Question #1 (2 points ) For the following account activities, indicate the adjus
ID: 2581535 • Letter: Q
Question
Question #1 (2 points) For the following account activities, indicate the adjustment to be made, if any, to cash flows in the operating section of the cash flow statement. Assume that the statement is prepared on the indirect method:
Is this correct?
(A) Increase net income (B) Decrease net income
(C) No adjustment (investing activity). (D) No adjustment (financing activity)
___A__1. Accounts receivable decreased by $5,000 from last year to this year.
___A__2. Depreciation was $30,000.
___A__3. Prepaid Expenses decreased $10,000.
___A__4. Accounts Payable increased $20,000.
__B___5. Merchandise inventory decreased by $15,000.
___C__6. Office furniture increased $8,000.
___C__7. Sold a building at a gain of $5,000.
___D__8. Issued a cash dividend.
__A___9. Amortization of intangible assets was $10,000.
__D___10. Purchased 100 shares of Google common stock for $15,000.
Explanation / Answer
Question #1 (2 points) For the following account activities, indicate the adjustment to be made, if any, to cash flows in the operating section of the cash flow statement. Assume that the statement is prepared on the indirect method:
1. Accounts receivable decreased by $5,000 from last year to this year. (A) Increase net income 2. Depreciation was $30,000. (A) Increase net income 3. Prepaid Expenses decreased $10,000. (A) Increase net income 4. Accounts Payable increased $20,000. (A) Increase net income 5. Merchandise inventory decreased by $15,000. (A) Increase net income 6. Office furniture increased $8,000. (C) No adjustment (Investing activity) 7. Sold a building at a gain of $5,000. (B) Decrease net income 8. Issued a cash dividend. (D) No adjustment (financing activity) 9. Amortization of intangible assets was $10,000. (A) Increase net income 10. Purchased 100 shares of Google common stock for $15,000. (D) No adjustment (financing activity)