Problem 1: What effect does the journal entry to book depreciation have on the amount of cash generated by operating activities?
Problem 2: The Knight Company reported depreciation expense of $5,000 and net income of $8,000 on its 2006 income statement. During 2006 the company's accounts receivable balance decreased by $2,000. Based on this information alone, what was the amount of cash flow from operating activities?
Use the following to answer questions 3-4:
Emett Brown Associates reports the following comparative balance sheets and income statement information.
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COMPARATIVE BALANCE SHEETS
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12/31/05
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12/31/06
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Cash
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$6,000
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$11,000
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Accounts Receivable
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2,000
|
4,000
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Prepaid Insurance
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5,000
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4,000
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Inventory
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3,000
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1,000
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Plant, Property & Equip.
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6,000
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5,000
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Totals
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$22,000
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$25,000
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|
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Accounts Payable
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4,000
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6,000
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Oper. Expenses Pay
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5,000
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2,000
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L. T. Notes Payable
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4,000
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3,000
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Stockholders' Equity
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9,000
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14,000
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Totals
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$22,000
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$25,000
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INCOME STATEMENT
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2006
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Revenue
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$35,000
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Cost of Goods Sold
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-20,000
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Gross Margin
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15,000
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Operating Expenses
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-10,000
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Net Income
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$5,000
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|
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Problem 3: The amount of cash revenue received from customers during 2006 was $________.
Problem 4: The amount of cash paid for inventory purchases during 2006 was $___________.
Problem 5: What types of items would appear on the statement of cash flow as financing activities?
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