Assume a company prepares the statement of cash flows using the indirect method. The company purchases its inventory on credit from suppliers. How should a decrease in accounts payable be reflected in the section that reconciles net income to cash flow from operating activities? Multiple Choice It would be added if the section starts with net income and subtracted if it starts with a net loss It would be added in reconciling net income to cash flow from operating activities It would be subtracted in reconciling net income to cash flow from operating activities A change in accounts payable does not affect the reconciliation of net income to cash flow from operating activities

Assume a company prepares the statement of cash flows using the indirect method. The company purchases its inventory on credit from suppliers. How should a decrease in accounts payable be reflected in the section that reconciles net income to cash flow from operating activities? Multiple Choice It would be added if the section starts with net income and subtracted if it starts with a net loss It would be added in reconciling net income to cash flow from operating activities It would be subtracted in reconciling net income to cash flow from operating activities A change in accounts payable does not affect the reconciliation of net income to cash flow from operating activities

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Indicate in which financial statement each item would most likely appear: income statement (I), balance sheet (B), or statement of cash flows (CF).
The statement of cash flows answers such questions as "Where does a company spend Its cash?" and "How does a company receive its cash? True or False True False
Any given transaction may affect a statement of cash flows (using the indirect method) in one or more of the following ways: Cash flows from operating activities a. Net income will be increased or adjusted upward. b. Net income will be decreased or adjusted downward. Cash flows from investing activities c. Increase as a result of cash inflows. d. Decrease as a result of cash outflows. Cash flows from financing activities e. Increase as a result of cash inflows. f. Decrease as a result of cash outflows. The statement of cash flows is not affected g. Not required to be reported in the body of the statement.
Which of the following has a different effect on net profit than it does on cashflow? A.Cash sale to customer B.Payment for wages C.Payment for rent D.Depreciation of equipment
occur when a company receives cash before it can recognize revenue or when a company pays cash before it can record the related expense. a. Deferrals O b. Estimates C. Accruals O d. Others
Which of the following is not a use of the statement of cash flows? a.Helps creditors analyze the company's operations. b.Provides information about the sources of cash flows. c.Measures how efficiently the company's cash resources are being used. d.Provides insights into the quality and reliability of reported income.
Which of the following statements about the direct and indirect methods for presenting Cash Flow Statement is NOT true? According to the indirect method, cash flows begin with net income or loss and is followed by subsequent additions to or deductions from that amount for non-cash revenue and expense items, resulting in cash flow from operating activities. The direct method is based on use of actual cash inflows and outflows from a company’s operations. Using direct and indirect methods leads to different amounts shown as cash flow from operations, investing, and financing activities. The cash flow statement, income statement and balance sheet are interconnected: the cash flow amount is equal to the corresponding income statement amount plus or minus the change in the related balance sheet account.
What’s the correct answer?
The method of presenting cash flow from operations where net income is adjusted for items without any cash effect is called a. direct method b. indirect method c. allowance method d. reconciliation method
Statement of Cash , select the false statement a.The cash received from the sale of goods is a cash inflow b.Dividends paid to shareholders are recorded as a cash outflow c.Proceeds from the sale of bonds are recorded as a cash outflow d.A sale of a fixed asset is recorded as a cash inflow
Indicate the section where transactions would appear on the statement of cash flows.O. Cash flows from operating activity F. Cash flows from financing activityI. Cash flows from investing activity Cash paid on account payable to supplier
Identify the following items:a. The company’s inventory valuation methodb. The definition of cash equivalents