1.Which of the following statements is TRUE regarding astatement of cash flows?
A. A statement of cash flows measures the profitability of acompany using the cash basis of accounting.
B. Two different methods may be used to compute the net cashflows from operating, investing, and financing activities.
C. Noncash investing and financing activities need to bedisclosed under “other activities.”
D. The statement of cash flows reports the changes in cash andcash equivalents.
2.Which of the following is a cashequivalent?
A. Accounts receivable
B. Certificates of deposit that mature in less than threemonths
C. Certificates of deposit that mature in one year or less
D. Prepaid expenses
3.Which of the following activities is an operatingactivity?
A. Payment on the principal portion of a bank loan
B. Collection of cash from issuing stock
C. Payment of interest on a bank loan
D. Payment of cash dividends
4.Which of the following activities would NOT beconsidered an investing activity?
A. Issuance of common stock
B. Purchase of used equipment
C. Sale of land
D. Sale of a long-term investment
5.Which of the following activities is a financingactivity?
A. Purchase of land by issuing stock
B. Payment of cash dividends
C. Purchase of land for cash
D. Purchase of inventory for cash
6.On a statement of cash flows, the net increase in cashwas $24,000. Cash provided from operations was $30,000. If the netcash outflow from investing activities was $7,000, then what wasthe net cash flow from financing activities?
A. net inflow of $1,000
B. net outflow of $1,000
C. net inflow of $13,000
D. net outflow of $13,000
7.Using the following information for Stewart Auto,Inc., calculate the net cash flow from operating activities usingthe indirect method.
Net income $150,000
Depreciation expense 10,000
Increase in accounts receivable 4,000
Decrease in inventory 5,000
Increase in accounts payable 8,000
Loss on sale of equipment 7,000
The net cash provided by operating activitiesis:
A. $142,000.
B. $144,000.
C. $160,000.
D. $176,000.
8. Which of the following statements is TRUE regardingthe indirect method of preparing a statement of cashflows?
A. A decrease in inventory is subtracted from net income.
B. A loss on the sale of an investment is added to netincome.
C. Depreciation expense is subtracted from net income.
D. An increase in wages payable is subtracted from netincome.
9.Which of the following statements is TRUE regardingthe direct method of preparing a statement of cashflows?
A. Depreciation expense is added as a reconciling item.
B. It is easier and less costly to prepare than the indirectmethod.
C. A supplementary schedule reconciling net income to the cashbasis must also be provided.
D. All of the statements above are correct.
10.Which of the following is an example of noncashinvesting and financing activity that is disclosed in asupplementary schedule accompanying the statement of cash flows orin a footnote to the financial statements?
A. Selling goods on credit
B. Paying the amount due a creditor
C. Purchasing equipment in exchange for a long-term note
D. Gain on the sale of land
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