Q5. The net income for Miller Bat Company was $3 million for the year ended December 31, 2004. Additional information is as follows:

• Depreciation on fixed assets $1,500,000

• Gain from cash sales of land 200,000

• Increase in accounts payable 300,000

• Dividends paid on preferred stock 400,000

The net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2004 is:

A)   $4,800,000.

B)   $4,600,000.

C)   $4,200,000.

Q6. Galaxy, Inc.’s balance sheet as of December 31, 2004 included the following information (in $):

	12-31-03	12-31-04
Accounts Payable	300,000	500,000
Dividends Payable	200,000	300,000
Common Stock	1,000,000	1,000,000
Retained Earnings	700,000	1,000,000

Galaxy’s net income in 2004 was $800,000. What was Galaxy’s cash flow from financing (CFF) in 2004?

A)   -$300,000.

B)   -$500,000.

C)   -$400,000.

Q7. Determine the cash flow from investing given the following table:

Item	Amount
Cash payment of dividends	$30
Sale of equipment	$25
Net income	$25
Purchase of land	$15
Increase in accounts payable	$20
Sale of preferred stock	$25
Increase in deferred taxes	$5

A)   -$5.

B)   $10.

C)   -$10.

Q8. Which of the following statements regarding depreciation expense in the cash flow statements is TRUE? Depreciation is added back to net income when determining CFO using:

A)   the indirect method.

B)   either the direct or indirect methods.

C)   the direct method.

答案和详解如下：

Q5. The net income for Miller Bat Company was $3 million for the year ended December 31, 2004. Additional information is as follows:

• Depreciation on fixed assets $1,500,000

• Gain from cash sales of land 200,000

• Increase in accounts payable 300,000

• Dividends paid on preferred stock 400,000

The net cash provided by operating activities in the statement of cash flows for the year ended December 31, 2004 is:

A)   $4,800,000.

B)   $4,600,000.

C)   $4,200,000.

Correct answer is B)

$3,000,000 + $1,500,000 − $200,000 + $300,000 = $4,600,000.

Q6. Galaxy, Inc.’s balance sheet as of December 31, 2004 included the following information (in $):

Galaxy’s net income in 2004 was $800,000. What was Galaxy’s cash flow from financing (CFF) in 2004?

A)   -$300,000.

B)   -$500,000.

C)   -$400,000.

Correct answer is C)

Dividends declared in 2004 are net income less the increase in retained earnings ($800,000 - $300,000 = $500,000). Dividends declared less the increase in dividends payable is dividends paid ($500,000 – ($300,000 - $200,000) = $400,000). This is a cash outflow so it is a negative number. Dividends are always cash flow from financing. Note that accounts payable changes are included in cash flow from operations (CFO).

Q7. Determine the cash flow from investing given the following table:

A)   -$5.

B)   $10.

C)   -$10.

Correct answer is B)

CFI = Sale of Equipment (+25) + Purchase of Land (–15) = $10.

Q8. Which of the following statements regarding depreciation expense in the cash flow statements is TRUE? Depreciation is added back to net income when determining CFO using:

A)   the indirect method.

B)   either the direct or indirect methods.

C)   the direct method.

Correct answer is A)

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.

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