Knowledge Check 01 Which of the following statements about the direct method are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? All subtotals and totals (such as net income) on the income statement are converted from an accrual basis to a cash basis. The direct method presents a summary of all transactions that result in either a debit or a credit to cash. ? The direct method is prepared by adjusting each expense on the income statement from the accrual basis to the cash basis. ? The direct method is prepared by adjusting each revenue on the income statement from the accrual basis to the cash basis. Which of the following statements about fihancing cash flows are true? ? A healthy company that is growing rapidly would be expected to report financing cash inflows to fund its expansion. ? A healthy company would only report positive net cash flows from financing activities. ? New loans would result in positive net cash flows from financing activities. ? The issuance of new shares would result in negative net cash flows from financing activities. Which of the following statements about the direct method are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) 1 Credits to the company's Cash account would represent cash outflows. 1 Debits to the company's Cash account would represent cash inflows. ? The direct method can be used to prepare all three sections of the statement of cash flows. 1 The direct method reports the total cash inflow or outflow from each main type of transaction relating to the company's operating activities