1. The direct method of determining cash flows begins with net income and lists all adjustments necessary to convert net income to a cash flow basis.

a. True

b. False

2. The indirect method for calculating Cash Flows from Operating Activities is preferred by the FASB (Financial Accounting Standards Board).

a. True

b. False

3. Which of the following would be included in the direct method cash flows from operating activities?

a. Cash payments for new office furniture

b. Cash receipts from the sale of worn-out equipment

c. Cash receipts from customers (from sales of inventory)

d. Cash payments of dividends

4. Cash loaned out to another corporation would be reported in which section of the Statement of Cash Flows?

a. Investing Activities

b. Operating Activities

c. Financing Activities

d. This would not be reported on the Statement of Cash Flows.