While calculating cash flows from operating activities using the indirect method, which of the following is added to the net income? Increase in accounts payable Decrease in sundry creditors Decrease in common stock Increase in inventories a 2. Silver Trading Corp. recorded a net income of $200,000 for the year 20X1. For the same period, the company purchased land for $150,000. It sold some of its long term investments for $50,000 during the period. The company also recorded a depreciation of $10,000 on its equipment. Considering the above transactions, Silver's net cash flows from investing activities for the year would be an: inflow of $200,000. inflow of $50,000. outflow of $100,000. outflow of $150,000. c 3. Wordmill Publications purchased a printing machine for $40,000 on January 1, 20X1. On December 31, 20X5, it sold the printing machine for $25,000. The book value of the equipment on the date of sale was $20,000. Assuming that the company used the indirect method while preparing its statement of cash flows, which of the following is true of the treatment of the gain on sale of the printing machine in the cash flow statements? The gain of $5,000 is deducted in the financing activities section of the statement of cash flows. The gain of $5,000 is added in the operating activities section of the statement of cash flows. The gain of $5,000 is added in the cash flows from financing activities section of the statement of cash flows. The gain of $5,000 is deducted in the operating activities section of the statement of cash flows.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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While calculating cash flows from operating activities using the indirect method, which of the following is added to the net income?

Increase in accounts payable
Decrease in sundry creditors
Decrease in common stock
Increase in inventories

2. Silver Trading Corp. recorded a net income of $200,000 for the year 20X1. For the same period, the company purchased land for $150,000. It sold some of its long term investments for $50,000 during the period. The company also recorded a depreciation of $10,000 on its equipment. Considering the above transactions, Silver's net cash flows from investing activities for the year would be an:

inflow of $200,000.
inflow of $50,000.
outflow of $100,000.
outflow of $150,000.

3. Wordmill Publications purchased a printing machine for $40,000 on January 1, 20X1. On December 31, 20X5, it sold the printing machine for $25,000. The book value of the equipment on the date of sale was $20,000. Assuming that the company used the indirect method while preparing its statement of cash flows, which of the following is true of the treatment of the gain on sale of the printing machine in the cash flow statements?

The gain of $5,000 is deducted in the financing activities section of the statement of cash flows.
The gain of $5,000 is added in the operating activities section of the statement of cash flows.
The gain of $5,000 is added in the cash flows from financing activities section of the statement of cash flows.
The gain of $5,000 is deducted in the operating activities section of the statement of cash flows.

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