Question

Which of the following would not be subtracted from net income in the operating section of...

Which of the following would not be subtracted from net income in the operating section of an indirect cash flow statement?

A decrease in Interest Payable
An increase in Unearned Revenue
An increase in Merchandise Inventory
An increase in Prepaid Expenses

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Gamma Corp. has provided the following information about one of its products:

January 1 – Beginning Inventory 240 units at $148 per unit

June 5 – Purchased 440 units at $168 per unit

November 10 – Purchased 140 units at $208 per unit

During the year, the company sold 480 units.

What is ending inventory (rounded) using the average cost method?

$73,920.
$71,920.
$57,453.
$59,452.

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FTD paid $4,500 for six months’ rent in advance on January 1, 2018. The company recorded this transaction by increasing the balance in the Prepaid Rent account. The balance in the Prepaid Rent account as of March 1, 2018, will be

$2,250
$2,000
$3,000
$1,500
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Answer #1

Which of the following would not be subtracted from net income in the operating section of an indirect cash flow statement?

An increase in Unearned Revenue

What is ending inventory (rounded) using the average cost method?

(240 x 148) + ( 440 x168 ) + ( 140 x 208 ) = 138560/(148+440+140) = 168.98

Closing Stock = 820 - 480 = 340 x 168.98 = 57453

The balance in the Prepaid Rent account as of March 1, 2018, will be

Rent for 2 months Jan and Feb = 4500 x 2/6 = 1500

Prepaid rent balance = 4500 - 1500 = 3000

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