Question

Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Entity A's income statement reveals depreciation expense of $10,000.

		Cash Flows From Operating Activities–Add to Net Income
		Cash Flows From Operating Activities–Deduct from Net Income
		Cash Flows From Investing Activities
		Cash Flows From Financing Activities
		Non-cash

Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Entity A acquired equipment by signing an installment note payable in favor of the dealer.

		Cash Flows From Operating Activities–Add to Net Income
		Cash Flows From Operating Activities–Deduct from Net Income
		Cash Flows From Investing Activities
		Cash Flows From Financing Activities
		Non-cash

Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Entity A issued common stock to investors for cash.

		Cash Flows From Operating Activities–Add to Net Income
		Cash Flows From Operating Activities–Deduct from Net Income
		Cash Flows From Investing Activities
		Cash Flows From Financing Activities
		Non-cash

Bonds that may reacquired by the issuer (from the investors) prior to maturity are:

		secured bonds
		debentures
		convertible bonds
		callable bonds

Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Merchandise inventory decreased during the year.

		Cash Flows From Operating Activities–Add to Net Income
		Cash Flows From Operating Activities–Deduct from Net Income
		Cash Flows From Investing Activities
		Cash Flows From Financing Activities
		Non-cash

An advantage of issuing bonds payable to finance a plant expansion (rather than common stock) is that:

		bond interest is tax deductible.
		earnings per share may be higher
		common shareholders retain their same percentage of ownership
		all of the choices are correct.

Entity A prepares its Statement of Cash Flows in accordance with US GAAP using the indirect method. Indicate the reporting of the following transaction or event by the major categories on the statement: Entity A's income statement reveals a loss on the sale of a patent of $5,000 (answer only for the loss).

		Cash Flows From Operating Activities–Add to Net Income
		Cash Flows From Operating Activities–Deduct from Net Income
		Cash Flows From Investing Activities
		Cash Flows From Financing Activities
		Non-cash

On January 1, 2023, Entity B issued $600,000 of 5%, 5-year bonds at 98. The bonds pay interest annually on December 31 and Entity D amortizes any premium or discount using the straight-line method. What is the annual interest expense?

		$32,400.
		$700,000.
		$32,600.
		$35,000.

Answer 1