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This is not the correct answer. Please see the correct answer for a complete explanation. This incorrect answer can probably be calculated in more than one way. One way is by omitting (1) the decrease in accounts receivable, (2) the increase in inventory, (3) the increase in accounts payable, and (4) the decrease in short-term notes payable. If you have calculated this answer in another way, please let us know how you did it so we can add that to this explanation of why this answer choice is incorrect. Please send us an email at support@hockinternational.com. Include the full Question ID number and the actual incorrect answer choice -- not its letter, because that can change with every study session created. The Question ID number appears in the upper right corner of the ExamSuccess screen. Thank you in advance for helping us to make your HOCK study materials better.
This is not the correct answer. Please see the correct answer for a complete explanation. This incorrect answer can be calculated in more than one way. Two ways are: (1) by omitting (a) the increase in accounts payable and (b) the increase in plant assets; and (2) by beginning with net income and adjusting it for the increase in plant assets and the increase in contributed capital but omitting all other items that increased or decreased net cash flow. If you have calculated this answer in another way, please let us know how you did it so we can add that to this explanation of why this answer choice is incorrect. Please send us an email at support@hockinternational.com. Include the full Question ID number and the actual incorrect answer choice -- not its letter, because that can change with every study session created. The Question ID number appears in the upper right corner of the ExamSuccess screen. Thank you in advance for helping us to make your HOCK study materials better.
This is not the correct answer. Please see the correct answer for a complete explanation. This incorrect answer can probably be calculated in more than one way. One way is by omitting (1) the amortization, (2) the decrease in accounts receivable, and (3) the increase in inventory. If you have calculated this answer in another way, please let us know how you did it so we can add that to this explanation of why this answer choice is incorrect. Please send us an email at support@hockinternational.com. Include the full Question ID number and the actual incorrect answer choice -- not its letter, because that can change with every study session created. The Question ID number appears in the upper right corner of the ExamSuccess screen. Thank you in advance for helping us to make your HOCK study materials better.
This question requires us to do the calculation for all activities of the statement of cash flows: operating activities, investment activities, and financing activities. The net cash flow from all three sources is the amount of change in cash. The best way to do this question is to start with net income and then look at each individual item and see if it needs to be added or subtracted from net income if it is an operating activity, or if it was a source or use of cash if it was an investing or operating activity. Net income of $70,000 is the starting point. Both depreciation expense of $14,000 and amortization expense of $1,000 are noncash expenses that are reductions to net income, so they both need to be added back. This gives us $85,000. The $2,000 decrease in accounts receivable needs to be added because the decrease means that we collected more than we had in credit sales during the period. This addition of $2,000 gives us $87,000. The $9,000 increase in inventories needs to be subtracted because this means we paid for inventory that has not yet been sold. This decrease of $9,000 takes us to $78,000. The $4,000 increase in accounts payable needs to be added because it means that we have not paid for all of the items that were purchased during the period. This takes us to $82,000. The $47,000 increase in plant assets indicates that we purchased plant assets, so this will be a decrease to cash, taking us to $35,000. The $31,000 increase in contributed capital means that cash increased due to the sale of shares. This takes us up to $66,000. The $55,000 decrease in short-term notes payable means that we have paid off principal of the notes payable during the period, so cash was used. This decrease in cash takes us to $11,000, which is the net increase in cash for the period.