory will be shown as a positive cash flow in the adjustments to Net income.
True
False

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.
Net cash flows from operating activities: $32,000 positive
Net cash flows from investing activities: $38,000 negative
Net cash flows from financing activities: $ 9,000 positive
How much was the net change in cash during the year?
$ 3,000 negative
$79,000 positive
$ 3,000 positive
$61,000 negative
None of these is correct

A company has $510,000 in Average common stockholders’ equity, Net income of $312,000, and Preferred dividends paid of $15,000. What is the rate of return on common stockholders’ equity?
58.2%
61.2%
59.3%
62.0%

Harrison Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014:
Retained earnings, beginning balance: $125,000
Retained earnings, ending balance: $117,000
Company reported net loss of $8,000 for the year.

A company reports total assets of $525,000 and stockholders’ equity of $395,000. Which of the following is the debt ratio?
0.29
0.71
0.55
0.25
None of these is correct

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following information for the year 2014.
Net cash flows from operating activities: $32,000 positive
Net cash flows from investing activities: $38,000 negative
Net cash flows from financing activities: $ 9,000 positive
If the beginning cash balance is $18,000, what would the ending cash balance be?
$21,000
$18,000
$ 3,000
$15,000
None of these is correct

Operating activities include activities that affect long-term liabilities and stockholders’ equity.
True
False

Peartree Company provides the following income statement for the year 2014:

Sales revenue $240,000
Cost of goods sold 110,000
Gross profit $130,000
Operating expenses
Salary expense
45,000
Depreciation expense
12,000
Other operating expenses
23,000
Total operating expenses
80,000
Operating income
50,000
Gain on sale of plant assets
5,000
Interest expense
(1,000)
Net income before income tax
$54,000
Income tax expense
5,000
Net income (loss)
$49,000

How much is the times-interest-earned ratio?
0.02
49.0
55.0
0.25
None of these is correct
What was the amount of dividends paid during the year?
$5,000
$2,000
Zero
$3,000
None of these is correct

A company reported the following amounts of net income:
2011
$18,000
2012
$24,000
2013
$26,000

Which of the following is the percentage change in net income from 2011 to 2012?
33.33%
8.33%
10.00%
30.00%
None of these is correct