True-False Circle T if the statement is true, F if it is false. Please provide explanations for the false answers, using the blank lines at the end of the section. TF 1. The statement of cash flows is a major fi- nancial statement required by the FASB. TF 2. Payment on an account payable is consid- ered a financing activity. TF 3. The proceeds from the sale of available- for-sale securities would be considered an investing activity, whether the investments are classified as short-term or long-term. TF 4. To calculate cash payments for purchases, the cost of goods sold must be known, along with the changes in inventory and accounts payable during the period. TF 5. Under the indirect method, a decrease in prepaid expenses would be added to net income in determining net cash flows from operating activities. TF 6. The schedule of noncash investing and fi- nancing transactions might include line items for depreciation, depletion, and am- ortization recorded during the period. TF 7. In the Analysis of Transactions columns of the bottom portion of a statement of cash flows work sheet, Retained Earnings is credited and Dividends Paid debited for dividends paid during the period. TF 8. In the Cash Flows from Operating Activi- ties section of a statement of cash flows work sheet, the items that are credited in the Analysis of Transactions columns must be deducted from net income in the state- ment of cash flows. TF 9. A net positive figure for cash flows from investing activities implies that the busi- ness is generally expanding. TF 10. The issuance of common stock for cash would be disclosed in the financing activ. ities section of the statement of cash flows. TF 11. Under the indirect method, a loss on the sale of buildings would be deducted from net income in the operating activities sec- tion of the statement of cash flows. TF 12. To calculate cash payments for operating expenses, operating expenses must be mod- ified by (among other items) depreciation, which is treated as an add-back. TF 13. Cash obtained by borrowing is considered a financing activity, whether the debt is classified as short-term or long-term. TF 14. The purchase of land in exchange for the issuance of common stock in effect repre sents simultaneous investing and financ- ing activities. TF 15. It is possible for the direct and indirect methods to produce different net-change- in-cash figures on a statement of cash flows. TF 16. Free cash flow does not include a deduc- tion for dividends because dividend pay- ment is never required. True-False Circle T if the statement is true, F if it is false. Please provide explanations for the false answers, using the blank lines at the end of the section. TF 1. The statement of cash flows is a major fi- nancial statement required by the FASB. TF 2. Payment on an account payable is consid- ered a financing activity. TF 3. The proceeds from the sale of available- for-sale securities would be considered an investing activity, whether the investments are classified as short-term or long-term. TF 4. To calculate cash payments for purchases, the cost of goods sold must be known, along with the changes in inventory and accounts payable during the period. TF 5. Under the indirect method, a decrease in prepaid expenses would be added to net income in determining net cash flows from operating activities. TF 6. The schedule of noncash investing and fi- nancing transactions might include line items for depreciation, depletion, and am- ortization recorded during the period. TF 7. In the Analysis of Transactions columns of the bottom portion of a statement of cash flows work sheet, Retained Earnings is credited and Dividends Paid debited for dividends paid during the period. TF 8. In the Cash Flows from Operating Activi- ties section of a statement of cash flows work sheet, the items that are credited in the Analysis of Transactions columns must be deducted from net income in the state- ment of cash flows. TF 9. A net positive figure for cash flows from investing activities implies that the busi- ness is generally expanding. TF 10. The issuance of common stock for cash would be disclosed in the financing activ. ities section of the statement of cash flows. TF 11. Under the indirect method, a loss on the sale of buildings would be deducted from net income in the operating activities sec- tion of the statement of cash flows. TF 12. To calculate cash payments for operating expenses, operating expenses must be mod- ified by (among other items) depreciation, which is treated as an add-back. TF 13. Cash obtained by borrowing is considered a financing activity, whether the debt is classified as short-term or long-term. TF 14. The purchase of land in exchange for the issuance of common stock in effect repre sents simultaneous investing and financ- ing activities. TF 15. It is possible for the direct and indirect methods to produce different net-change- in-cash figures on a statement of cash flows. TF 16. Free cash flow does not include a deduc- tion for dividends because dividend pay- ment is never required
