1.A contingent liability that is probable and can be reasonably estimated will immediately result in:

Multiple Choice

• an increase in both liabilities and stockholders equity.

• an increase in liabilities and a decrease in net income.

• an increase in liabilities without any need for financial statement disclosure.

• an increase in liabilities and a decrease in assets.

2.Which of the following statements is not true regarding the cash flow statement?

Multiple Choice

• The cash flow statement provides information about changes in all the balance sheet accounts.

• The change in cash is classified into cash flow from three categories: operating activities, investing activities and financing activities.

• The cash flow statement generally shows that cash flows and accrual earnings are substantially the same.

• The cash flow statement explains the causes for year-to-year changes in cash and cash equivalents.

3.Joe Carie, head accountant, is using the indirect method and the account balance from the balance sheet and income statement to prepare a statement of cash flows. An increase in the Computer Equipment account would:

Multiple Choice

• decrease cash flow from financing activities.

• decrease cash flow from investing activities.

• increase cash flow from operating activities.

• increase cash flow from investing activities.

4.Cash interest from investments is recorded as _______ in statements of cash flows for U.S. GAAP, but can be recorded as ________ when using IFRS.

Multiple Choice

• cash flows from investing activities / cash flows from financing activities

• cash flows from financing activities / cash flows from operating activities

• cash flows from operating activities / cash flows from financing activities

• cash flows from operating activities / cash flows from investing activities