11) Under the indirect method of preparing the statement of cash flows, the starting point to determine Net Cash Provided by Operating Activities is:
A) the beginning cash balance.
B) the ending cash balance.
C) net income.
D) sales.
12) Under the indirect method of preparing the statement of cash flows, a gain on the sale of equipment is:
A) subtracted from net income in the operating activities section.
B) added to net income in the operating activities section.
C) subtracted from the book value of the equipment in the financing activities section.
D) ignored since this transaction does not affect cash.
13) When preparing the statement of cash flows using the indirect method, which statement is FALSE?
A) Gains on the sale of long-term assets are subtracted from net income.
B) Losses on the sale of long-term assets are subtracted from net income.
C) Depreciation expense is added to net income.
D) Increases in current liabilities are added to net income.
14) The method of preparing the statement of cash flows that starts with net income and adjusts it for items that affect net income, but do not affect cash is called the:
A) lower-of-cost or market method.
B) direct method.
C) indirect method.
D) gross profit method.
15) All of the following may appear as an adjustment of net income when preparing the statement of cash flows using the indirect method EXCEPT:
A) payment of cash dividends.
B) depreciation expense.
C) loss on sale of long-term assets.
D) an increase in accounts payable.
16) Using the indirect method to calculate net cash provided by operating activities, a decrease in prepaid expenses is:
A) subtracted from net income.
B) added to net income.
C) ignored since it does not affect expenses.
D) ignored since it does not affect net income.
17) Under the indirect method of preparing a statement of cash flows, amortization expense for the current period is:
A) added in the investing activities section.
B) subtracted in the investing activities section.
C) added in the financing activities section.
D) added in the operating activities section.
18) In computing Net Cash Provided by Operating Activities using the indirect method, each of the following is added to net income EXCEPT:
A) an increase in accrued expenses payable.
B) a gain on sale of equipment.
C) depreciation expense.
D) a decrease in inventory.
19) Using the indirect method to prepare the statement of cash flows, dividends paid during the year are:
A) subtracted from net income in the operating activities section.
B) added to net income in the operating activities section.
C) shown as a cash outflow in the financing activities section.
D) shown as a cash outflow in the investing activities section.
20) Using the indirect method of preparing the statement of cash flows, which of the following would be added to net income?
A) Depletion expense
B) An increase in accounts receivable
C) A decrease in accounts payable
D) A gain on the sale of property