Changes in the Balance Sheet Accounts at June 30, 2014

question 70

Multiple Choice

Changes in the balance sheet accounts at June 30, 2014 and 2015 for the Poker Company are presented below:
$\begin{array}{lr}\text { Assets } & \begin{array}{r}\text { Increase } \\\text { (Decrease }\end{array} \\\text { Cash } & \$ 80,000 \\\text { Accounts receivable } & 200,000 \\\text { Lnventory } & 300,000 \\\text { Long-term investments } & 200,000 \\\text { Equipment } & (200,000 \\\text { Accumulated depreciation } & (60,000) \\\\\text { Liabilities and Stockholders' Equity }\\\text {Accounts payable }&\$(40,000) \\\text {Dividends payable}&400,000\\\text {Notes payable-Current }&(200,000) \\\text {Notes payable-Long-term }&400,000\\\text {Common stock, \( \$ 1.00 \) par }&300,000\\\text {Additional paid-in capital }&100,000\\\text {Retained eamings }&80,000\\\end{array}$
Additional Information for 2015:
Net income was $480,000 and dividends of $400,000 were declared.
Common stock was issued for cash.
A Long-term investment was sold for $160,000.
A new Long-term investment was acquired for $360,000.
Equipment that cost $600,000 was sold for $200,000. The book value of those assets was $150,000.
-The cash flow from investing activities for 2015 is a

• A)$200,000 outflow.
• B)$400,000 inflow.
• C)$400,000 outflow.
• D)$600,000 inflow.

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Definitions:

Average Rate of Return

This financial ratio measures the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Estimated Annual Net Income

The projection or forecast of a company's net income over a one-year period, considering all expected revenues and expenses.

Straight-Line Depreciation

A method of allocating the cost of a physical asset evenly over its useful life.

Average Rate of Return

The ratio of the average annual profit to the initial investment, expressed as a percentage, used to assess the profitability of an investment.