1. The primary objective of the statement of cash flows is to provide information about a companyâ€™s
cash receipts and disbursements.
non-cash financing and investing activities.
2. During the year, cash increased by $300 million. Investing and financing activities created positive cash flow totaling $500 million. What were net cash flows from operating activities in the statement of cash flows
Inflow of $300 million
Outflow of $200 million
Inflow of $600 million
3. Which of the following is not reported as an adjustment to net income when using the indirect method of computing net cash flows from operating activities
Cash dividends paid
A change in accounts receivable
A change in a prepaid expense
4. Which of the following is reported as a deduction from net income when using the indirect method to determine net cash flows from operating activities
A bad debt written off under the allowance method
Amortization of premium on bonds payable
5. Each year, White Mountain Enterprises (WME) prepares a reconciliation schedule that compares its income statement with its statement of cash flows on both the direct and indirect method bases.
In its 2011 income statement, WME reported $58,000 for insurance expense. WME paid $72,000 in insurance premiums during 2011. In its reconciliation schedule, WME should
show a $14,000 positive adjustment to net income under the indirect method for the increase in prepaid insurance.
show a $14,000 negative adjustment to net income under the indirect method for the decrease in prepaid insurance.
show a $14,000 negative adjustment to net income under the indirect method for the increase in prepaid insurance.
show a $14,000 positive adjustment to net income under the indirect method for the decrease in prepaid insurance
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