Question

1. Given the following activities:

       

       

       Purchase of machinery                                    $175,000

       Repayment of bank loans                                    75,000

       Sale to customer or account                                60,000

       Payment on mortgage payable                         200,000

       Payment to suppliers                                           65,000

       Purchase of30 day treasury bill                           15,000

The cash outflows for investing and financing activities were

a) investing $175,000; financing $310,000.

b) investing $190,000; financing $310,000.

c) investing $175,000; financing $275,000

d) investing $190,000; financing $275,00

2. Information on a company’s cash flows is used for all of the following, except?

a) estimate the company’s future cash requirements.

b) evaluate the potential for the company to be able to pay dividends in the future.

c) assess the company’s ability to repay debt in the future.

d) evaluate a company’s liquidity (i.e., the value of a company’s liquid assets in comparison to its short-term debt obligations).

3. Under the indirect approach, adjustments must be made to net income in the operations section for all of the following items, except

a) loss on the sale of land.

b) gain on the sale of equipment.

c) proceeds for the issuance of preferred shares.

d) depreciation

4. Public companies cannot pay a dividend on the date of declaration?

a) True

b) False

Answer 1

Investing activities
Purchase of machinery	$(175,000)
Cash flows from Investing activities	$(175,000)

Financing activities
Repayment of bank loans	$(75,000)
Payment of mortgage payable	$(200,000)
Cash flows from financing activities	$(275,000)

The answer is Option c.

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The answer is Option d.

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The answer is Option c.

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The answer is Option a.