13.An analyst has gathered the following information about a company:

What is the cash flow from investing?

A)   $130.

B)   $10.

C)   $110.

D)   $20.

14.An analyst has gathered the following information about a company:

What is the cash flow from operations?

A)   $170.

B)   $135.

C)   $156.

D)   $150.

15.Which of the following statements regarding depreciation expense in the cash flow statements is TRUE? Depreciation is:

A)   added back to net income when determining CFO using the direct method.

B)   added back to net income when determining CFO using the indirect method.

C)   considered a cash item.

D)   added back to net income when determining CFO using either the direct or indirect methods.

答案和详解如下：

13.An analyst has gathered the following information about a company:

Income Statement for the Year 2005
Sales		$1,500
Expenses
COGS	$1,300
Depreciation	20
Goodwill	10
Int. Expenses	40
Total expenses		1,370
Income from cont. op.		130
Gain on sale		30
Income before tax		160
Income tax		64
Net Income		$96

Additional Information:
Dividends paid	30
Common stock sold	20
Equipment purchased	50
Bonds issued	80
Fixed asset sold for (original cost of $100 with accumulated depreciation of $70)	60
Accounts receivable decreased by	30
Inventory decreased by	20
Accounts payable increased by	20
Wages payable decreased by	10

What is the cash flow from investing?

A)   $130.

B)   $10.

C)   $110.

D)   $20.

The correct answer was B)  

Purchase of equipment	-$50
Fixed asset sold	$60
CFI	$10

14.An analyst has gathered the following information about a company:

Income Statement for the Year 2004
Sales		$1,500
Expenses
COGS	$1,300
Depreciation	30
Int. Expenses	40
Total expenses		1,370
Income from cont. op.		130
Gain on sale		30
Income before tax		160
Income tax		64
Net Income		$96

Additional Information:
Dividends paid	$30
Common stock sold	20
Equipment purchased	50
Bonds issued	80
Fixed asset sold for (original cost of $100 with accumulated depreciation of $70)	60
Accounts receivable decreased by	30
Inventory decreased by	20
Accounts payable increased by	20
Wages payable decreased by	10

What is the cash flow from operations?

A)   $170.

B)   $135.

C)   $156.

D)   $150.

The correct answer was C)  

Net Income	+$96
Depreciation	+30
Gain on sale of asset	-30
Accts. Rec.	+30
Inventory	+20
Accts. Payable	+20
Wage/Pay	-10
CFO	+$156

15.Which of the following statements regarding depreciation expense in the cash flow statements is TRUE? Depreciation is:

A)   added back to net income when determining CFO using the direct method.

B)   added back to net income when determining CFO using the indirect method.

C)   considered a cash item.

D)   added back to net income when determining CFO using either the direct or indirect methods.

The correct answer was B)

Depreciation is a non-cash expense. Only in the indirect method is depreciation added back to net income when determining CFO because net income is only used in the indirect method and not the direct method. The direct method instead starts with cash sales and works down the income statement.