Question

Which of the following is not a use of cash?

Repayment of bond payable

Purchasing supplies for cash

Paying dividends to stockholders

Buying inventory on account

Which of the following cash flows results from an operating activity?

Paying dividends to stockholders

Repaying note payable

Purchasing equipment

Receiving interest on investment

The two approaches to reporting cash flows provided by operating activities are the

direct and indirect methods.

the basic and standard methods.

the gross margin and contribution margin methods.

the liquidity and profitability methods.

Which of the following methods of reporting cash flows provided by operating activities does the Financial Accounting Standards Board recommend

The indirect method

The direct method

Either the indirect method or the direct method

Neither the indirect method nor the direct method

Answer 1

Which of the following is not a use of cash?-

Buying inventory on account.

Not use of cash because we are buying inventory on credit basis.

Which of the following cash flows results from an operating activity?-

Receiving interest on investment.

Short term investments are treated as trading securities and purchases from it and proceeds from sale of investments are included in operating activity.

The two approaches to reporting cash flows provided by operating activities are the-

Direct and indirect methods.

Direct method- Records all transactions on a cash basis.

Indirect method- Basis on an accrual accounting.

Which of the following methods of reporting cash flows provided by operating activities does the Financial Accounting Standards Board recommend-

The direct method.

Because it gives indication of cash flows in and out of business.