Question : 109.Which method will yield higher cash flows from operating activities? A. The : 1259496

 

 

109.Which method will yield higher cash flows from operating activities?   

A. The indirect method.

 

B. The direct method.

 

C. Both direct and indirect methods will yield the same amount.

 

D. Depends upon the situation.

 

 

 

 

110.Which of the following statements regarding the direct and indirect methods of reporting cash flow from operating activities is false?   

A. Although both methods result in the same net increase or decrease in cash for the year, net cash flow from operating activities will be different under the two methods.

 

B. The direct method shows the specific cash inflows and outflows constituting the operating activities of the business.

 

C. Under the indirect method, the computation of net cash flow from operating activities begins with net income as shown in the income statement.

 

D. The FASB permits both the direct and the indirect methods, but has expressed a preference for the direct method.

 

 

 

 

111.Which of the following would not be presented in the cash flows from operating activities section of the statement of cash flows when the direct method is used?   

A. Dividends paid.

 

B. Dividends received.

 

C. Neither dividends paid nor dividends received would be shown.

 

D. Both dividends paid and dividends received would be shown.

 

 

 

 

112.Which statement is true as to the FASB’s position on the presentation of the statement of cash flows?   

A. The FASB recommends the use of the indirect method, but most companies use the direct method.

 

B. The FASB recommends the use of the direct method, but most companies use the indirect method.

 

C. The FASB recommends the use of the direct method, and most companies use the direct method.

 

D. The FASB recommends the use of the indirect method, and most companies use the indirect method.

 

 

 

 

113.Which of the following does not create a difference between net income and the net cash flow from operations?   

A. Non-operating gains and losses.

 

B. Depreciation expense.

 

C. Timing differences between credit sales and collections from customers.

 

D. Payment of a cash dividend.

 

 

 

 

114.Cigna Corporation’s 2015 net income is smaller than net cash flow from operating activities. Which of the following would not be an explanation of why net income is smaller than net cash flow from operating activities?   

A. Cigna paid dividends to shareholders during 2015.

 

B. Cigna’s accounts payable increased during 2015.

 

C. Cigna recognized depreciation expense in 2015.

 

D. Cigna sold equipment at a loss in 2015.

 

 

 

 

115.When using the indirect method, depreciation expense:   

A. Increases net cash flow from operations.

 

B. Decreases net cash flow from operations.

 

C. Does not affect net income.

 

D. Does not affect net cash flow from operations.

 

 

 

 

116.Which of the following is not true regarding the direct and indirect methods of computing net cash flow from operating activities?   

A. Both methods result in the same dollar amount of cash flow from operating activities.

 

B. Both methods involve adjusting entries to the company’s books so that the accounting records reflect the figures shown in the statement of cash flows.

 

C. Both methods are acceptable to the FASB for reporting purposes.

 

D. Both methods convert accrual-based income statement amounts to cash flow results.

 

 

 

 

117.Craig Corporation’s reported net income for 2015 is less than its net cash flow from operating activities. One reason for this could be:   

A. The sale of machinery at a loss in 2015.

 

B. An increase in inventory levels during 2015.

 

C. The sale of investments at a gain in 2015.

 

D. An error in the preparation of the statement of cash flows; net income should be greater than or equal to net cash flow from operating activities.

 

 

 

 

118.The Nelson Corporation reported net income in excess of its net cash flow from operating activities for the current year. An explanation for this may be:   

A. A loss on the sale of equipment in the current year.

 

B. An increase in accounts payable during the year.

 

C. Depreciation expense recognized for the year.

 

D. A gain on the sale of investments during the year.