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Under the indirect method,changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities.

A) True
B) False

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Which of the following would be classified as a financing activity on the statement of cash flows?


A) Cash receipts from accounts receivable collections.
B) Cash receipts from sale of equipment.
C) Cash paid to purchase treasury stock.
D) Cash receipts from short-term notes receivable.

E) B) and D)
F) A) and B)

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Which of the following would be reported as a cash outflow from investing activities?


A) Donating an old piece of equipment to charity.
B) Repaying the principal of a bond.
C) Buying another company's bonds with cash.
D) Paying for an investment asset by issuing company stock.

E) C) and D)
F) A) and B)

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Almost all U.S.companies have used the indirect method of preparing the statement of cash flows:


A) because most users of the financial statements do not understand the direct method.
B) in spite of the Financial Accounting Standard Board's stated preference for the direct method.
C) because it usually requires less space in the annual report.
D) so that stockholders cannot determine how much cash was spent on executives' salaries.

E) None of the above
F) All of the above

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Which of the following would be classified as an operating activity on the statement of cash flows using the direct method?


A) Cash dividends paid to stockholders.
B) Cash received from selling equipment.
C) Cash paid to retire bonds payable at maturity.
D) Cash received from accounts receivable collections.

E) B) and C)
F) C) and D)

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When the indirect method is used,details from which of the following balance sheet accounts are used in calculating both operating and financing cash flows?


A) Bonds payable.
B) Taxes payable.
C) Retained earnings.
D) Contributed capital.

E) A) and B)
F) B) and C)

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The advantages of the direct method include all of the following except:


A) It allows for more detailed analysis of operating cash flows.
B) It provides more information than the indirect method to relate cash inflows and outflows.
C) It allows for more reliable prediction of future cash flows.
D) Comparisons between companies are facilitated since most U.S.companies use the direct method.

E) C) and D)
F) All of the above

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Which of the following are used to determine cash flows from financing activities?


A) Short-term debt,accrued liabilities,contributed capital,and notes payable.
B) Long-term debt,contributed capital,and retained earnings.
C) Short-term debt,accrued liabilities,retained earnings,and bonds payable.
D) Long-term debt,notes payable,interest expense,and bonds payable.

E) B) and D)
F) A) and C)

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Treasury stock purchases made with cash are cash outflows in the financing activities section of the statement of cash flows.

A) True
B) False

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B.Darin Company loaned $3,000,000 at 7% interest to S.Dee Company.

A) True
B) False

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Depreciation is added back to net income in a statement of cash flows prepared using the indirect method because it:


A) reduces net income but not cash.
B) is a cash inflow.
C) is a revenue.
D) is a valuation concept.

E) C) and D)
F) All of the above

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If sales are $850,000 and the beginning and ending balances of accounts receivable are $43,000 and $48,000,respectively,the cash collected from customers is:


A) $850,000
B) $802,000
C) $845,000
D) $855,000

E) All of the above
F) A) and D)

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Use the information above to answer the following question.What is the amount of cash collected from customers?


A) $130,000
B) $134,000
C) $126,000
D) $116,000

E) None of the above
F) All of the above

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Which of the following is not needed to prepare a statement of cash flows?


A) Statement of retained earnings.
B) Comparative balance sheet.
C) Additional information on financing and investing activities.
D) Income statement.

E) B) and C)
F) B) and D)

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Assume a company uses the indirect method to prepare its statement of cash flows.If inventory decreases and unearned revenue increases during an accounting period,what does the company do with the changes in these accounts to calculate cash flows from operating activities?


A) Both are added to net income.
B) The change in inventory is added to net income;the change in unearned revenue is subtracted.
C) Both are subtracted from net income.
D) The change in unearned revenue is added to net income;the change in inventory is subtracted.

E) None of the above
F) A) and B)

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A piece of equipment with a cost of $130,000 and accumulated depreciation of $85,000 is sold for $50,000 cash.The amount that should be reported as a cash inflow from investing activities is:


A) $50,000.
B) $5,000.
C) $45,000
D) $0.This is a financing activity.

E) C) and D)
F) A) and D)

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Which of the following statements is true?


A) GAAP classifies dividends paid as a financing activity,but IFRS allows them to be classified as either an operating or financing activity.
B) GAAP allows interest paid to be classified as either an operating or financing activity,but IFRS requires that it be classified as a financing activity.
C) GAAP classifies dividends received as an investing activity,but IFRS allows them to be classified as either an operating or investing activity.
D) GAAP classifies interest received as either an operating or investing activity,but IFRS requires it to be classified as an investing activity.

E) A) and D)
F) None of the above

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Which of the following would not be added to net income in calculating cash flows from operating activities on a statement of cash flows prepared using the indirect method?


A) Amortization expense.
B) A decrease in accounts receivable.
C) An increase in wages payable.
D) A gain on the sale of equipment.

E) B) and D)
F) None of the above

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If a company is to succeed over the long-term,a positive cash flow from operating activities is necessary.

A) True
B) False

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Match the letter with each item below to indicate how net income is adjusted when using the indirect method to determine net cash flow from operating activities. A - Add item to net income S - Subtract item from net income N - No adjustment necessary _______ decrease in property,plant and equipment _______ increase in accounts receivable _______ decrease in inventory _______ decrease in prepaid expenses _______ increase in accounts payable _______ decrease in accrued liabilities _______ decrease in income tax payable _______ increase in dividends payable _______ gain on sales of property,plant and equipment _______ depreciation

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Showing 61 - 80 of 147

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