Question :
41. Under U.S. GAAP, the classification of interest expense as an : 1230581
41. Under U.S. GAAP, the classification of interest expense as an operating activity and dividends paid on common or preferred shares as a financing activity appears inconsistent to some observers as both are payments to suppliers of funds. Authoritative guidance requires the different treatments because
A. interest is an expense in computing net income
B. dividends represent a distribution of assets generated by net income not an expense reducing net income
C. interest represent a distribution of assets generated by net income not an expense reducing net income
D. dividends is an expense in computing net income
E. Choices a and b
42. Both U.S. GAAP and IFRS permit considerable flexibility with respect to the display of information in the statement of cash flows. Firms must report cash flows from operations, investing, and financing for the _____.
A. current year
B. current year and the prior year
C. current year and the prior two years
D. current year and the prior three years
E. current year and the prior four years
43. Both U.S. GAAP and IFRS permit considerable flexibility with respect to the display of information in the statement of cash flows. Firms must report the beginning and ending cash balances, and the change in the cash balance. The change in cash must reconcile to the sum of the cash inflows and outflows from _____ activities.
A. operating
B. investing
C. financing
D. operating, investing, and financing
E. none of the above
44. Both U.S. GAAP and IFRS permit considerable flexibility with respect to the display of information in the statement of cash flows. If the firm uses the direct method of reporting cash flows from _____ activities rather than the indirect method, it must also provide a separate reconciliation of net income to cash flows from _____
A. operating; operating
B. financing; financing
C. investing; investing
D. operating, investing; and financing; operating, investing; and financing;
E. none of the above
45. Both U.S. GAAP and IFRS permit considerable flexibility with respect to the display of information in the statement of cash flows. Within the investing and financing cash flow categories, the presentation for most items should _____.
A. not net cash inflows against cash outflows
B. net cash inflows against cash outflows
C. net cash inflows against net income
D. net cash inflows against free cash flows
E. net free cash flows against cash outflows
46. Examples of nonmonetary transactions is/are:
A. the acquisition of equipment in exchange for shares of common stock
B. the conversion of a firm’s debt into common shares
C. paying interest
D. paying dividends
E. choices a and b
47. Under both U.S. GAAP and IFRS, nonmonetary transactions do not appear in the statement of cash flows as investing or financing activities, because they do not help in explaining the change in cash. Firms must disclose nonmonetary investing and financing activities in _____.
A. the body of the statement of cash flows, only
B. a separate schedule, only
C. a note, only
D. the body of the statement of cash flows, in a separate schedule, or in a note
E. none of the above
48. Although the guidance in U.S. GAAP and IFRS states a preference that companies present cash flows from operations using the _____. , most companies present cash flows from operations as _____.
A. a reconciliation of net income to operating cash flow (the direct method); direct method
B. direct method; a reconciliation of net income to operating cash flow (the indirect method)
C. cash method; accrual method
D. accrual method; cash method
E. none of the above
49. The first section of the statement of cash flows derives cash flow from operations. Both U.S. GAAP and IFRS permit firms to report cash flow from operations using the __________.
A. direct method, only
B. indirect method, only
C. direct and indirect methods
D. adjustment method, only
E. income method, only
50. The first section of the statement of cash flows derives cash flow from _____. activities. The _____. method reports the amounts of cash received from customers less cash disbursed to suppliers, employees, lenders, and taxing authorities.
A. operating; direct
B. operating; indirect
C. investing; direct
D. investing; indirect
E. financing: direct
