Question

Multiple Choice Question 58

An analysis of the machinery accounts of Sunland Company for 2018 is as follows:

						Machinery, Net of
				Accumulated		Accumulated
		Machinery		Depreciation		Depreciation
Balance at January 1, 2018		$490000		$126000		$364000
Purchases of new machinery in 2018 for cash		210000		—		210000
Depreciation in 2018		—		102000		(102000	)
Balance at Dec. 31, 2018		$700000		$228000		$472000

The information concerning Sunland's machinery accounts should be shown in Sunland's statement of cash flows (indirect method) for the year ended December 31, 2018, as a(n)

$210000 decrease in cash flows from investing activities.

subtraction from net income of $102000 and a $210000 decrease in cash flows from financing activities.

addition to net income of $102000 and a $210000 decrease in cash flows from investing activities.

$102000 increase in cash flows from financing activities.

Multiple Choice Question 109

Concord Corporation's comparative balance sheet at December 31, 2018 and 2017 reported accumulated depreciation balances of $1253000 and $890000, respectively. Property with a cost of $74900 and a carrying amount of $57100 was the only property sold in 2018. Depreciation charged to operations in 2018 was

$380800.

$420100.

$345200.

$363000.

Multiple Choice Question 43

On January 1, 2016, Wildhorse Co., purchased a machine (its only depreciable asset) for $870000. The machine has a 5-year life, and no salvage value. Sum-of-the-years'-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2019, for financial statement reporting, Wildhorse decided to change to the straight-line method for depreciation of the machine. Assume that Wildhorse can justify the change.

Wildhorse's income before depreciation, before income taxes, and before the cumulative effect of the accounting change (if any), for the year ended December 31, 2019, is $720000. The income tax rate for 2019, as well as for the years 2016-2018, is 40%. What amount should Wildhorse report as net income for the year ended December 31, 2019?

$180000

$379800

$432000

$369800

Answer 1

58)It is option C

Option A correct since the purchase of machinery is a investing activity and it reduces cash

Option B incorrect subtraction from net income of $102000 is correct but the other part $210000 decrease in cash flows from financing activities is investing activity and not financing activity

Option C is correct as in indirect method we will add back depreciation to net income and purchase of machinery is a investing activity

Option D incorrect since it is investing activity and not financing activity