Mars Chemicals Company Uses the Indirect Method to Prepare Its

question 148

Multiple Choice

Mars Chemicals Company uses the indirect method to prepare its statement of cash flows.Refer to the following portion of the comparative balance sheet: $\begin{array}{c}\text { Mars Chemicals Company}\\\text { Comparative Balance Sheet}\\\text { December 31,2017 and 2016}\\\begin{array}{|l|r|r|r|}\hline&2016 & 2015 & \text { Increase/(Decrease) }\\\hline \text { Common Stock } & \$ 33,000 & \$ 2,500 & \$ 30,500 \\\hline \text { Retained Earnings } & 154,000 & 155,000 & (1,000) \\\hline \text { Treasury Stock } & (8,500) & (\underline{5,200}) & \underline{(3,300}) \\\hline \text { Total Equity } & \$ 178,500 & \$ 152,300 & \$ 26,200 \\\hline\end{array}\end{array}$ Net Income for the year was $60,000.
Which of the following statements is true of Taylor's statement of cash flows for 2016?

• A)The company issued stocks for $33,000.
• B)The company declared $61,000 as dividends.
• C)The company purchased treasury stock for $8,500.
• D)The net cash flow from financing activities is $178,500.

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Definitions:

Overhead Rate

A measure used to allocate overhead costs to products or services, often calculated by dividing total overheads by a base measure such as labor hours or machine hours.

Estimated Labor-Hours

The projected number of labor hours required to complete a batch of goods or provide a service.

Predetermined Overhead Rate

A rate used to allocate estimated overhead costs to products or job orders, based on a planned level of activity or driver.

Unused Capacity

Resources available for use that are not being employed in production, often representing inefficiency.