CHAPTER 23 STATEMENT OF CASH FLOWS IFRS questions are available at the end of this chapteR WITH CORRECT ANSWERS

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34. When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in determining cash flow from operating activities?... Direct Method Indirect Method a. Increase Decrease b. Decrease Increase c. Increase Increase d. Decrease Decrease Ans: C, LO: 3, Bloom: C, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 35. In determining net cash flow from operating activities, a decrease in accounts payable during a period a. means that income on an accrual basis is less than income on a cash basis. b. requires an addition adjustment to net income under the indirect method. c. requires an increase adjustment to cost of goods sold under the direct method. d. requires a decrease adjustment to cost of goods sold under the direct method. Ans: C, LO: 3, Bloom: C, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 23 - 11 Test Bank for Intermediate Accounting, Sixteenth Edition 36. When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustments in determining cash flows from operating activities? Indirect Method Direct Method a. Increase Decrease b. Decrease Increase c. Increase Increase d. Decrease Decrease Ans: A, LO: 3, Bloom: C, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 37. When preparing a statement of cash flows, a decrease in prepaid insurance during a period would require which of the following adjustments in determining cash flows from operating activities? Indirect Method Direct Method a. Increase Decrease b. Decrease Increase c. Increase Increase d. Decrease Decrease Ans: A, LO: 3, Bloom: C, Difficulty: Difficult, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 38. When preparing a statement of cash flows, the following are used for which method in determining cash flows from operating activities? Gross Accounts Receivable Net Accounts Receivable a. Indirect Direct b. Direct Indirect c. Direct Direct d. Neither Indirect Ans: B, LO: 4, Bloom: K, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 39. Which of the following statements about the statement of cash flows is correct? a. The indirect method starts with income from continuing operations. b. The direct method is known as the reconciliation method. c. The direct method is more consistent with the primary purpose of the statement of cash flows. d. All of these answers are correct. Ans: C, LO: 3, Bloom: K, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 40. When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is added to net income to compute cash provided by/used by operating activities? a. Increase in accounts receivable. b. Gain on sale of land. c. Amortization of patent. d. All of these are added to net income to arrive at cash flow from operating activities. Ans: C, LO: 2, Bloom: C, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 23 - 12 Statement of Cash Flows 41. When using the indirect method to prepare the operating section of a statement of cash flows, which of the following is deducted from net income to compute cash provided by/used by operating activities? a. Decrease in accounts receivable. b. Gain on sale of land. c. Amortization of patent. d. All of these are deducted from net income to arrive at cash flow from operating activities. Ans: B, LO: 2, Bloom: C, Difficulty: Moderate, Min: 2, AACSB: Analytic, AICPA BB: None, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Reporting, IFRS: None 42. Which of the following is false concerning the statement of cash flows? [Show More]

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