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
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