21.2   Learning Objective 21-2

 

1) When preparing the statement of cash flows by the indirect method, if current assets have increased the difference is:

A) added to net income.

B) added to investments.

C) deducted from net income.

D) subtracted from investments.

 

2) Using the indirect method for cash flows, depreciation expense is added to net income to determine the:

A) cash flow from investing activities.

B) cash flow from financing activities.

C) cash flow from operating activities.

D) cash flow from fixed asset activities.

3) If, on the comparative balance sheet, Accounts Payable has decreased, the amount of decrease would be:

A) added to net income on the statement of cash flows.

B) subtracted from net income on the statement of cash flows.

C) ignored because cash is not involved.

D) None of these answers are correct.

 

4) If Accounts Receivable decreases on a comparative balance sheet, this means:

A) collections were more than sales.

B) credit sales are decreasing.

C) credit sales are increasing more than collections.

D) None of these answers are correct.

5) In the statement of cash flows, which event would cause net income to be increased?

A) A decrease in Inventory

B) An increase in Prepaid Insurance

C) A decrease in Accounts Payable

D) An increase in Accounts Receivable

 

6) Operating activities deal with which types of accounts?

A) Current liabilities and owner’s equity

B) Current and intangible assets

C) Current assets and current liabilities

D) Current assets and owner’s equity

7) When preparing the statement of cash flows by the indirect method, if current liabilities increase the difference is:

A) added to net income.

B) added to investments.

C) deducted from net income.

D) subtracted from investments.

 

8) When preparing the statement of cash flows by the indirect method, if accumulated depreciation increases the difference is:

A) added to net income.

B) added to investments.

C) deducted from net income.

D) not considered in the statement of cash flows using the indirect method.

 

9) Which of the following, under the indirect method, is not a proper adjustment to net income to arrive at cash flow from operations?

A) Adding a decrease in inventory

B) Adding an increase in salaries payable

C) Deducting a increase in prepaid expense

D) All are proper adjustments to net income.

 

10) Which of the following would be included in the net cash flows from operating activities section of a cash flow statement using the indirect method?

A) Sales of plant, property and equipment

B) Making loans and paying out interest

C) Payment of interest and expenses

D) Issuing bonds and notes

 

 



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