1. On a statement of cash flows prepared using the direct method, if Income Taxes Payable decreased during the accounting period, cash payments for taxes will be less than the expense shown on the income statement.

Question 1 options:

	a) True
	b) False

2. On a statement of cash flows prepared using the direct method, if certain expenses do not require a current outlay of cash, those expenses must be subtracted from operating expense to arrive at cash payments for operating expenses.

Question 2 options:

	a) True
	b) False

3. The direct method of preparing a statement of cash flows

Question 3 options:

a)	is the overwhelming choice of most companies.

b)	begins with net income in the operating activities section.

c)	will produce the same net figure as the indirect method.

d)	All of these choices.

4. On a statement of cash flows prepared using the direct method, if accounts receivable decrease from one accounting period to the next, cash receipts from sales will not be as great as sales.

Question 4 options:

	a) True
	b) False

5. The direct method converts each item on the income statement to its cash equivalent.

Question 5 options:

	a) True
	b) False