Jelly Bean Company Uses the Indirect Method to Prepare Its

question 84

Multiple Choice

Jelly Bean 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 were no stock retirements during the year. "2) 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 $4,000 of positive cash flow from transactions involving treasury stock.
• C)There was $4,000 negative cash flow from transactions involving treasury stock.
• D)There was $12,000 negative cash flow from transactions involving treasury stock.

---

Definitions:

Cash Operating Costs

The expenses a company incures during its day-to-day operational activities, usually excluding non-cash costs like depreciation.

Current Salvage Value

The estimated value that an asset can be sold for at the end of its useful life in its present condition.

Profitability Index

A measure comparing the present value of future cash flows to the initial investment, used to assess the attractiveness of a project.

Present Value

Present value is the current worth of a future sum of money or stream of cash flows given a specified rate of return, important in assessing the value of investments.