Q1. The statement of cash flows

must be prepared on a daily basis.

summarizes the operating, financing, and investing activities of an entity.

is another name for the income statement.

is a special section of the income statement.

Q2. Cash equivalents are generally investments with maturities of

$1,000 or more.

three months or less.

at least six months.

one year or the operating cycle, whichever is less.

Q3. The order of presentation of activities on the statement of cash flows is

operating, investing, and financing.

operating, financing, and investing.

financing, operating, and investing.

financing, investing, and operating.

Q4. For the following transaction, indicate where, if at all, it would be classified on the statement of cash flows. Assume the indirect method is used. Decrease in income taxes payable.

Operating activities section

Investing activities section

Financing activities section

Does not represent a cash flow

Q5. Starting with net income and adjusting it for items that affected reported net income but which did not affect cash is called the

direct method.

indirect method.

working capital method.

cost-benefit method.

Q6. Using the indirect method, patent amortization expense for the period

is deducted from net income.

causes cash to increase.

causes cash to decrease.

is added to net income.

Q7. In developing the cash flows from operating activities, most companies in the U. S.

use the direct method.

use the indirect method.

present both the indirect and direct methods in their financial reports.

prepare the operating activities section on the accrual basis.

Q8. Which of the following would be added to net income using the indirect method?

An increase in accounts receivable

An increase in prepaid expenses

Depreciation expense

A decrease in accounts payable

Q9. A measure that describes the cash remaining from operations after adjustment for capital expenditures and dividends is

adjusted cash from operations.

cash provided by operations.

free cash flow.

net cash provided by operating activities.

Q10. Free cash flow equals cash provided by

operations less capital expenditures and cash dividends.

operations less cash dividends.

investing activities less capital expenditures and cash dividends.

operations less capital expenditures.