QUESTION 1

1. If Prepaid Insurance increased during the period,

   	A.	there is no impact on the statement of cash flows.
   	B.	Insurance expense on an accrual basis is less than Insurance expense on a cash basis.
   	C.	Insurance expenses on an accrual basis is greater than insurance expenses on a cash basis
   	D.	Insurance expense on an accrual basis is the same as insurance expenses on a cash basis.

2 points

QUESTION 2

1. On the statement of cash flows using the indirect method, patent amortization expense will

   	A.	be added to net income in the operating section.
   	B.	be deducted from net income in the operating section.
   	C.	appear as an inflow of cash in the investing section.
   	D.	appear as an outflow of cash in the investing section.

2 points

QUESTION 3

1. The Titanic Company had the following cash transactions during 20XX:

   Received $300,000 from customers.

   Received $10,000 dividend revenue from stock investments.

   Purchased equipment for $70,000.

   Sold land for $60,000 which had a book value of $50,000.

   The 20XX cash flows from INVESTING Activities would be reported as:

   	A.	net decrease in cash of $10,000.
   	B.	net decrease in cash of $20,000.
   	C.	net increase in cash of $300,000.
   	D.	net increase in cash of $240,000.

2 points

QUESTION 4

1. The Titanic Company had the following cash transactions during 20XX:

   Paid cash dividends of $40,000

   Issued additional common stock for $300,000

   Redeemed bonds payable $100,000

   Paid interest on the bonds $10,000

   The 20XX cash flows from FINANCING Activities would be reported:

   	A.	net increase in cash of $360,000.
   	B.	net increase in cash of $350,000.
   	C.	net increase in cash of $150,000
   	D.	net increase in cash of $160,000.

2 points

QUESTION 5

1. The indirect and direct methods of preparing the statement of cash flows are identical except for the

   	A.	significant noncash activity section.
   	B.	operating activities section.
   	C.	investing activities section.
   	D.	financing activities section.

2 points

QUESTION 6

1. In converting net income to net cash provided by operating activities, under the indirect method:

   	A.	decreases in accounts receivable and increases in prepaid expenses are added.
   	B.	decreases in inventory and increases in accrued liabilities are added.
   	C.	decreases in accounts payable and decreases in inventory are deducted.
   	D.	increases in accounts receivable and increases in accrued liabilities are deducted.

2 points

QUESTION 7

1. The information in a statement of cash flows will not help investors to assess the entity's ability to

   	A.	generate future cash flows.
   	B.	pay dividends.
   	C.	obtain favorable borrowing terms from a bank.
   	D.	pay its obligations when they become due.

2 points

QUESTION 8

1. Generally, the most important category on the statement of cash flows is cash flows from

   	A.	operating activities.
   	B.	investing activities.
   	C.	financing activities.
   	D.	significant noncash activities.

2 points

QUESTION 9

1. A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

   	A.	adjusted cash from operations
   	B.	free cash flow
   	C.	cash provided by operations
   	D.	net cash provided by operating activities