Homework #3 :Introduction to Financial Accounting (Business Foundations Specialization) Answers 2026

Question-wise Correct Answers

Q1. Cash flow from Operating Activities

✅ Collections from customers
✅ Payments for salaries and wages
❌ Purchases of equipment
❌ Loss on sale of equipment
❌ Amortization of a patent

Q2. Cash flow from Investing Activities

❌ Purchases of inventory
✅ Proceeds from selling equipment
❌ Proceeds from issuing stock
✅ Payments to acquire a company
❌ Depreciation on a building

Q3. Growth stage (Cash flows: Ops −30, Invest −45, Finance +90)

✅ Start-up

Q4. Operating cash flow (Inventory bought for $20,000 cash)

✅ ($20,000)

Q5. Negative number in Operating section (Indirect method)

❌ Gain on sale of equipment
❌ Depreciation on a building
❌ Decrease in Accounts Receivable
❌ Capital expenditures
✅ Decrease in Accounts Payable

Q6. Cash Flow from Operating Activities (Calculation)

Net Income 10

• Depreciation 2
  − Increase in AR (5)
  − Decrease in AP (10)

• Decrease in Inventory (5)
  👉 CFO = $2

✅ $2

Q7. Corrected Cash from Operations

Original CFO = 90
Depreciation understated by 10 → CFO increases by 10
✅ $100

Q8. Investing cash flow (Sale of PP&E for $100)

✅ $100

Q9. Inventory transactions in Operating section

✅ Purchased $100 of inventory for cash
❌ Sold $500 of inventory
❌ FX translation increase
❌ Acquired inventory via acquisition
✅ Paid $400 to suppliers for inventory purchased on account

Q10. EBITDA Calculation

EBITDA = Revenue − Other Expenses
= 1000 − 500
= 500

✅ $500

🧾 Final Summary Table