1. Which of the following is incorrect about the statement of cash flows? A. It is a fourth basic financial statement. B.

It provides information about cash receipts and cash payments of an entity during a period.

C. It reconciles the ending cash account balance to the balance per the bank statement. It provides information about the operating, investing, and financing activities of the D. business.

2. The statement of cash flows classifies cash receipts and cash payments by these activities: A. operating and nonoperating. B. investing, financing, and operating. C. financing, operating, and nonoperating. D. investing, financing, and nonoperating.

3. Which is an example of a cash flow from an operating activity? A. Payment of cash to lenders for interest. B. Receipt of cash from the sale of capital stock. C. Payment of cash dividends to the company's stockholders. D. None of the above.

4. Which is an example of a cash flow from an investing activity? A. Receipt of cash from the issuance of bonds payable. B. Payment of cash to repurchase outstanding capital stock. C. Receipt of cash from the sale of equipment. D. Payment of cash to suppliers for inventory.

5. Cash dividends paid to stockholders are classified on the statement of cash flows as: A. operating activities. B. investing activities.

C. a combination of a) and b). D. financing activities.

6. Which is an example of a cash flow from a financing activity? A. Receipt of cash from sale of land. B. Issuance of debt for cash. C. Purchase of equipment for cash. D. None of the above

7. Which of the following is incorrect about the statement of cash flows? A. The direct method may be used to report cash provided by operations. B. The statement shows the cash provided (used) for three categories of activity. C. The operating section is the last section of the statement. D. The indirect method may be used to report cash provided by operations.

8. In regard to the indirect method only, net income is $132,000, accounts payable increased $10,000 during the year, inventory decreased $6,000 during the year, and accounts receivable increased $12,000 during the year. Under the indirect method, what is net cash provided by operations? A. $102,000. B. $112,000. C. $124,000. D. $136,000.

9. Items that are added back to net income in determining cash provided by operations under the indirect method do not include: A. depreciation expense. B. an increase in inventory. C. amortization expense.

D. loss on sale of equipment.

10. The statement of cash flows should not be used to evaluate an entity's ability to: A. earn net income. B. generate future cash flows. C. pay dividends. D. meet obligations.

11. Free cash flow provides an indication of a company's ability to: A. generate net income. B. generate cash to pay dividends. C. generate cash to invest in new capital expenditures. D. both b) and c).

12. In a worksheet for the statement of cash flows, a decrease in accounts receivable is entered in the reconciling columns as a credit to Accounts Receivable and a debit in the: A. investing activities section. B. operating activities section. C. financing activities section. D. none of the above.

13. In regard to the direct method only, the beginning balance in accounts receivable is $44,000, the ending balance is $42,000, and sales during the period are $129,000. What are cash receipts from customers? A. $127,000. B. $129,000. C. $131,000. D. $141,000.

14. Which of the following items is reported on a cash flow statement prepared by the direct method? A. Loss on sale of building. B. Increase in accounts receivable. C. Depreciation expense. D. Cash payments to suppliers.