51.Under the direct method, which of the following would
not
be included in the operating section of the cash flow statement?
A. Cash payments for income taxes
B. Cash payments to purchase insurance
C. Cash payments to purchase long-term equipment
D. Cash receipts from customers
52.When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment for an increase in the accounts receivable balance?
A. Add the increase to net income
B. Add the increase to cash collections from customers
C. Deduct the increase from net income
D. Add the increase to cash payments to suppliers
53.When using the indirect method to complete the cash flows from operating activities section, what is the proper treatment for an increase in the inventory account?
A. Deduct the increase to cash payments to suppliers
B. Add the increase to net income
C. Add the increase to cash collections from customers
D. Deduct the increase from net income
54.Which of the following would be shown as a deduction from net income when calculating net cash flow from operating activities using the indirect method?
A. Decrease in accounts payable for inventory purchases
B. Loss on the sale of equipment
C. Decrease in accounts receivable
D. Increase in salaries payable
55.Equipment with an original cost of $20,000 and accumulated depreciation of $7,500 was sold at a loss of $2,500. As a result of this transaction, cash would:
A. increase by $10,000.
B. decrease by $7,500.
C. increase by $20,000.
D. decrease by $10,000.
56.Which of the following statements is
incorrect
regarding the use of the indirect method when preparing the operating activities of the statement of cash flows?
A. A decrease in accounts payable is deducted from net income
B. A decrease in prepaid insurance is added to net income
C. Gain on the retirement of bonds is deducted from net income
D. Depreciation expense is subtracted from net income
57.All of the following are deducted from net income when preparing the statement of cash flows under the indirect method
except:
A. an increase in accounts payable.
B. a decrease in accrued liabilities.
C. an increase in accounts receivable.
D. an increase in inventory.
58.All of the following are additions to net income when preparing the statement of cash flows under the indirect method
except:
A. losses on sales of long term assets.
B. a decrease in accounts payable.
C. a decrease in prepayments.
D. a decrease in accounts receivable.
59.Where is the gain resulting from the sale of equipment shown when using the indirect method to prepare the cash flow statement?
A. In the operating section as a deduction
B. In the investing section as a deduction
C. In the operating section as an addition
D. In the investing section as an addition
60.Which of the following statement is
incorrect
regarding the investing activities section of the statement of cash flows?
A. Investing activities deal with long-term liabilities (debt) and equity accounts.
B. Increases in long-term asset balances suggest cash outflows to purchase assets.
C. Decreases in long term asset balances suggest cash inflows from selling assets.
D. Investing activities involve cash purchases and cash disposals of long-term assets.