Message Company Uses the Indirect Method to Prepare Its Statement

question 101

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: $\begin{array}{c}\text { Message Company}\\\text { Comparative Balance Sheet}\\\text { December 31,2017 and 2016}\\\begin{array}{|l|r|r|r|}\hline&2017 & 2016 & \text { Increase/(Decrease) }\\\hline \text { Common Stock } & \$ 18,000 & \$ 12,400 & \$ 5,600 \\\hline \text { Retained Earnings } & 113,000 & 80,000 & 33,000 \\\hline \text { Treasury Stock } & (8,000) & (5,400) & \underline{(2,600) } \\\hline \text { Total Equity } & \$ 123,000 & \$ 87,000 & \$ 36,000 \\\hline\end{array}\end{array}$ 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 $5,600 from the issuance of Common Stock.
• C)There was a positive cash flow of $5,600 from the issuance of Common Stock.
• D)There was positive cash flow of $18,000 from issuance of Common Stock.

---

Definitions:

Set Point

The genetically influenced weight range for an individual; it is maintained by biological mechanisms that regulate food intake, fat reserves, and metabolism.

Genetically Influenced

Traits or characteristics that are shaped in part by an individual's genetic makeup.

Metabolic Rate

The rate at which the body uses energy to maintain basic life functions such as breathing, circulation, and cell production.

Set Point Theory

A theory suggesting that an individual's body weight is maintained around a biologically predetermined point, making significant long-term weight change difficult.