Question :
71. Which of the following not added to net income as : 1245811
71. Which of the following is not added to net income as an adjustment to reconcile net income to cash from operating activities on the statement of cash flows?
A. Increase in an accrued liability
B. Amortization of discount on bond payable
C. Loss on sale of operational asset
D. Increase in deferred tax asset
E. None of these answers is correct.
72. On a statement of cash flows prepared using the direct method, cash from customers would be sales plus a(n)
A. decrease in accounts payable.
B. increase in accounts payable.
C. decrease in accounts receivable.
D. increase in accounts receivable.
E. None of these answers is correct.
73. Amortization of the premium on bonds payable is subtracted from net income in the reconciliation of net income to cash flows from operations because
A. it is a financing cash outflow.
B. it reduces income without causing a cash outflow.
C. interest expense understates the cash paid for interest by the amount of the premium amortization.
D. it increases income without causing a cash flow.
E. None of these answers is correct.
74. In the preparation of a statement of cash flows, adjustments to net income to reconcile net income to cash from operating activities include
A. dividends received.
B. the difference between the purchase price and the resale price of treasury stock (assuming the cost method of accounting for treasury stock).
C. amortization of organization cost.
D. redemption premium on preferred stock redeemed during the period.
E. All of these answer choices are correct.
75. During Year 7, Frank Company had a net increase in accounts receivable of $10,000. The T-account work sheet for preparing the statement of cash flows
A. adds the increase in accounts receivable in deriving cash flow from operating activities.
B. subtracts the increase in accounts receivable in deriving cash flow from operations.
C. adds the increase in accounts receivable in deriving cash flow from financing activities.
D. subtracts the increase in accounts receivable in deriving cash flow from financing activities.
E. subtracts the increase in accounts receivable in deriving cash flow from investing activities.
76. In Year 8, Global Marketing Corporation had a net increase in inventories of $50,000. The T-account work sheet for preparing the statement of cash flows
A. adds this change in inventory in deriving cash flow from operating activities.
B. adds this change in inventory in deriving cash flow from financing activities.
C. subtracts this change in inventory in deriving cash flow from operating activities.
D. subtracts this change in inventory in deriving cash flow from financing activities.
E. subtracts this change in inventory in deriving cash flow from investment activities.
77. The extent to which a firm adjusts net income for changes in noncurrent assets and noncurrent liabilities in deriving cash flow from operations depends on the nature of its operations. Firms that grow or diversify by acquiring minority ownership positions in other businesses will often show a
A. addition to retained earnings for distributed earnings.
B. addition to net income for distributed earnings.
C. subtraction from net income for equity in undistributed earnings.
D. addition to net income for equity in undistributed earnings.
E. subtraction from net income for distributed earnings.
78. Firms engage in transactions involving derivatives. For the most part, the complex parts of these transactions occur _____, but those transactions do _____ until, possibly, their settlement.
A. after the firm has acquired the derivative; not affect cash flows
B. before the firm has acquired the derivative; not affect cash flows
C. when the firm has acquired the derivative; not affect cash flows
D. after the firm has acquired the derivative; not affect net income
E. before the firm has acquired the derivative; not affect net income
79. Which of the following is/are true?
A. Most derivative acquisitions represent marketable securities held as current assets.
B. The cash flow from operations section shows a subtraction for the increase in the current asset accounts in an amount equal to the firm’s expenditure to acquire the derivative.
C. If the firm classifies the derivative as a nonoperating asset, then the cash outflow appears in the investing section of the statement of cash flows.
D. Subsequent to acquisition, the firm may report changes in the fair value of the derivative in income.
E. all of the above
80. Which of the following is not true?
A. Most derivative acquisitions represent marketable securities held as current assets.
B. The cash flow from operations section shows a subtraction for the increase in the current asset accounts in an amount equal to the firm’s expenditure to acquire the derivative.
C. If the firm classifies the derivative as a nonoperating asset, then the cash outflow appears in the investing section of the statement of cash flows.
D. Subsequent to acquisition, the firm may report changes in the fair value of the derivative in income.
E. Firms engage in transactions involving derivatives and for the most part, the complex parts of these transactions occur before the firm has acquired the derivative.
