TEST BANK FOR The Statement of Cash Flows CHAPTERS 12 LATEST UPDATED VERSION 2026 WITH A CORRECTED ANSWERS.

TEST BANK FOR The Statement of Cash Flows CHAPTERS 12
LATEST UPDATED VERSION 2026 WITH A CORRECTED
ANSWERS.
1. The statement of cash flows summarizes the operating, investing, and financing activities of a business for a period of
time.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-01 - LO: 12-01
KEYWORDS: Bloom's: Remembering

2. The accrual-based income statement is considered to be a good indicator of current cash inflows and outflows.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-01 - LO: 12-01
KEYWORDS: Bloom's: Remembering

3. Depreciation is a noncash expense that is added back to net income in determining cash provided from operating
activities under the indirect method.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-01 - LO: 12-01
KEYWORDS: Bloom's: Remembering

4. Most experts now agree that there has been a tendency to rely far too heavily on net income and its companion,
earnings per share, and in many cases to ignore a company’s cash flows.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-01 - LO: 12-01
KEYWORDS: Bloom's: Remembering

5. In terms of the statement of cash flows, cash includes actual cash items plus certain cash equivalents such as
commercial paper, money market funds, and Treasury bills.
a. True
b. False
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

,Chapter 12: The Statement of Cash Flows


ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-02 - LO: 12-02
KEYWORDS: Bloom's: Remembering




© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

,Chapter 12: The Statement of Cash Flows
6. To be classified as a cash equivalent, an item must be readily convertible to a known amount of cash and have an
original maturity to the investor of three months or more.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-02 - LO: 12-02
KEYWORDS: Bloom's: Remembering

7. Under certain conditions, an investment in common stock can be considered a cash equivalent.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-02 - LO: 12-02
KEYWORDS: Bloom's: Remembering

8. Cash equivalents are reported in the Operating Activities section of the statement of cash flows.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-02 - LO: 12-02
KEYWORDS: Bloom's: Remembering

9. It is not possible for Cash to decrease from Yr. 1 to Yr. 2 if income rises over this period.
a. True
b. False

ANSWER: False
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-02 - LO: 12-02
KEYWORDS: Bloom's: Remembering

10. The investment in stock of another company is considered a significant activity and thus is reported on the statement
of cash flows.
a. True
b. False

ANSWER: True
DIFFICULTY: Easy
LEARNING OBJECTIVES: FACC.PONO.13.12-02 - LO: 12-02
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

, Chapter 12: The Statement of Cash Flows
KEYWORDS: Bloom's: Remembering




© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.