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The work sheet used to prepare a statement of cash flows (indirect method to determine cash flows from operating activities)should have a total in the Changes column equal to total assets.

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Operating activities involve the acquiring and selling of goods and services for cash or on account.

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Which of the following statements is true?


A) The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the direct method.
B) The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the indirect method.
C) The FASB prefers the indirect method of preparing the operating activities section of the statement of cash flows.
D) Most companies use the indirect method of preparing the operating activities section of the statement of cash flows.

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Below is information for Fargo Corp.for 2013 and 2014: Below is information for Fargo Corp.for 2013 and 2014: At the end of 2014,Fargo issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2013 (before their maturity date) .All interest expense was paid in cash during 2014. The following statements describe how Fargo reported the cash flow effects of the items described above on its 2014 statement of cash flows.The indirect method is used to prepare the operating activities section.Which of the following has been reported incorrectly by Fargo? A) Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in the financing activities section. B) The loss on bond retirement of $15,000 was added to net income in the operating activities section. C) Payments of $560,000 were reported as a cash outflow in the investing activities section. D) Interest expense of $45,000 was not reported separately because it is included in net income in the operating activities section. At the end of 2014,Fargo issued bonds at par value for $800,000 cash.The proceeds from these bonds were used to retire the $500,000 bond issue outstanding at the end of 2013 (before their maturity date) .All interest expense was paid in cash during 2014. The following statements describe how Fargo reported the cash flow effects of the items described above on its 2014 statement of cash flows.The indirect method is used to prepare the operating activities section.Which of the following has been reported incorrectly by Fargo?


A) Proceeds of $800,000 from the issuance of bonds were reported as a cash inflow in the financing activities section.
B) The loss on bond retirement of $15,000 was added to net income in the operating activities section.
C) Payments of $560,000 were reported as a cash outflow in the investing activities section.
D) Interest expense of $45,000 was not reported separately because it is included in net income in the operating activities section.

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When using the indirect method,how is the issuing of stock for cash shown on the statement of cash flows?


A) Operating activity
B) Investing activity
C) Financing activity
D) Non cash investing and financing activity

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A mortgage incurred in exchange for an office building would be reported in the statement of cash flows in


A) the cash flows from financing activities section
B) the cash flows from investing activities section
C) a separate schedule
D) the cash flows from operating activities section

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An important __________________________ activity for many companies is acquiring property.

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Explain where to find the information needed to determine a company's cash flow adequacy.

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The information needed to determine a co...

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Under the _______________________________,the net cash flow from operating activities is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments,and all accruals of future operating cash receipts or payments.

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Which of the following statements is false?


A) A balance sheet reports a company's cash balance at a specific date.
B) An income statement reports the amounts of revenue and expense on an accrual basis,not the amount of cash received from revenues or paid for expenses.
C) A statement of retained earnings reports the amount of cash received from operating activities and the amount of cash paid for dividends.
D) A statement of cash flows explains the changes in cash from operating,investing,and financing activities.

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Turtle Island Music Store reported net income of $200,000.Cash from operations


A) will be more than $200,000.
B) will be less than $200,000.
C) will be equal to $200,000.
D) cannot be determined without more information.

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The primary purpose of the statement of cash flows is to provide information about


A) the financial position of the company.
B) the profitability of the company.
C) the investing and financing activities of the company.
D) the cash inflows and outflows of the company.

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Which of the following should be classified as an investing activity on the statement of cash flows?


A) interest on notes payable
B) payment to suppliers for inventory
C) payment of dividends
D) None of these

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When using the direct method,how is the payment of a cash dividend shown on the statement of cash flows?


A) Operating activity
B) Investing activity
C) Financing activity
D) Noncash investing and financing activity

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The purchase of merchandise is an important ____________________ activity for a retailer.

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When using the indirect method,how is depreciation expense recorded on the statement of cash flows?


A) Operating activity
B) Investing activity
C) Financing activity
D) Noncash investing and financing activity

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Which balance sheet accounts are most affected by operating activities?


A) Current assets and current liabilities.
B) Long-term assets.
C) Long-term liabilities.
D) Stockholders' equity.

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Which of the following transactions is a significant noncash investing and financing activity?


A) Land is purchased for cash.
B) Bonds are issued for cash.
C) Cash equivalents are purchased.
D) Equipment is acquired by issuing a long-term note.

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Arizona Inc.reported the following information for 2013 and 2014. Arizona Inc.reported the following information for 2013 and 2014. If Arizona uses the indirect method to prepare the operating activities section of the statement of cash flows,what amount will be reported as net cash inflow from operating activities for 2014? A) $64,000 B) $66,000 C) $68,000 D) $70,000 If Arizona uses the indirect method to prepare the operating activities section of the statement of cash flows,what amount will be reported as net cash inflow from operating activities for 2014?


A) $64,000
B) $66,000
C) $68,000
D) $70,000

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During 2012,the accounts payable balance of Bennington Corp.decreased.Which of the following statements is true?


A) This decrease indicates that Bennington paid less during the period than it recognized as expenses on the income statement.
B) This decrease is added to net income in the operating activities section of a statement of cash flows prepared under the indirect method.
C) This decrease is deducted from net income in the operating activities section of a statement of cash flows prepared under the indirect method.
D) This decrease is considered only when the operating activities section of a statement of cash flows is prepared under the direct method.

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