FINANCIAL ACCOUNTING AND REPORTING 3

MULTIPLE CHOICE

21. Which of the following would not be classified as an operating activity? a. Interest income b. Income tax expense c. Dividend income d. Payment of dividends 22. Cash flows from investing activities would be decreased by which of the following? a. Issuance of bonds c. Purchase of long-term investments

b. Issuance of common stock d. Payment of dividends 23. In a statement of cash flows, payments to acquire bonds or mortgages of other entities should be classified as cash outflows for a. lending b. operating c. investing d. financing activities 24. In a statement of cash flows (indirect method), an increase in inventories should be presented as a. an inflow of cash. b. an inflow and outflow of cash. c. an addition to net income. d. a deduction from net income from continuing operations. 25. Patriot Corporation purchased a 3-month U.S. Treasury bill. In preparing Patriot's statement of cash flows, this purchase would a. have no effect c. be treated as an outflow from investing activities b. be treated as an outflow from operating activities d. be treated as an outflow from financing activities 26. Which of the following would be an addition to net income when using the indirect method to derive net cash flows from operating activities? a. Payment of cash dividends c. Increase in merchandise inventory b. Decrease in accounts payable d. Loss on sale of mach and eqpt 27. Which of the following would be an example of an investing activity? a. Issuance of long-term bonds c. Payment of cash dividends b. Issuance of common stock d. Sale of plant assets 28. In a statement of cash flows, interest payments to lenders and other creditors should be classified as cash outflows for a. borrowing activities c. investing activities. b. operating activities d. financing activities 29. In a statement of cash flows, which of the following would increase reported cash flows from operating activities using the direct method? a. Collection of a note receivable c. Gain on purchase of treasury stock b. Dividends received from investments d. Gain on sale of equipment 30. Which of the following would be subtracted from net income when using the indirect method to derive net cash flows from operating activities? a. Decrease in salaries and wages payable c. Decrease in net AR b. Loss on sale of investments d. Depreciation expense