ACCT CH. 17 EXAM QUESTIONS WITH
CORRECT ANSWERS
Which is an example of a cash flow from an operating activity?
Payment of cash to lenders for interest.
Receipt of cash from the sale of capital stock.
Payment of cash dividends to the company's stockholders.
None of the answer choices is correct. - ANSWER-Payment of cash to lenders for
interest.
Cash dividends paid to stockholders are classified on the statement of cash flows as
a combination of operating and investing activities.
financing activities.
operating activities.
investing activities. - ANSWER-financing activities.
Cash flow activities that include acquiring and disposing of investments and property,
plant, and equipment are classified as
operating activities.
investing activities.
financing activities.
non-cash activities. - ANSWER-investing activities.
Which of the following would be classified as an operating activity?
Sale of equipment.
Making a loan to another entity.
, Payment of interest.
Payment of a cash dividend. - ANSWER-Payment of interest.
Operating activities include cash outflows to:
make loans to other entities.
purchase debt or equity securities.
suppliers for inventory.
purchase property and equipment. - ANSWER-suppliers for inventory.
Which of the following is incorrect about the statement of cash flows?
The indirect method may be used to report cash provided by operations.
The direct method may be used to report cash provided by operations.
The statement shows the cash provided (used) for three categories of activities.
The operating section is the last section of the statement. - ANSWER-The operating
section is the last section of the statement.
Which of the following is not a reason that companies favor the indirect method of
preparing the statement of cash flows?
It requires less information.
It focuses on the differences between net income and the cash flows from operating
activities.
It is easier to prepare.
It is less costly to prepare. - ANSWER-It requires less information.
Information used to prepare the statement of cash flows usually comes from all of the
following except
comparative balance sheet.
current income statement.
CORRECT ANSWERS
Which is an example of a cash flow from an operating activity?
Payment of cash to lenders for interest.
Receipt of cash from the sale of capital stock.
Payment of cash dividends to the company's stockholders.
None of the answer choices is correct. - ANSWER-Payment of cash to lenders for
interest.
Cash dividends paid to stockholders are classified on the statement of cash flows as
a combination of operating and investing activities.
financing activities.
operating activities.
investing activities. - ANSWER-financing activities.
Cash flow activities that include acquiring and disposing of investments and property,
plant, and equipment are classified as
operating activities.
investing activities.
financing activities.
non-cash activities. - ANSWER-investing activities.
Which of the following would be classified as an operating activity?
Sale of equipment.
Making a loan to another entity.
, Payment of interest.
Payment of a cash dividend. - ANSWER-Payment of interest.
Operating activities include cash outflows to:
make loans to other entities.
purchase debt or equity securities.
suppliers for inventory.
purchase property and equipment. - ANSWER-suppliers for inventory.
Which of the following is incorrect about the statement of cash flows?
The indirect method may be used to report cash provided by operations.
The direct method may be used to report cash provided by operations.
The statement shows the cash provided (used) for three categories of activities.
The operating section is the last section of the statement. - ANSWER-The operating
section is the last section of the statement.
Which of the following is not a reason that companies favor the indirect method of
preparing the statement of cash flows?
It requires less information.
It focuses on the differences between net income and the cash flows from operating
activities.
It is easier to prepare.
It is less costly to prepare. - ANSWER-It requires less information.
Information used to prepare the statement of cash flows usually comes from all of the
following except
comparative balance sheet.
current income statement.
