Question 1

The direct method for the preparation of the operating activities section of the statement of cash flows:

Accepted Answer

A)   Reports net income and then adjusts it for items necessary to determine net cash provided or used by operating activities.
B)   Separately lists each major item of operating cash receipts.
C)   Separately lists each major item of operating cash payments.
D)   Separately lists each major item of operating cash receipts and cash payments.
E)   All of these answers are correct.F) A) and E)
G) A) and D)

Question 2

The increase or decrease in cash equals the current period's cash balance minus the prior period's cash balance.

Accepted Answer

A) True 
 B)False

Question 3

The appropriate statement of cash flow activity category for the purchase of equipment for cash is:

Accepted Answer

A)   Operating.
B)   Financing.
C)   Investing.
D)   Schedule of noncash investing or financing activity.
E)   Not reported on the statement of cash flows.F) A) and B)
G) B) and E)

Question 4

A cash equivalent is an investment that:

Accepted Answer

A)   Is within 3 months of its maturity date.
B)   Is readily convertible to a known amount of cash.
C)   Is highly liquid.
D)   Is subject to an insignificant risk of changes in value.
E)   All of these answers are correct.F) A) and C)
G) D) and E)

Question 5

Decisions on whether a company can pay its existing debts as they mature can be evaluated by looking at the company's statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 6

The appropriate statement of cash flow activity category for the payment of wages is:

Accepted Answer

A)   Operating.
B)   Financing.
C)   Investing.
D)   Schedule of noncash investing or financing activity.
E)   Not reported on the statement of cash flows.F) C) and D)
G) A) and B)

Question 7

Using the indirect method to calculate net cash provided or used)  by operating activities, which of the following is subtracted from net income?

Accepted Answer

A)   Decrease in income taxes payable.
B)   Bad debts expense.
C)   Amortization of intangible assets.
D)   Depreciation expense.
E)   None of these answers is correct.F) None of the above
G) C) and D)

Question 8

A change in retained earnings can be due to payment of cash dividends.

Accepted Answer

A) True 
 B)False

Question 9

Managers use cash flow predictions to:

Accepted Answer

A)   Make decisions about acquiring new property, plant and equipment.
B)   Keep or eliminate a product line.
C)   Maintain or downsize a department.
D)   Insource or outsource production of a product.
E)   All of these answers are correct.F) C) and D)
G) A) and B)

Question 10

The direct method of reporting operating cash flows:

Accepted Answer

A)   Is recommended, but not required, by IFRS.
B)   Is used by most companies.
C)   Is recommended by IFRS.
D)   Is not required by IFRS.
E)   All of these answers are correct.F) A) and E)
G) D) and E)

Question 11

Both the direct and indirect methods yield the same net cash flow provided used) by investing activities.

Accepted Answer

A) True 
 B)False

Question 12

Many business decisions are based on cash flow evaluations.

Accepted Answer

A) True 
 B)False

Question 13

Under IFRS, the payment of cash dividends to shareholders can be classified as either a financing activity or operating activity.

Accepted Answer

A) True 
 B)False

Question 14

Under the direct method, the gain or loss from retirement of debt is reported in the operating section of the statement of cash flows.

Accepted Answer

A) True 
 B)False

Question 15

Explain the value of the statement of cash flows in analyzing cash flows.

Accepted Answer

By dividing cash flows into three catego...

Question 16

The statement of cash flows reports:

Accepted Answer

A)   Operating activities.
B)   Investing activities.
C)   Financing activities.
D)   Noncash financing and investing activities.
E)   All of these answers are correct.F) A) and B)
G) C) and D)

Question 17

Received a settlement on a lawsuit.A - Operating activities. B - Investing activities. C - Financing activities.D - Schedule of noncash financing and investing activities. E - Not reported on the statement of cash flows.

Accepted Answer

A)   1 = C; 2 = B; 3 = A; 4 = B; 5 = A.
B)   1 = D; 2 = A; 3 = A; 4 = B; 5 = E.
C)   1 = D; 2 = A; 3 = B; 4 = C; 5 = A.
D)   1 = B; 2 = A; 3 = C; 4 = B; 5 = E.
E)   1 = C; 2 = C; 3 = B; 4 = C; 5 = E.F) None of the above
G) All of the above

Question 18

The direct method of preparing the statement of cash flows separately lists each major item of operating cash receipts and each major item of operating cash payments.

Accepted Answer

A) True 
 B)False

Question 19

The statement of cash flows only measures outflows of cash during a period.

Accepted Answer

A) True 
 B)False

Question 20

Under the indirect method, decreases in non-cash current assets are added to net income.

Accepted Answer

A) True 
 B)False

Exam 16: Reporting and Analyzing Cash Flows

The appropriate statement of cash flow activity category for the purchase of equipment for cash is:

Correct AnswerverifiedShow Answer

The direct method for the preparation of the operating activities section of the statement of cash flows:

Correct AnswerverifiedShow Answer

The statement of cash flows only measures outflows of cash during a period.

Correct AnswerverifiedShow Answer

Decisions on whether a company can pay its existing debts as they mature can be evaluated by looking at the company's statement of cash flows.

Correct AnswerverifiedShow Answer

Received a settlement on a lawsuit.A - Operating activities. B - Investing activities. C - Financing activities.D - Schedule of noncash financing and investing activities. E - Not reported on the statement of cash flows.

Correct AnswerverifiedShow Answer

The increase or decrease in cash equals the current period's cash balance minus the prior period's cash balance.

Correct AnswerverifiedShow Answer

Explain the value of the statement of cash flows in analyzing cash flows.

Correct AnswerverifiedBy dividing cash flows into three catego...View AnswerShow Answer

The statement of cash flows reports:

Correct AnswerverifiedShow Answer

Many business decisions are based on cash flow evaluations.

Correct AnswerverifiedShow Answer

The direct method of reporting operating cash flows:

Correct AnswerverifiedShow Answer

A cash equivalent is an investment that:

Correct AnswerverifiedShow Answer

The direct method of preparing the statement of cash flows separately lists each major item of operating cash receipts and each major item of operating cash payments.

Correct AnswerverifiedShow Answer

Under IFRS, the payment of cash dividends to shareholders can be classified as either a financing activity or operating activity.

Correct AnswerverifiedShow Answer

A change in retained earnings can be due to payment of cash dividends.

Correct AnswerverifiedShow Answer

Under the indirect method, decreases in non-cash current assets are added to net income.

Correct AnswerverifiedShow Answer

Under the direct method, the gain or loss from retirement of debt is reported in the operating section of the statement of cash flows.

Correct AnswerverifiedShow Answer

Both the direct and indirect methods yield the same net cash flow provided used) by investing activities.

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Using the indirect method to calculate net cash provided or used) by operating activities, which of the following is subtracted from net income?

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The appropriate statement of cash flow activity category for the payment of wages is:

Correct AnswerverifiedShow Answer

Managers use cash flow predictions to:

Correct AnswerverifiedShow Answer

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By dividing cash flows into three catego...
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