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Exam 23: Statement of Cash Flows

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Question 21

True/False

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IFRS does not allow flexibility regarding the classification of certain items on the statement of cash flows.

A) True
B) False

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Question 22

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The primary purpose of the statement of cash flows is to provide information

A) about the operating, investing, and financing activities of a company during a period.
B) that is useful in assessing cash flow prospects.
C) about the cash receipts and cash payments of a company during a period.
D) about the entity's ability to meet its obligations, its ability to pay dividends, and its needs for external financing.

E) A) and B)
F) A) and C)

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Question 23

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All of the following could potentially be classified as either operating or investing cash flows under IFRS, except:

Income from an investment in ordinary shares using the equity method is added to net income in computing net cash provided from operating activities.

The net increase (decrease) in cash reported on the statement of cash flows should reconcile the beginning and ending cash balances reported in the comparative statements of financial position.

Crabbe Company reported $80,000 of selling and administrative expenses on its income statement for the past year.The company had depreciation expense and an increase in prepaid expenses associated with the selling and administrative expenses for the year.Assuming use of the direct method, how would these items be handled in converting the accrual based selling and administrative expenses to the cash basis?

A company should add back bond premium amortization to net income to arrive at net cash flow from operating activities.

Most of the companies interpret IFRS to mean that significant non-cash transactions should be reported

A company borrows $10,000 and signs a 90-day nontrade note payable.In preparing a statement of cash flows (indirect method) , this event would be reflected as a(n)

Cash payments for operating expenses are computed by subtracting an increase in prepaid expenses and a decrease in accrued expenses payable from operating expenses.

When preparing a statement of cash flows (indirect method) , an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because

Which of the following would be classified as a financing activity on a statement of cash flows?

Under the accrual basis of accounting, net income is usually the same as net cash flow from operating activities.

When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustments in determining cash flows from operating activities?

The statement of cash flows provides information to help investors and creditors assess the cash and non-cash investing and financing transactions during the period.

Cash receipts from customers are computed by adding a decrease in accounts receivable to revenue from sales.

All of the following statements are true regarding IAS 7, except:

The IASB does not permit the direct method presentation of the statement of cash flows.

When preparing a statement of cash flows, the following are used for which method in determining cash flows from operating activities?

Dolan Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Moss Co.during the current year, even though no dividends were declared or paid by Moss during the year.On Dolan's statement of cash flows (indirect method) , the $25,000 should