Question 1

The direct method of preparing a statement of cash flows

Accepted Answer

A) eliminates the need for a schedule of noncash investing and financing transactions. 
B) provides a different result than the indirect method. 
C) adjusts net income for changes in current accounts. 
D) shows cash receipts from sales. 
A) eliminates the need for a schedule of noncash investing and financing transactions. 
B) provides a different result than the indirect method. 
C) adjusts net income for changes in current accounts. 
D) shows cash receipts from sales.

Question 2

When a statement of cash flows is prepared using the direct method,

Accepted Answer

A) net income is the starting point in determining cash flows from operations. 
B) cash paid for dividends is not included. 
C) the increase in cash is different than when the indirect method is used. 
D) the amount of cash collected from customers is calculated. 
A) net income is the starting point in determining cash flows from operations. 
B) cash paid for dividends is not included. 
C) the increase in cash is different than when the indirect method is used. 
D) the amount of cash collected from customers is calculated.

Question 3

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Prepaid Expenses-indicate the effect on cash payments for operating expenses by choosing one of the following:

Accepted Answer

A) Add to operating expenses to arrive at cash payments for operating expenses. 
B) Subtract from operating expenses to arrive at cash payments for operating expenses. 
C) Not used to adjust operating expenses to arrive ay cash payments for operating expenses. 
A) Add to operating expenses to arrive at cash payments for operating expenses. 
B) Subtract from operating expenses to arrive at cash payments for operating expenses. 
C) Not used to adjust operating expenses to arrive ay cash payments for operating expenses.

Question 4

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Income Taxes Payable-indicate the effect on cash payments for income taxes by choosing one of the following:

Accepted Answer

A) Add to Income Taxes to arrive at cash payments for income taxes. 
B) Subtract from Income Taxes to arrive at cash payments for income taxes. 
C) Not used to adjust Income Taxes to arrive at cash payments for income taxes. 
A) Add to Income Taxes to arrive at cash payments for income taxes. 
B) Subtract from Income Taxes to arrive at cash payments for income taxes. 
C) Not used to adjust Income Taxes to arrive at cash payments for income taxes.

Question 5

On a statement of cash flows prepared using the direct method,if Income Taxes Payable decreased during the accounting period,cash payments for taxes will be less than the expense shown on the income statement.

Accepted Answer

A) True 
 B)False

Question 6

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Inventory-indicate the effect on cash payments for purchases by choosing one of the following:

Accepted Answer

A) Add to Cost of Goods Sold to compute cash payments for purchases. 
B) Subtract from Cost of Goods Sold to compute cash payments for purchases. 
C) Not used to adjust Cost of Goods Sold to compute cash payments for purchases. 
A) Add to Cost of Goods Sold to compute cash payments for purchases. 
B) Subtract from Cost of Goods Sold to compute cash payments for purchases. 
C) Not used to adjust Cost of Goods Sold to compute cash payments for purchases.

Question 7

The direct method converts each item on the income statement to its cash equivalent.

Accepted Answer

A) True 
 B)False

Question 8

Using the direct method,calculate the amount of cash payments for purchases.Show your work

Accepted Answer

The answer of Using the direct method,calculate the amount of...

Question 9

Assume that the balance of accounts payable does not change during a period.When preparing a statement of cash flows,an increase in ending inventory over beginning inventory will result in an adjustment to cost of goods sold under the direct approach because

Accepted Answer

A) the amount of cost of goods sold is equal to the amount of cash paid for purchases. 
B) consumed inventory is an expense but not a use of funds. 
C) the amount of cost of goods sold on an accrual basis is less than the amount of cash paid for purchases of inventory. 
D) the amount of cash paid for purchases of inventory is less than the amount of cost of goods sold on an accrual basis. 
A) the amount of cost of goods sold is equal to the amount of cash paid for purchases. 
B) consumed inventory is an expense but not a use of funds. 
C) the amount of cost of goods sold on an accrual basis is less than the amount of cash paid for purchases of inventory. 
D) the amount of cash paid for purchases of inventory is less than the amount of cost of goods sold on an accrual basis.

Question 10

On a statement of cash flows prepared using the direct method,the FASB requires that cash payments for interest be classified as operating activities.

Accepted Answer

A) True 
 B)False

Question 11

The direct method of preparing a statement of cash flows

Accepted Answer

A) is the overwhelming choice of most companies. 
B) begins with net income in the operating activities section. 
C) will produce the same net figure as the indirect method. 
D) All of these choices. 
A) is the overwhelming choice of most companies. 
B) begins with net income in the operating activities section. 
C) will produce the same net figure as the indirect method. 
D) All of these choices.

Question 12

Using the direct method,calculate the amount of cash payments for operating expenses.Show your work

Accepted Answer

The answer of Using the direct method,calculate the amount of...

The direct method of preparing a statement of cash flows

When a statement of cash flows is prepared using the direct method,

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Prepaid Expenses-indicate the effect on cash payments for operating expenses by choosing one of the following:

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Income Taxes Payable-indicate the effect on cash payments for income taxes by choosing one of the following:

On a statement of cash flows prepared using the direct method,if Income Taxes Payable decreased during the accounting period,cash payments for taxes will be less than the expense shown on the income statement.

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Inventory-indicate the effect on cash payments for purchases by choosing one of the following:

The direct method converts each item on the income statement to its cash equivalent.

Using the direct method,calculate the amount of cash payments for purchases.Show your work

Assume that the balance of accounts payable does not change during a period.When preparing a statement of cash flows,an increase in ending inventory over beginning inventory will result in an adjustment to cost of goods sold under the direct approach because

On a statement of cash flows prepared using the direct method,the FASB requires that cash payments for interest be classified as operating activities.

The direct method of preparing a statement of cash flows

Using the direct method,calculate the amount of cash payments for operating expenses.Show your work

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters

Exam 15: Supplement: the Statement of Cash Flows

The direct method of preparing a statement of cash flows

When a statement of cash flows is prepared using the direct method,

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Prepaid Expenses-indicate the effect on cash payments for operating expenses by choosing one of the following:

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Increase in Income Taxes Payable-indicate the effect on cash payments for income taxes by choosing one of the following:

On a statement of cash flows prepared using the direct method,if Income Taxes Payable decreased during the accounting period,cash payments for taxes will be less than the expense shown on the income statement.

Assume the direct method is used to compute net cash flows from operating activities.For this item extracted from the financial statements-Decrease in Inventory-indicate the effect on cash payments for purchases by choosing one of the following:

The direct method converts each item on the income statement to its cash equivalent.

Using the direct method,calculate the amount of cash payments for purchases.Show your work

Assume that the balance of accounts payable does not change during a period.When preparing a statement of cash flows,an increase in ending inventory over beginning inventory will result in an adjustment to cost of goods sold under the direct approach because

On a statement of cash flows prepared using the direct method,the FASB requires that cash payments for interest be classified as operating activities.

The direct method of preparing a statement of cash flows

Using the direct method,calculate the amount of cash payments for operating expenses.Show your work

Accounting Principles and the Financial Statements

Analyzing and Recording Business Transactions

Adjusting the Accounts

Completing the Accounting Cycle

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Supplement: Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long -Term Assets

Current Liabilities and Fair Value Accounting

Accounting for Partnerships

Accounting for Corporations

Long Term Liabilities

The Statement of Cash Flows

Financial Statement Analysis

Accounting for Investments

Filters