111. The indirect method of reporting
A. is preferred by the Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards No. 95, “Statement of Cash Flows”
B. shows a reconciliation between net income and cash flow from operations either at the bottom of the statement of cash flows or in a separate note
C. reports the amounts of cash received from customers less cash disbursed to various suppliers, employees, lenders for interest payments, and taxing authorities
D. reports the net income for a period and then adjusts the net income to convert revenues to cash received from customers and to convert expenses to cash disbursed to various suppliers of goods and services
E. all of the above
112. Straightforward Inc.’s recordkeeping system incorporates the appropriate classification codes into the initial recording of transactions in the Cash account and then prepares the statement of cash flows. One can prepare the statement of cash flows by examining every transaction affecting the cash account, and classifying each as
A. a cash receipts, cash disbursements, or financing activity.
B. an operating, investing, or financing activity.
C. a cash receipts, cash disbursements, or investing activity.
D. a cash receipts, cash disbursements, or operating activity.
E. a cash receipts, cash disbursements, or exchange activity.
113. Given the large number of transactions affecting the Cash account during a period, most firms prefer to prepare the statement of cash flows after they have prepared the
A. funds flow statement and income statement.
B. balance sheet and funds flow statement.
C. income statement and the balance sheet.
D. statement of cash receipts and disbursements
E. none of the above.
114. Which of the following concerning the preparation of the statement of cash flows is correct?
A. the T-account work sheet for preparing the statement of cash flows provides built-in checks to ensure the full recognition of the effects of each transaction on various accounts.
B. the accountant often prepares a T-account work sheet at the end of the period after preparing the balance sheet and income statement. The work sheet provides the information for preparing the statement of cash flows.
C. the accountant often prepares a T-account work sheet during the period . The work sheet provides the information for preparing the statement of cash flows.
D. both a and b.
E. none of the above.
115. One can prepare the statement of cash flows
A. by examining every transaction affecting the cash account, and classifying each one as an operating activity, investing activity, or financing activity.
B. using the T-account work sheet after the income statement and balance sheet have been prepared.
C. using the T-account work sheet before the income statement and balance sheet have been prepared.
D. both a and b.
E. none of the above.
116. Most firms prefer to prepare the statement of cash flows after they have prepared the income statement and the balance sheet. The amounts debited to various accounts on the T-account work sheet
A. do not equal amounts credited to various accounts.
B. must equal amounts credited to the liability accounts, only.
C. may or may not equal amounts credited to various accounts.
D. must equal amounts credited to various accounts.
E. must equal amounts credited to the shareholders’ equity accounts, only.
117. Most firms prefer to prepare the statement of cash flows after they have prepared the income statement and the balance sheet. In the preparation of the T-account work sheet, an error
A. often results from the partial recording of a transaction in which debits do not equal credits.
B. usually becomes evident only on completion of the work sheet.
C. requires the preparer to retrace each of the entries to discover the source of the error.
D. all of the above.
E. none of the above
118. The final step in preparing the statement of cash flows is to use the information provided in the master T-account for _____ to prepare the formal statement.
A. Cash
B. Funds
C. Operations
D. Changes in accounts
E. none of the above
119. Many analysts focus attention on cash flow from operations, thinking it as important as, or more important than, net income. A common misconception is that the management has little opportunity to manipulate transactions affecting the statement of cash flows. The manipulation possibilities arise from the
A. amounts of cash flows
B. timing of cash flows
C. classification and disclosure in the statement and related notes
D. choices b and c
E. none of the above
120. Firms have some choice as to when they disburse cash. Firms that delay making payments to suppliers, employees, and others during the last several days of an accounting period
A. conserve cash and increase cash flow from operations for that period.
B. conserve cash and decrease cash flow from operations for that period.
C. do not conserve cash and increase cash flow from operations for that period.
D. do not conserve cash and decrease cash flow from operations for that period.
E. do not effect the cash balance and has no affect on cash flow from operations for that period.
121. Firms have some choice as to when they disburse cash. A firm may delay making payments to suppliers, employees, and others during the last several days of an accounting period. When this firm makes the cash payments during the early part of the next period, cash flow from
A. operations declines.
B. operations increases.
C. financing declines.
D. financing increases.
E. investing declines.
122. Firms have some choice as to when they disburse cash. A firm may delay making payments to suppliers, employees, and others during the last several days of an accounting period and then make the cash payments during the early part of the next period. The firm
A. decreases cash flow from financing during the first period but increases cash flow from financing during the second period.
B. increases cash flow from operations during the first period but decreases cash flow from operations during the second period.
C. decreases cash flow from operations during the first period but increases cash flow from operations during the second period.
D. increases cash flow from financing during the first period but decreases cash flow from financing during the second period.
E. increases cash flow from investing during the first period but decreases cash flow from investing during the second period.
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