1. Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

A. An increase in wages payable will be added to net income.

B. An increase in prepaid expenses will be subtracted from net income.

C. An increase in income taxes payable will be subtracted from net income.

D. A gain on the sale of a depreciable asset will be subtracted from net income.

2. Which of the following would not be a cash flow from financing activities?

A. Repayment of principal on a long-term note payable.

B. Issuance of common stock for cash.

C. Collection of a cash dividend.

B. Borrowing cash on a long-term note payable.

3. Which of the following statements does not correctly describe an adjustment to net income when determining cash flows from operating activities using the indirect method?

A. A loss on the sale of a depreciable asset will be added to net income.

B. An increase in accounts receivable will be subtracted from net income.

C. An increase in accrued liabilities will be subtracted from net income.

D. An increase in accounts payable will be added to net income.

4. Which of the following transactions would not be reported within the investing section of the cash flow statement?

A. The cash sale of land at a gain.

B. The purchase of a stock investment for cash.

C. The cash receipt of a dividend from a stock investment.

D. The purchase of a building for cash.

5. The payment of interest on a note payable is a cash flow from a financing activity.

True

False