Intermediate Accounting II Final Exam questions and 100%correct answers

What is the primary purpose of the statement of cash flows? - correct answer To provide relevant information about the cash receipts and cash disbursements of a company. The information provided in the statement of cash flows can assist users to assess: - correct answer (1) A company's ability to meet its obligations, ability to pay dividends, and its need for external financing (2) The reasons for differences between net income and the net increase in cash. What are cash equivalents? - correct answer Short-term, highly liquid debt investments that are both: (1) Readily convertible into cash (2) So near their maturity date that they present insignificant risk of change in value because of changes in interest rates When will debt investments qualify as a cash equivalent? - correct answer When purchased with original maturities of 3 months or less When is an investment determined to be a cash equivalent? - correct answer The date of purchase; An investment will not convert into a cash equivalent as its maturity date approaches to within 3 months. How can the statement of cash flows be prepared? - correct answer Two different formats: -Direct method -Indirect method