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When preparing the operating section of the statement of cash flows using the indirect method,noncash expenses are ________ net income.

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Activities that involve the production or purchase of merchandise and the sale of goods and services to customers,including expenditures related to administering the business,are classified as:


A) Financing activities.
B) Investing activities.
C) Operating activities.
D) Direct activities.
E) Indirect activities.

F) A) and E)
G) A) and D)

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When preparing the operating activities section of the statement of cash flows using the indirect method,decreases in current operating assets are added to net income.

A) True
B) False

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The cash flows from operating activities section of an indirect method of cash flows begins with net income or loss.

A) True
B) False

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All of the following statements related to reporting cash flows from operating activities under U.S.GAAP and IFRS are true except:


A) The definition of cash and cash equivalents is similar for U.S. GAAP and IFRS.
B) U.S. GAAP requires cash flows from interest revenue and dividend revenue be classified as operating activities.
C) IFRS permits classification of interest revenue and dividend revenue under operating or investing activities.
D) U.S. GAAP requires cash outflows for interest expense to be classified as financing activities.
E) IFRS permits classification of interest expense under operating or financing activities.

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

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For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Received interest from investments in trading securities.


A) F
B) O
C) N
D) I

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

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The statement of cash flows reports:


A) Assets, liabilities, and equity.
B) Revenues, gains, expenses, and losses.
C) Cash inflows and cash outflows for an accounting period.
D) Equity, net income, and dividends.
E) Changes in equity.

F) A) and C)
G) A) and B)

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Common uses of the statement of cash flows include all but which of the following?


A) Management prediction of future cash flows for decision making.
B) Investor assessment of cash flows before buying and selling stock.
C) Creditor evaluation of a company's ability to generate cash to cover debt.
D) Government assessment of whether company is able to pay taxes as they become due.
E) Management determination of the specific sources and uses of cash.

F) A) and B)
G) B) and E)

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Which one of the following is representative of typical cash flows from operating activities?


A) Proceeds from collecting the principal amounts of loans.
B) Repayment of principals on loans.
C) Proceeds from the issuance of bonds and notes payable.
D) Payments by a merchandiser to acquire equity securities of other companies.
E) Receipts of cash sales.

F) B) and D)
G) C) and D)

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Alvez Company reports net income of $305,000 for the year ended December 31.It also reports $93,700 depreciation expense and a $10,000 loss on the sale of equipment.Its comparative balance sheet reveals a $40,200 increase in accounts receivable,a $10,200 decrease in prepaid expenses,a $15,200 increase in accounts payable,a $12,500 decrease in wages payable,and a $100,000 decrease in notes payable.Calculate the cash provided (used) in operating activities using the indirect method.


A) $461,800.
B) $371,400.
C) $381,400.
D) $351,000.
E) $361,000.

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

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When preparing the operating activities section of the statement of cash flows using the indirect method,depreciation is subtracted from net income.

A) True
B) False

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In preparing Marjorie Company's statement of cash flows for the most recent year,the following information is available: Purchase of equipment $260,000Proceeds from the sale of equipment 87,000 Purchase of land 91,000\begin{array}{llr} \text {Purchase of equipment } &\$260,000\\ \text {Proceeds from the sale of equipment } &87,000\\ \text { Purchase of land } &91,000\end{array} Net cash flows from investing activities for the year were:


A) $438,000 of net cash used.
B) $438,000 of net cash provided.
C) $264,000 of net cash used.
D) $351,000 of net cash used.
E) $264,000 of net cash provided.

F) B) and E)
G) A) and B)

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Analysis reveals that a company had a net increase in cash of $20,000 for the current year.Net cash provided by operating activities was $18,000; net cash used in investing activities was $10,000 and net cash provided by financing activities was $12,000.If the year-end cash balance is $24,000,the beginning cash balance was:


A) $4,000.
B) $16,000.
C) $44,000.
D) $40,000.
E) $39,000.

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

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The direct method of reporting operating cash flows:


A) Is recommended but not required by the FASB.
B) Must be used by all companies.
C) Is used by most companies.
D) Is considered supplementary disclosure.
E) Is not recommended by the FASB, but is commonly used.

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

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The statement of cash flows helps analysts evaluate all but which of the following?


A) Ability of the company to generate profit.
B) Source of cash used for plant expansion.
C) Differences between net income and net operating cash flow.
D) Source of cash used to finance investing activities.
E) Source of cash used for debt repayments.

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

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The following transactions and events occurred during the year.Assuming that this company uses the indirect method to report cash provided by operating activities,indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column. The following transactions and events occurred during the year.Assuming that this company uses the indirect method to report cash provided by operating activities,indicate where each item would appear on its statement of cash flows by placing an x in the appropriate column.

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For each of the following items, indicate whether it would be classified as an (O) operating activity, an (I) investing activity, a (F) financing activity, or a significant (N) noncash financing and investing activity. -Sold equipment for cash.


A) F
B) O
C) N
D) I

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

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Managers only use the cash flow statement to evaluate the net cash increase or decrease,and do not pay much attention to the details of cash flows from operating activities,cash flows from investing activities,and cash flows from financing activities.

A) True
B) False

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Jeffreys Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $240,000 was sold for a $10,000 loss in Year 2.The following selected information is available for Jeffreys Company from its comparative balance sheet.Compute the cash received from the sale of the equipment.  At December 31  Year 2  Year 1  Equipment $510,000$750,000 Accumulated Depreciation-Equipment 328,000500,000\begin{array} { | l | r | r | } \hline \text { At December 31 } & \text { Year 2 } & \text { Year 1 } \\\hline \text { Equipment } & \$ 510,000 & \$ 750,000 \\\hline \text { Accumulated Depreciation-Equipment } & 328,000 & 500,000 \\\hline\end{array}


A) $62,000.
B) $38,000.
C) $28,000.
D) $18,000.
E) $58,000.

F) B) and E)
G) A) and E)

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The statement of cash flows is:


A) Another name for the statement of financial position.
B) A financial statement that presents information about changes in equity during a period.
C) A financial statement that reports the cash inflows and cash outflows for an accounting period, and that classifies those cash flows as operating activities, investing activities, or financing activities.
D) A financial statement that lists the types and amounts of assets, liabilities, and equity of a business on a specific date.
E) A financial statement that lists the types and amounts of the revenues and expenses of a business for an accounting period.

F) B) and D)
G) A) and C)

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