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 cash c. reported as an outflow of cash

b. deducted from net income d. added to net income

1. 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 activities c. investing activities

b. financing activities d. selling activities

1. 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

1. ividends received from investments d. gain on early retirement of bonds

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

a. lending activities b. operatingactivities c. investing activities d.financing activities

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

a. operating activities b. investing activities c.financing activities d. none of the above

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

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

a. cash payment b. zero c. acquisition price d.mortgage amount

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

a. cash payment b. zero c. acquisition price d. mortgage amount

8. In a statement of cash flows , cash transfers between a bank account and a money

market fund are classifiedas:

a. operating activities b. financing activities c.investing activities d. none of the these

9. The primary purpose of the 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 during the period.

c. provide information about the operating, investing and financing activities of an entity during 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 Method Direct Method

a. Increase Decrease

b. Increase Increase

c. Decrease Increase

d. Decrease Decrease

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

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

Indirect Method Direct Method

a. Increase Decrease

b. Increase Increase

c. Decrease Increase

d. Decrease Decrease

13. On a statement of cash flows , a patent amortization expense is treated as an adjustment toreported net earnings because amortization

a. is an inflow of funds to the cash account

1. reduces reported net earnings and involves an outflow of cash
2. Is a directsource of cash
3. reduces reported net earnings but does not involve an outflow of funds

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

1. Operating activities c. Long-term investing activities

b. Short term investing activities d. Financing activities

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

1. Depreciation expense
2. Non-operating gains and losses
3. Timing differences between credit sales and collections from customers
4. 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 flow Conversion of Cash flow Conversion of

Per share Debt to Equity per share Debt to Equity

a. Yes Yes c. No Yes

b. Yes No d. No No

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

a. will be overstated c. will be negative

b. will be understated d. will not be affected