Reference no: EM132569984
The following SELECTED account balances were extracted from the Balance Sheet and Income Statement of Rackham Corp. for 2018 and 2017. Rackham uses the INDIRECT method for its SCF.
B/S 12-31-18 12-31-17
Equipment $475,000 $400,000
Accumulated Depreciation 125,000 100,000
Interest Payable 9,000 5,000
Prepaid Insurance 12,000 9,000
Retained Earnings 200,000 185,000
I/S 2018 2017
Depreciation $40,000 $35,000
Gain on Sale of Equipment 11,000 27,000
Interest Expense 30,000 20,000
Insurance Expense 25,000 22,000
Net Income 50,000 30,000
During 2018, Rackham Corp. purchased $134,000 of new equipment. Rackham borrowed $90,000 during the year.
Question 1: In the Investing section, the purchase of fixed assets shows:
a.+$134,000
b.-$134,000
c.-$94,000
d.-$75,000
Question 2: In the Operating section, with regard to depreciation, Rackham will show:
a.+$40,000
b.+$5,000
c.-$40,000
d.-$5,000
e.None of the above
Question 3: In the Investing section, the sale of fixed assets shows:
a.+$59,000
b.+$70,000
c.+$44,000
d.+$28,000
e.None of the above
Question 4: The total of the Operating Cash Flow for Rackham is:
a.+$45,000
b.+$91,000
c.+$80,000
d.+$102,000
e.None of the above
Question 5: In the operating section, with regard to Interest, Rackham will show:
a.-$4,000
b.+$4,000
c.-$34,000
d.-$26,000
e.-$10,000
Question 6: In the operating section, with regard to Insurance, Rackham will show:
a.-$3,000
b.+$3,000
c.-$25,000
d.-$28,000
e.-$22,000
Question 7: In the Financing section, the dividends paid shows:
a.$0, no dividends were paid
b.-$15,000
c.-$35,000
d.-$5,000
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