Avatar Company Uses the Indirect Method to Prepare Its Statement

question 66

Multiple Choice

Avatar Company uses the indirect method to prepare its statement of cash flows. Please refer to the following portion of the comparative balance sheet:
$$\begin{array} { | l | r | r | r | } \hline&2014 & 2013 & \text { Increase/decrease }\\\hline \text { Common stock } & \$ 30,000 & \$ 2,000 & \$ 28,000 \\\hline \text { Retained earnings } & 113,000 & 74,000 & 39,000 \\\hline \text { Treasury stock } & ( 8,000 & ( 5,000 ) & ( 3,000 ) \\\hline \text { Total equity } & \$ 135,000 & \$ 71,000 & \$ 64,000 \\\hline\end{array}$$

Note: There were no stock retirements during the year.
There were no sales of treasury stock during the year.
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There were no sales of treasury stock during the year.
Which of the following statements would be TRUE?

• A) There was zero net cash flow from transactions involving treasury stock.
• B) There was $3,000 of positive cash flow from transactions involving treasury stock.
• C) There was $3,000 negative cash flow from transactions involving treasury stock.
• D) There was $8,000 negative cash flow from transactions involving treasury stock.

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Definitions:

Decentralization

The distribution of functions, powers, people, or things away from a central location or authority, often to increase efficiency or responsiveness.

Quality Managers

Professionals responsible for monitoring and evaluating the various stages of the production process to ensure that the final product meets predetermined quality standards.

Decentralization

The distribution of decision-making power and responsibility to lower levels within an organization.

Responsibility Accounting Reports

These are financial reports designed to track the financial performance of specific departments or units within an organization, emphasizing accountability and performance evaluation.