1. Cash flows from (used for) _____ activities are the cash flows received from or used for transactions that affect investments in the noncurrent assets of the company.

A. operating

B. investing

C. financing

D. None of these are correct.

2. Cash flows from (used for) _____ activities are the cash flows from transactions that affect the net income of a company.

A. operating

B. investing

C. financing

D. None of these are correct.

3. Cash flows from (used for) _____ activities are the cash flows received from or used for transactions that affect the debt and equity of the company.

A. operating

B. investing

C. financing

D. None of these are correct.

4.Under the indirect method of cash flow, depreciation expense is deducted from the net income.

A. True

B. False

5.Under the indirect method, increases in noncash current operating assets are _____.

A. added to net income

B. deducted from net income

C. ignored

D. None of these are correct

6.Russell Corporation had the following activities:

• Recorded depreciation of $5,000.
• Purchased $10,000 of equipment with cash.
• Paid $4,000 in interest payments.
• Received $8,000 cash for the sale of an asset.

What is the amount of net cash flows from (used for) investing activities?

A. $(2,000)

B. $2,000

C. $(11,000)

D. None of these are correct.

7.Russell Corporation had the following activities:

• Recorded depreciation of $5,000.
• Received cash from the sale of common stock, $20,000.
• Purchased $10,000 of equipment with cash.
• Paid $4,000 income tax.
• Received $8,000 cash for the sale of an asset.
• Paid cash dividends, $10,000.

What is the amount of net cash flows from (used for) financing activities?

A. $25,000

B. $10,000

C. $(14,000)

D. None of these are correct.

8.In the statement of cash flows prepared by the indirect method, the sum of net cash flows used for operating activities, investing activities, and financing activities is equal to _____.

A. the net increase or decrease of cash

B. the beginning balance of cash

C. the ending balance of cash

D. the annual cash requirement of the company

9.In the statement of cash flows prepared by the indirect method, Alpha Inc. reports a net increase in cash of $35,000. If the beginning cash balance is $4,500, the ending cash balance is equal to _____.

A. $35,000

B. $4,500

C. $30,500

D. $39,500

10.Free cash flow is calculated as _____.

A. cash flow from operating activities plus investments in PP&E needed to maintain current production

B. cash flow from operating activities less investments in PP&E needed to maintain current production

C. cash flow from operating activities less cash flow from investing activities less cash flow from financing activities

D. None of these are correct

11.An increase in free cash flow from one year to the next is considered _____.

A. unfavorable

B. irrelevant

C. favorable

D. None of these are correct

12.There are __________ steps in preparing a spreadsheet (work sheet) for the statement of cash flows using the indirect method.

A. five

B. six

C. seven

D. eight

13.Under the direct method, depreciation expense is _____ in the Operating Activities section.

A. added

B. deducted

C. ignored

D. None of these are correct.

14.The difference between the direct and indirect methods lies in the presentation of the cash flows from _____ activities.

A. financing

B. investing

C. operating

D. None of these are correct.