Question

1) Which of the following is a method for reporting cash flows from operating activities that begins with net income and reconciles to cash flows from operating​ activities?
A.accrual method
B.direct method
C.indirect method
D.cashminus−basis method

2) Under the indirect method of preparing a statement of cash​ flows, cash disbursed for the acquisition of a capital asset​ is:

A.added in the financing activities section

B.added in the investing activities section

C.subtracted in the operating activities section

D.subtracted in the investing activities section

3) All of the following might appear on an indirect method statement of cash flows except​:
A.depreciation expense
B.interest received on notes receivable
C.decrease in inventory
D.loss on sale of capital assets

4) The issuance of common shares in exchange for land and equipment​ will:

A.affect the operating activities section of a cash flow statement

B.affect the financing activities section of a cash flow statement

C.not affect a cash flow statement

D.affect the investing activities section of a cash flow statement

5)The balance in Common Shares on January​ 1, 2017, and December​ 31, 2017, is respectively​ $145,000 and​ $172,500. During the​ year, $57,000 repurchase of shares was recorded. During the​ year, shares were issued. The proceeds from the issue of shares amounted​ to:

A.​$64,500

B.​$29,500

C.​$260,500

D.​$84,500

Answer 1

1

Indirect method begins with net income and reconciles to cash flows from operating​ activities

Option C indirect method is correct

2

Cash disbursed for the acquisition of a capital asset ​is subtracted in the investing activities section

Option D is correct

3

Interest received on notes receivable will not appear on indirect method statement of cash flow

Option B is correct

4

The issuance of common shares in exchange for land and equipment​ will not affect a cash flow statement

Option C is correct

5

Proceeds from the issue of shares = 172500-(145000-57000)= 84,500

Option D $84,500 is correct