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Match the Statements Below with the Appropriate Item Based on How

Question 216

Matching

Match the statements below with the appropriate item based on how the item should be reported in the statement of cash flows, using the direct method.

Premises:

Responses:

Decrease in accounts payable during a period.

Added in determining cash receipts from customers

Declaration and payment of a cash dividend.

Deducted in determining cash receipts from customers

Decrease in accounts receivable during a period.

Added in determining cash payments to suppliers

Depreciation expense.

Deducted in determining cash payments to suppliers

Conversion of bonds payable into ordinary shares.

Cash outflow—investing activity

Decrease in inventory during a period.

Cash inflow—investing activity

Sale of equipment for cash at book value.

Cash outflow—financing activity

Issuance of preference shares for cash.

Cash inflow—financing activity

Purchase of land for cash.

Significant noncash investing and financing activity

Loss on disposal of a plant asset.

Is not shown

Premises:

Decrease in accounts payable during a period.

Declaration and payment of a cash dividend.

Decrease in accounts receivable during a period.

Depreciation expense.

Conversion of bonds payable into ordinary shares.

Decrease in inventory during a period.

Sale of equipment for cash at book value.

Issuance of preference shares for cash.

Purchase of land for cash.

Loss on disposal of a plant asset.

Responses:

Added in determining cash receipts from customers

Deducted in determining cash receipts from customers

Added in determining cash payments to suppliers

Deducted in determining cash payments to suppliers

Cash outflow—investing activity

Cash inflow—investing activity

Cash outflow—financing activity

Cash inflow—financing activity

Significant noncash investing and financing activity

Is not shown

Correct Answer:

Premises:

Responses:

Decrease in accounts payable during a period.

Declaration and payment of a cash dividend.

Decrease in accounts receivable during a period.

Depreciation expense.

Conversion of bonds payable into ordinary shares.

Decrease in inventory during a period.

Sale of equipment for cash at book value.

Issuance of preference shares for cash.

Purchase of land for cash.

Loss on disposal of a plant asset.

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