Question :
68. Cigna Corporation’s 2010 net income smaller than net cash flow : 1229446
68. Cigna Corporation’s 2010 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 2010.
B. Cigna’s accounts payable increased during 2010.
C. Cigna recognized depreciation expense in 2010.
D. Cigna sold equipment at a loss in 2010.
69. 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.
70. At the beginning of 2009, Baldwin Corporation bought an automobile for $36,000 by issuing a note payable. The automobile has a six-year life and is depreciated using the straight-line method. To determine net cash flow from operating activities for 2009 using the indirect method, net income should be:
A. Increased by $6,000.
B. Decreased by $6,000.
C. Increased by $42,000.
D. Neither increased nor decreased. No adjustments are necessary since no cash was received or paid.
71. 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.
72. 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.
73. An example of a non-cash investing or financing activity that is disclosed in a supplementary schedule accompanying the statement of cash flows is:
A. Recording depreciation expense for the current year.
B. Declaring, but not paying, dividends on common stock.
C. Selling land in exchange for a note receivable.
D. Transferring cash from a checking account into a money market fund.
74. When equipment is sold at a loss:
A. The net proceeds are shown in the investing section.
B. The book value of the asset is shown in the investing section.
C. The book value of the asset is shown in the investing section, and the loss is shown in the operating section.
D. The net proceeds are shown in the financing section.
75. When net cash flow from operating activities is presented by the direct method, the statement of cash flows is accompanied by a supplementary schedule reconciling:
A. Net cash flow from operating activities with net sales.
B. Net income with the net increase or decrease in cash and cash equivalents.
C. Net income with net cash flow from operating activities.
D. Net cash flow from operating activities shown in the statement with that which would result from use of the indirect method.
76. 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.
77. When equipment is purchased entirely through a loan:
A. The equipment is shown as an increase in the investing activities section.
B. The equipment is shown as a decrease in the investing activities section.
C. The loan is shown as an increase in the financing section.
D. Neither the loan nor the purchase of equipment is shown in the investing or the financing sections.
