31. If a company paid dividends during the year, how would it be classified on the cash flow statement?
A. As a cash flow from operations.
B. As a cash flow from investing activities.
C. As a cash flow from financing activities.
D. As a cash and cash equivalent.
32. If a company received interest during the year on its investments, how would it be classified on the cash flow statement?
A. As a cash flow from operations.
B. As a cash flow from investing activities.
C. Both of the above are correct
D. Neither of the above are correct.
33. If a company paid interest during the year on amounts it had borrowed, how would it be classified on the cash flow statement?
A. As a cash flows from operations.
B. As a cash flows from financing activities.
C. Both of the above are correct
D. Neither of the above are correct
34. A cash flow statement for an entity calculates the cash flow from operations by starting with net income and then makes a series of adjustments to it. What method of calculating cash flow from operations are they using?
A. Direct method
B. Indirect method
C. Net income method
D. Cash equivalents method
35. A cash flow statement for an entity calculates the cash flow from operations by showing cash collections and cash disbursements related to operations. What method of calculating cash flow from operations are they using?
A. Direct method
B. Indirect method
C. Net income method
D. Cash equivalents method
36. A company is preparing the cash flow from operations (CFO) section of its cash flow statement. Amortization expense for the year was $25,000. Which of the following statements is true?
A. Amortization expense should be added back to net income to calculate CFO if they are using the indirect method.
B. Amortization expense should be deducted from net income to calculate CFO if they are using the indirect method.
C. Amortization expense should be added back to net income to calculate CFO if they are using the direct method.
D. Amortization expense should be deducted from net income to calculate CFO if they are using the direct method.
37. A company sold a piece of land for $40,000 which had an original cost $25,000. What is the cash flow effect of this transaction?
A. A $15,000 increase in cash flows from operations.
B. A $40,000 increase in cash flows from operations.
C. A $15,000 increase in cash flows from investing activities.
D. A $40,000 increase in cash flows from investing activities.
38. How should a loss on the sale of land be reflected in the operating activities section of the cash flow statement under the indirect method?
A. As a cash inflow
B. As a cash outflow
C. As an addition to net income
D. As a deduction to net income
39. Under the indirect method why is a gain on the disposal of land subtracted from net income?
A. Because it is not a cash expense.
B. Because it is not a cash revenue.
C. Because it is an investing activity.
D. Because it is a financing activity.
40. A company sold a piece of land for $40,000 which had an original cost of $55,000. What is the cash flow effect of this transaction?
A. A $55,000 increase in cash flows from operations.
B. A $40,000 increase in cash flows from operations.
C. A $55,000 increase in cash flows from investing activities.
D. A $40,000 increase in cash flows from investing activities.