In determining the cash flows from operating activities for the statement of cash flows by the indirect method, the depreciation expense for the period is added to the net income for the period.
True or False
True
Cash flows from financing activities, as part of the statement of cash flows, include payments for dividends.
True or False
True
The declaration and issuance of a stock dividend would be reported on the statement of cash flows.
True or False
False
The order of presentation of activities on the statement of cash flows is
a. operating, financing, and investing.
b. financing, operating, and investing.
c. operating, investing, and financing.
d. financing, investing, and operating.
c. operating, investing, and financing.
Cash flows from investing activities, as part of the statement of cash flows, include receipts from the sale of land.
True or False
True
Cash flows from investing activities, as part of the statement of cash flows, include payments for the acquisition of fixed assets.
True or False
True
Cash dividends of $50,000 were declared during the year. Cash dividends payable were $10,000 and $20,000 at the beginning and end of the year, respectively. The amount of cash for the payment of dividends during the year is
a. $50,000
b. $70,000
c. $40,000
d. $60,000
c. $40,000
A major disadvantage of the indirect method of reporting cash flows from operating activities is that the difference between the net amount of cash flows from operating activities and net income is not emphasized.
True or False
False
The acquisition of land in exchange for common stock is an example of noncash investing and financing activity.
True or False
True
Investing activities include
a. obtaining capital from owners.
b. repaying money previously borrowed.
c. obtaining cash from creditors.
d. collecting cash on loans made.
d. collecting cash on loans made.
Free cash flow is cash from operations, less cash for
a. dividends and cash for fixed assets needed to maintain productivity
b. dividends, cash for fixed assets needed to maintain productivity, and cash to redeem bonds payable
c. fixed assets needed to maintain productivity
d. dividends and cash to redeem bonds payable
a. dividends and cash for fixed assets needed to maintain productivity
Net income was $ 51,000 for the year. The accumulated depreciation balance increased by $14,000 over the year. There were no sales of fixed assets or changes in noncash current assets or liabilities. Under the indirect method, the cash flow from operations is $37,000.
True or False
False
To arrive at cash flows from operations, it is necessary to convert the income statement from an accrual basis to the cash basis of accounting.
True or False
True
Cash flows from investing activities, as part of the statement of cash flows, include payments for the purchase of treasury stock.
True or False
False
The statement of cash flows may be used by management to
a. assess the major policy decisions involving investments and financing
b. assess the liquidity of the business
c. determine dividend policy
d. All of these choices are correct.
b. assess the liquidity of the business
Cash flows from operating activities, as part of the statement of cash flows, include cash transactions that enter into the determination of net income.
True or False
True
Cash outflows from financing activities include the payment of cash dividends, the acquisition of treasury stock, and the repayment of amounts borrowed.
True or False
True
Cash flows from investing activities, as part of the statement of cash flows, include receipts from the issuance of bonds payable.
True or False
False
The following information is available from the current period financial statements:
Net income
$ 135,761
Depreciation expense
$22,029
Increase in accounts receivable
$20,282
Decrease in accounts payable
$15,277
Determine the net cash flow from operating activities using the indirect method.
