Santa Fe Company was started on January 1, Year 1, when it acquired $8,500 cash by issuing common stock. During Year 1, the company earned cash
revenues of $4,250, paid cash expenses of $3,000, and paid a cash dividend of $550. Based on this information, which of the following statements is true?
The Year 1 income statement would show net income of $700.
The Year 1 statement of cash flows would show a net cash flow from financing activities of $7,950.
The Year 1 statement of cash flows would show net cash inflow from operating activities of $8,500.
The balance sheet at December 31, Year 1 would show total stockholders’ equity of $12,750.
$8,500 cash inflow from issuing stock − $550 cash outflow for dividends = $7,950 net cash inflow from financing activities
References
Multiple Choice Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
Difficulty: 2 Medium Learning Objective: 01-08
Prepare a statement of cash
flows.
95.
Award: 1.00 point
96.
Award: 1.00 point
97.
Award: 1.00 point
Santa Fe Company was started on January 1, Year 1, when it acquired $9,000 cash by issuing common stock. During Year 1, the company earned cash
revenues of $4,500, paid cash expenses of $3,750, and paid a cash dividend of $250. Based on this information, which of the following statements is true?
The balance sheet at December 31, Year 1 would show total stockholders’ equity of $8,750.
The Year 1 income statement would show net income of $500.
The Year 1 statement of cash flows would show net cash inflow from operating activities of $4,500.
The Year 1 statement of cash flows would show a net cash flow from financing activities of $8,750.
$9,000 cash inflow from issuing stock − $250 cash outflow for dividends = $8,750 net cash inflow from financing activities
References
Multiple Choice Learning Objective: 01-07
Prepare an income statement, a
statement of changes in
stockholders equity, and a
balance sheet.
Difficulty: 2 Medium Learning Objective: 01-08
Prepare a statement of cash
flows.
Robertson Company paid $1,850 cash for rent expense. As a result of this business event:
Total stockholders’ equity decreased.
Liabilities decreased.
The net cash flow from operating activities decreased.
Both total stockholders’ equity and net cash flow for operating activities decreased.
Paying cash for rent expense decreases assets (cash) and decreases stockholders’ equity (expense decreases retained earnings). Liabilities are not affected. It
is reported as a cash flow for operating activities on the statement of cash flows.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Show how business events affect the
accounting equation.
Mayberry Company paid $30,000 cash to purchase land. As a result of this business event:
Total stockholders’ equity was not affected.
The net cash flow from investing activities decreased.
Total assets were not affected.
Total assets and total stockholders’ equity were not affected, and net cash flow from investing activities decreased.
Paying cash to purchase land is an asset exchange transaction that decreases one asset (cash) and increases another asset (land); therefore, there is no overall
effect on total assets, total liabilities, or total stockholders’ equity. It is reported as a cash outflow for investing activities on the statement of cash flows.
References
Multiple Choice Difficulty: 2 Medium Learning Objective: 01-04 Show how business events affect the
accounting equation.
98.
Award: 1.00 point
Lexington Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)
1) Acquired $4,200 cash from issuing common stock.
2) Borrowed $2,800 from a bank.
3) Earned $3,700 of revenues.
4) Incurred $2,520 in expenses.
5) Paid dividends of $520.
Lexington Company engaged in the following transactions during Year 2:
1) Acquired an additional $1,100 cash from the issue of common stock.
2) Repaid $1,720 of its debt to the bank.
3) Earned revenues, $5,100.
4) Incurred expenses of $2,990.
5) Paid dividends of $1,360.
What is the net cash flow from financing activities on Lexington's statement of cash flows for Year 2?
$260 outflow
$260 outflow
$1,100 inflow
$1,980 outflow
$1,980 inflow
$1,100 cash inflow from issuing stock − $1,720 cash outflow for loan repayment − $1,360 cash outflow for dividends = $1,980 cash outflow for financing