1.In a statement of cash flows (operating activities shown using the indirect approach ) a decrease in accounts receivable should be

a. reported as an inflow and outflow of cashc. reported as an outflow of cash

b.deducted from net incomed. added to net income\

2.In a statement of cash flows, receipts from sales of property , plant and equipment and other

productive assets should generally be classified as cash inflows from

a.operating activitiesc. investing activities

b.financing activitiesd. selling activities

3.In a statement of cash flows,which of the following would increase reported cash flows from operating activitiesusing the direct method ?(Ignore income tax considerations.)

a. gain on sale of equipment c. change from straight line to accelerateddepreciation

b.dividends received from investmentsd. gain on early retirement of bonds

4.In a statement of cash flows,proceeds from issuing equity instruments should be classified as cash inflows from

a.lending activitiesb. operatingactivitiesc.investing activitiesd.financing activities

5.In a statement of cash flows , collections of account receivable are classified as

a.operating activitiesb.investing activitiesc.financing activitiesd.none of the above

6 -7A companyacquired a building , paying a portion of a purchase price in cash and issuing a mortgage note payable to the seller for the balance.

6.In a statement of cash flows, what amount include in the financing activities for the above transaction?

a.cash paymentb. zero c. acquisition priced.mortgage amount

7.In a statement of cash flows, what amount included in the investingactivities for the above transaction

a. cash paymentb. zero c. acquisition price d. mortgage amount

8. In astatement of cash flows , cash transfers between a bank accountand a money

market fund are classifiedas:

a.operating activitiesb.financing activitiesc.investing activitiesd.none of the these

9. The primary purpose ofthe statement of cash flows is to provide information

a.about the operating, investingand financing activities of an entity during a period.

b. about the cash receipts and cash payments of an entity during a period

c. about the entity's ability to meet its and its needs for external financing

d. that is useful in assessing cash flow prospects.

10. It is an objective of the statement of cash flows to

a. disclose changes during the period in all asset and all equity accounts

b. disclose the change in working capital duringthe period.

c. provide information about the operating, investingand financing activities of an entityduring a period.

d.disclose changes in net assets.

11 . When preparing a statement of cash flows, an increase in accounts payable during a period

would require which of the following adjustments in determining cash flow from operating activities ?

Indirect MethodDirect Method

a.IncreaseDecrease

b.IncreaseIncrease

c.DecreaseIncrease

d.DecreaseDecrease

12. When preparing a statement of cash flows, a decrease in prepaid insurance during a period

would requirewhich of the following adjustments in determining cash flow from operating activities ?

Indirect Method Direct Method

a.IncreaseDecrease

b.IncreaseIncrease

c.DecreaseIncrease

d.DecreaseDecrease

13. On a statement of cash flows , a patent amortization expense is treated as an adjustment toreportednet earningsbecause amortization

a.is an inflow of funds to the cash account

b.reduces reported net earningsand involves an outflow of cash

c.Is a directsource of cash

d.reduces reported net earningsbut does notinvolve an outflow offunds

14. In the long run, it is most important for the business to generate a positive cash flow from

a.Operating activitiesc. Long-term investing activities

b. Short term investing activities d. Financing activities

15.Which of the followingmay not create a difference between net income and the net cash flow from operations ?

a.Depreciation expense

b.Non-operating gains and losses

c.Timing differences between credit sales andcollections from customers

d.Payment of a cash dividend

16.Which of the following information should be disclosed as a supplemental information in the statement of cash flows?

Cash flowConversion ofCash flowConversion of

Per shareDebt to Equityper shareDebt to Equity

a.YesYesc.NoYes

b.YesNod.NoNo

17.If the amortization expenseon the patents for the current period is understated on the income statement , the cash provided by operations

a.will be overstatedc.will be negative

b.will be understatedd. will not be affected