Message Company Uses the Indirect Method to Prepare Its Statement

question 41

Multiple Choice

Message Company uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet: Note: 1. There was no retirement of stock during the year.
2) There were no sales of treasury stock during the year.
Which of the following statements is correct?

• A) There was zero net cash flow from transactions involving Common Stock.
• B) There was a negative cash flow of $6,900 from the issuance of Common Stock.
• C) There was a positive cash flow of $6,900 from the issuance of Common Stock.
• D) There was positive cash flow of $19,000 from issuance of Common Stock.

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Definitions:

Default Judgment

A judgment entered by a court against a defendant who has failed to appear in court to answer or defend against the plaintiff’s claim.

Affirmative Defense

A response to a plaintiff’s claim that does not deny the plaintiff’s facts but attacks the plaintiff’s legal right to bring an action. An example is the running of the statute of limitations.

Negligence

The failure to exercise the standard of care that a reasonable person would exercise in similar circumstances.

Electronic Discovery

The process by which electronic data is sought, located, secured, and searched with the intent of using it as evidence in a legal case.