BGN5 e CH 13 Exam

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BGN 5e Exam Questions - Chapter 13

1. Hathaway Company recorded the following events for the year just ended:

Collection of a loan made to another company $110,000


Dividends paid to shareholders 180,000
Interest paid on notes payable 70,000
Payment of deferred taxes 90,000
Retirement of preferred stock 100,000
Sale of bonds issued by other companies 150,000

The net decrease in cash resulting from financing activities for the year was:
A) $70,000.
B) $90,000.
C) $190,000.
D) $280,000.

Feedback – The correct answer is D:


Learning Objectives 2 and 3 – As a general rule, borrowing from creditors or repaying
creditors as well as transactions with the company’s owners are classified as financing
activities. As such, the net decrease in cash resulting from financing activities for the year
is determined as follows. (Note that the order of the items listed below is not important.)

Inflow
(Outflow)
Retirement of preferred stock $ (100,000)
Dividends paid to shareholders (180,000)
Net cash used in financing activities $(280,000)

2. Hathaway Company recorded the following events for the year just ended.

Collection of a loan made to another company $110,000


Dividends paid to shareholders 180,000
Interest paid on notes payable 70,000
Payment of deferred taxes 90,000
Retirement of preferred stock 100,000
Sale of bonds issued by other companies 150,000

The net change in cash resulting from investing activities for the year was:
A) ($5,000).
B) $10,000.
C) $40,000.
D) $260,000.
Feedback – The correct answer is D:
Learning Objectives 2 and 3 – Generally speaking, transactions that involve acquiring
or disposing of noncurrent assets are classified as investing activities. The net change in
cash resulting from investing activities for the year is determined as follows. (Note that
the order of the items listed below is not important.)

Inflow
(Outflow)
Sale of bonds issued by other companies $150,000
Collection of a loan made to another company 110,000
Net cash provided by investing activities $260,000

3. Jenkins Company recorded the following activity for the year just ended:

Common stock issued $400,000


Dividends paid to stockholders 40,000
Dividends received from investments 120,000
Notes issued to creditors for borrowed funds 160,000
Proceeds from sale of plant equipment 800,000
Purchase of plant equipment 240,000

The net cash provided by financing activities for the year was:
A) $400,000.
B) $520,000.
C) $560,000.
D) $600,000.

Feedback – The correct answer is B:


Learning Objectives 2 and 3 – As a general rule, borrowing from creditors or repaying
creditors as well as transactions with the company’s owners are classified as financing
activities. The net cash provided by financing activities for the year is determined as
follows. (Note that the order of the items listed below is not important.)

Inflow
(Outflow)
Common stock issued $400,000
Notes issued to creditors for borrowed funds 160,000
Dividends paid to stockholders (40,000)
Net cash provided by financing activities $520,000

4. Jenkins Company recorded the following activity for the year just ended.
Common stock issued $400,000
Dividends paid to stockholders 40,000
Dividends received from investments 120,000
Notes issued to creditors for borrowed funds 160,000
Proceeds from sale of plant equipment 800,000
Purchase of plant equipment 240,000

The net cash provided by investing activities for the year was:
A) $560,000.
B) $760,000.
C) $800,000.
D) $820,000.

Feedback – The correct answer is A:


Learning Objectives 2 and 3 – Generally speaking, transactions that involve acquiring
or disposing of noncurrent assets are classified as investing activities. The net cash
provided by investing activities for the year is determined as follows. (Note that the order
of the items listed below is not important.)

Inflow
(Outflow)
Proceeds from sale of plant equipment $ 800,000
Purchase of plant equipment (240,000)
Net cash provided by investing activities $ 560,000

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