This document of ACC 560 Week 10 Quiz 13 consists of:
1. The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement.
2. For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both.
3. A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions.
4. A statement of cash flows indicates the sources and uses of cash during a period.
5. A statement of cash flows should help investors and creditors assess the entity’s ability to generate future income.
6. The information in a statement of cash flows helps investors and creditors assess the company’s ability to pay dividends and meet obligations.
7. Financial statement readers can determine future investing and financing transactions by examining a company’s statement of cash flows.
8. In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt.
9. Noncash investing and financing activities must be reported in the body of a statement of cash flows.
10. The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities.
11. The sale of land for cash would be classified as a cash inflow from an investing activity.
12. Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income.
13. The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities.
14. The payment of interest on bonds payable is classified as a cash outflow from operating activities.
15. Any item that appears on the income statement would be considered as either a cash inflow or cash outflow from operating activities.
16. The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash.
17. All major financing and investing activities affect cash.
18. Cash provided by operations is generally equal to operating income.
19. Using the indirect method, an increase in accounts receivable during a period is deducted from net income in calculating cash provided by operations.
20. Using the indirect method, an increase in accounts payable during a period is deducted from net income in calculating cash provided by operations.
21. A loss on sale of equipment is added to net income in determining cash provided by operations under the indirect method.
22. In preparing a statement of cash flows, an increase in the Common Stock and Treasury Stock accounts during a period would be an investing activity.
23. Cash provided by operating activities fails to take into account that a company must invest in new fixed assets just to maintain its current level of operations.
24. Free cash flow equals cash provided by operations less capital expenditures and cash dividends.