Balance Sheet and Cash Flows
Chapter 12
Statement of Cash Flows
True / False Questions 1.
Interest and dividends from investments held by a company are reported as cash inflows from investing activities on the statement of cash flows. True False 2.
Under the indirect method, changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities. True False 3.
Using the indirect method, the increase in accumulated depreciation is added to net income in the operating section. True False 4.
When the net cash flows from operating, investing, and financing activities are combined to arrive at the overall net change in cash, a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance. True False 5.
Major investing and financing activities that do not involve cash do not have to be reported as part of the statement of cash flows. True False 6.
In general, the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows. True False 7.
If a company uses the direct method of calculating cash flows from operating activities, it must adjust net income for gains or losses when selling property, plant, and equipment. True False 8.
When using the spreadsheet approach for preparing a Statement of Cash Flows using the indirect method, one half of the spreadsheet reflects changes in balance sheet accounts and the other half is used to demonstrate their effect on cash flows. True False 9.
The reporting of financing activities is identical under the indirect and direct methods for the statement of cash flows. True False 10.
Depreciation expense is not reported on the statement of cash flows when prepared using the direct method. True False 11.
When preparing the operating activities section of the statement of
Statement of Cash Flows
True / False Questions 1.
Interest and dividends from investments held by a company are reported as cash inflows from investing activities on the statement of cash flows. True False 2.
Under the indirect method, changes in current assets are used in determining cash flows from operating activities and changes in current liabilities are used in determining cash flows from financing activities. True False 3.
Using the indirect method, the increase in accumulated depreciation is added to net income in the operating section. True False 4.
When the net cash flows from operating, investing, and financing activities are combined to arrive at the overall net change in cash, a net decrease in cash is subtracted from the beginning cash balance to calculate the ending cash balance. True False 5.
Major investing and financing activities that do not involve cash do not have to be reported as part of the statement of cash flows. True False 6.
In general, the cash flow from operating activities is considered by many to be the most important component of the statement of cash flows. True False 7.
If a company uses the direct method of calculating cash flows from operating activities, it must adjust net income for gains or losses when selling property, plant, and equipment. True False 8.
When using the spreadsheet approach for preparing a Statement of Cash Flows using the indirect method, one half of the spreadsheet reflects changes in balance sheet accounts and the other half is used to demonstrate their effect on cash flows. True False 9.
The reporting of financing activities is identical under the indirect and direct methods for the statement of cash flows. True False 10.
Depreciation expense is not reported on the statement of cash flows when prepared using the direct method. True False 11.
When preparing the operating activities section of the statement of