Intermediate Accounting 301

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 3  | Differentiate between investing activities, financing activities, and operating activities.Investing activities include lending money and collecting interest, financing includes borrowing money and paying interest and operating is the rest of it.|  6  | Identify the following items as (1) operating, (2) investing, or (3) financing activities: purchase of land; payment of dividends; cash sales; and purchase of treasury stock.Investing, financing, operating, financing.| 7  | Unlike the other major financial statements, the statement of cash flows is not prepared from the adjusted trial balance. From what sources does the information to prepare this statement come, and what information does each source provide?Balance sheet and income statement| | |

8  | Why is it necessary to convert accrual-based net income to a cash basis when preparing a statement of cash flows?Accrual based income includes receivables and payables, which are ignored in cash basis accounting.|  10  | Broussard Company reported net income of $3.5 million in 2010. Depreciation for the year was $520,000; accounts receivable increased $500,000; and accounts payable increased $300,000. Compute net cash flow from operating activities using the indirect method.3,500,000 + 520,000 – 500,000 + 300,000 = 3,820,000|  12  | Your roommate is puzzled. During the last year, the company in which she is a stockholder reported a net loss of $675,000, yet its cash increased $321,000 during the same period of time. Explain to your roommate how this situation could occur.Most likely due to sale of investments or equipment.| 13  | The board of directors of Gifford Corp. declared cash dividends of $260,000 during the current year. If dividends payable was $85,000 at the beginning of the year and $90,000 at the end of the year, how much cash was paid in dividends during the year?85,000 + 260,000 – 90,000 = 55,000|  16  | Each of the following items must be considered in preparing a...
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