. The direct method of preparing the statement of cash flows is most frequently used. a) True b) False financing Business activities that generate or use cash are classified as operating, investing. or activities on the statement of cash flows. 8. a) True b) False 9. The purchase of stock in another company is classified as a financing activity a) True b) False 1o. The indirect method for computing and reporting net cash flows from operating activities involves adjusting the net income figure to obtain net cash provided or used by operating activities. a) True b) False 11. Which of the following best describes an investment in equity securities? a) Reflects a creditor relationship. b) Generates interest revenue. c) Fair value adjustments always increase net income. d) Reflects an owner relationship. 2. Roe Corporation owns 10,000 shares of WRJ Corporation stock. WRJ Corporation has 25,000 sh of stock outstanding. WRJ paid $4 per share in cash dividends to its shareholders. The journal to record Roe Corporation's receipt of these dividends is: a) Debit Cash $40,000: credit Long-Term Investment $40,000. b) Debit Long-Term Investment $40,000; credit Cash $40,000. c) Debit Cash $40,000; credit Dividend Revenue $40,000. d) Debit Cash $40,000: credit Unrealized Gain-Equity $40,000