Question :
55.Which method of reporting cash flows from operating activities used : 1254287
55.Which method of reporting cash flows from operating activities is used by most businesses in preparing the statement of cash flows?
A. Accrual method
B. Indirect method
C. Direct method
D. Computational method
56.When using the indirect method to prepare the statement of cash flows, an increase in noncash current assets is
A. subtracted from current liabilities in the cash flows from financing activities section.
B. subtracted from net income in the cash flows from operating activities section.
C. added to net income in the cash flows from operating activities section.
D. added to equipment purchases in the cash flows from investing activities section.
57.When using the indirect method to prepare the statement of cash flows, a decrease in current liabilities is:
A. subtracted from current assets in the cash flows from financing activities section.
B. subtracted from net income in the cash flows from operating activities section.
C. added to net income in the cash flows from operating activities section.
D. added to inventory purchases in the cash flows from investing activities section.
58.On January 1, 2013, the Carrington Corporation decided to switch from the direct method to the indirect method of preparing the statement of cash flows. Assuming a positive net income figure but a decrease in the cash balance, what can be said about the change in method of preparing the statement?
A. The direct method will yield a larger amount for cash flows from operating activities.
B. The only difference will be in the cash flows from financing activities section.
C. There will be no difference in the totals on the statement of cash flows.
D. The indirect method will yield a larger amount for cash flows from operating activities.
59.Which of the following is a correct statement of one of the rules for converting net income to the cash flow from operating activities using the indirect method?
A. Increases in current liabilities are added to net income.
B. All non-cash expenses and losses are subtracted from net income.
C. Increases in current assets are added to net income.
D. Decreases in current assets are subtracted from net income.
60.Which of the following is an incorrect statement of one of the rules for converting net income to the cash flow from operating activities using the indirect method?
A. Increases in current assets are subtracted from net income.
B. Non-cash revenue and gains are added to net income.
C. Decreases in current assets are added to net income.
D. Increases in current liabilities are added to net income.
61.Which of the following statements best explains the correct handling of depreciation on the statement of cash flows when using the indirect method?
A. Depreciation expense is subtracted from net income because it causes a loss when the related plant asset is sold.
B. Depreciation expense is subtracted in the cash flows from investing activities section because it reduces the book value of the corresponding plant asset.
C. Depreciation expense is a non-cash expense that is added to net income to derive cash flows from operating activities.
D. Depreciation expense adds to the company’s Cash account to help pay for new equipment.
62.When preparing a statement of cash flows, in which section is it permitted to use either the direct method or the indirect method?
A. Investing activities
B. Operating activities
C. Financing activities
D. All of these
63.On January 1, 2013, the balance of Jackson Corporation’s Accounts Receivable was $20,000. Sales on account for 2013 amounted to $160,000 and the ending balance of Accounts Receivable was $32,000. What is the amount of cash collected from customers?
A. $128,000
B. $148,000
C. $172,000
D. $180,000
64.Harrison Company, a small consulting firm, charges all of its operating expenses on Accounts Payable. On January 1, 2013, Harrison’s Accounts Payable balance was $12,000 and, during the year, an additional $108,000 of operating expenses was charged on account. The ending Accounts Payable balance was $36,000. What is the amount of cash paid for expenses during 2013?
A. $132,000
B. $120,000
C. $84,000
D. $32,000
