Transactions that result in significant investing and financing activities but that do not involve cash are reported either directly after the statement of cash flows or in a note to the financial statements.

True or False

The first step involved in preparing the statement of cash flows is:

Combine the operating, investing, and financing activities

Determine net cash flows from financing activities

Determine net cash flows from investing activities

Determine net cash flows from operating activities

The total net cash flows from operating activities are identical under both the indirect and direct methods.

True or False

Nearly all major companies in the United States use the direct method to prepare the statement of cash flows.

True or False

The indirect method and the direct method affect only the ______ section of the statement of cash flows.

operating activities

financing activities

investing activities

noncash activities

Net cash flows from operating activities uses information from all of the following sources, except the _____.

income statement

current assets section of the balance sheet

stockholders' equity section of the balance sheet

current liabilities section of the balance sheet

Under the indirect method, the operating activities section of the cash flow statement begins with net income.

True or False

The statement of cash flows reports business activities on an accrual basis.

True or False

Depreciation expense is added back to net income in calculating operating cash flows.

True or False