Question 1

Which of the following would not appear on a statement of cash flows prepared using the direct method?

Accepted Answer

Depreciation expense would not appear on a statement of cash flows using the direct method because it is a non-cash expense. The direct method reports actual cash inflows and outflows occurring during the period, while depreciation is a non-cash expense that is added back to net income when calculating net cash provided by operating activities. A statement of cash flows using the indirect method would include depreciation among the adjustments made to net income to arrive at net cash provided by operating activities.

Question 2

A company uses the direct method to prepare the statement of cash flows. It presents the following amounts on its financial statements:  *Relates solely to the acquisition of inventory
Which of the following is correct about the accounts receivable in the operating activities category in the statement of cash flows?

Accepted Answer

The answer of A company uses the direct method to...

Question 3

Under the direct method of cash flow to prepare the statement of cash flows, which of the following is not included in the statement of cash flows?

Accepted Answer

The direct method of cash flow focuses on cash inflows and outflows from operating activities, therefore changes in depreciation, which is a non-cash expense, is not included in the statement of cash flows. Changes in accounts receivable, accounts payable, and interest expense are included in the statement of cash flows.

Question 4

Using the direct method to prepare the statement of cash flows, cash payments for merchandise inventory is categorized on the statement of cash flows as

Accepted Answer

Cash payments for merchandise inventory are part of the operating activities of a business, as they relate to the primary business operations of buying and selling goods. As such, they are categorized as a cash payment in the operating activities section of the statement of cash flows prepared using the direct method.

Question 5

The ________ section in a statement of cash flows using the direct method of cash flows is not the same compared to the indirect method of cash flows on the statement of cash flows.

Accepted Answer

The operating activities section on the statement of cash flows using the direct method will show actual cash inflows and outflows from operating activities, while the operating activities section on the statement of cash flows using the indirect method will adjust net income for non-cash items to arrive at the cash flows from operating activities.

Question 6

Which of the following would be presented exactly the same whether the company used the direct method or indirect method when preparing the statement of cash flows?

Accepted Answer

The direct and indirect methods differ only in the presentation of cash flows from operating activities. Cash flows from investing and financing activities are presented in the same way under both methods.

Question 7

Which of the following would appear on a statement of cash flows prepared using the direct method?

Accepted Answer

All of the listed items would appear on a statement of cash flows prepared using the direct method. The direct method reports cash inflows and outflows from operating activities based on the actual cash transactions during the accounting period. Therefore, interest received on a loan and collections from customers would be reported as cash inflows, while cash payments for dividends would be reported as a cash outflow.

Question 8

Using the direct method to prepare the statement of cash flows, cash payments to supplies is computed as

Accepted Answer

The direct method for preparing the statement of cash flows requires adjustments to the income statement items to reflect cash transactions. To calculate cash payments to supplies, purchases (which reflects credit purchases and cash purchases) is used and the increase in accounts payable is subtracted (as an increase in accounts payable means payment was not made in cash). Therefore, the formula for cash payments to supplies is: purchases - increase in accounts payable.

Question 9

In a company that uses the direct method to prepare the statement of cash flows, the amount of cash it uses to purchase inventory is computed as

Accepted Answer

The direct method calculates the cash inflows and outflows directly from operating activities, which includes cash used for purchasing inventory. The amount of cash used to purchase inventory can be calculated as the cost of goods sold plus ending inventory, minus beginning inventory. This is because the cost of goods sold reflects the cost of the inventory that was sold, and the ending inventory reflects the cost of the inventory that was purchased but not yet sold. By subtracting the beginning inventory from the sum of the cost of goods sold and ending inventory, we get the amount of cash used to purchase inventory. Therefore, the correct choice is D.

Question 10

Which of the following would appear on a statement of cash flows prepared using the direct method?

Accepted Answer

The direct method reports actual cash inflows and outflows, so cash payments for salaries would appear on the statement. Choices B, C, and D are all non-cash expenses, so they would not appear directly on the statement prepared using the direct method.

Question 11

Using the direct method to prepare the statement of cash flows, how would the amount of cash payments to employees categorized on the statement of cash flows?

Accepted Answer

Cash payments to employees would be equal to salary expense plus the decrease in salaries payable, as this reflects the actual amount of cash paid out to employees during the period, taking into account any changes in the balance of salaries payable. The decrease in salaries payable would indicate a reduction in the amount owed to employees, which would have been paid in cash during the period.

Question 12

A company uses the direct method to prepare the statement of cash flow computes the amount of cash it receives from customers as

Accepted Answer

The amount of cash received from customers can be computed by adding the decrease (or subtracting the increase) in accounts receivable to sales revenue. This is because sales revenue represents the total amount of sales, whereas the change in accounts receivable reflects the amount of cash received from customers during the period. Therefore, option C is the correct choice.

Question 13

A company uses the direct method to prepare the statement of cash flows. It presents the following data on its financial statements:  *Relates solely to the acquisition of inventory
Which of the following is correct about accounts payable transaction in the operating activities category in the statement of cash flows?

Accepted Answer

An increase in accounts payable indicates that the company has purchased inventory on credit and owes money to its suppliers. Therefore, the increase in accounts payable should be subtracted from purchases to determine the actual cash paid to suppliers. This adjustment will be reflected in the operating activities section of the statement of cash flows, which reports cash inflows and outflows related to the company's primary operations.

Question 14

A company's income statement reports $30,000 depreciation expenses during the period. Using the direct method to prepare the statement of cash flows, how would the depreciation expense be reported on the statement of cash flows?

Accepted Answer

Depreciation expense is a non-cash charge and does not affect cash flow; therefore, it is not reported on the statement of cash flows when using the direct method.

Question 15

Which of the following would not appear on a statement of cash flows prepared using the direct method?

Accepted Answer

The direct method of preparing the statement of cash flows shows the cash inflows and outflows directly. Therefore, net income does not appear on this statement as it is calculated using the accrual basis of accounting. Instead, the direct method would show the cash received from customers and payments made for interest and salaries and wages paid to employees.

Question 16

In a company that uses the direct method to prepare the statement of cash flows, the amount of cash it pays to employees is computed as

Accepted Answer

The direct method calculates the amount of cash paid to employees as salary expense plus the decrease in salaries payable. This is because the decrease in salaries payable means that the company has paid out more cash to employees than it has recorded as salary expense, and this difference needs to be added to the recorded salary expense in order to arrive at the actual cash paid to employees.

Question 17

Using the direct method of cash flow, which of the following is a category in the statement of cash flows?

Accepted Answer

Collections from customers is a category in the statement of cash flows when using the direct method, as it directly shows the cash inflows from operating activities.

Question 18

All of the following are categories in the operating activities section using the direct method in the statement of cash flows except

Accepted Answer

Changes in amortization are not considered an operating activity in the direct method statement of cash flows. The other options, changes in accounts receivable, inventory, and accounts payable, are all categories in the operating activities section using the direct method.

Question 19

In a company that uses the direct method to prepare the statement of cash flows, the amount of cash it pays in interest expense is computed as

Accepted Answer

According to the direct method, interest expense is calculated as the change in interest payable plus interest expense. This is because the change in interest payable represents the amount of interest that was accrued during the period but was not paid, and adding it to the actual interest expense will give the total amount of cash paid for interest.

Question 20

Under the direct method of cash flow, which of the following is not included in the statement of cash flows?

Accepted Answer

Changes in amortization are not included in the direct method of cash flow since it is a non-cash item that is included in the net income calculation. The direct method focuses on cash receipts and payments during the period. Changes in accounts receivable, accounts payable, and inventories are all included in the direct method of cash flow as they represent changes in cash flows related to operating activities.

Quiz 13: Statement of Cash Flows

Which of the following would not appear on a statement of cash flows prepared using the direct method?

Under the direct method of cash flow to prepare the statement of cash flows, which of the following is not included in the statement of cash flows?

Using the direct method to prepare the statement of cash flows, cash payments for merchandise inventory is categorized on the statement of cash flows as

The ________ section in a statement of cash flows using the direct method of cash flows is not the same compared to the indirect method of cash flows on the statement of cash flows.

Which of the following would be presented exactly the same whether the company used the direct method or indirect method when preparing the statement of cash flows?

Which of the following would appear on a statement of cash flows prepared using the direct method?

Using the direct method to prepare the statement of cash flows, cash payments to supplies is computed as

In a company that uses the direct method to prepare the statement of cash flows, the amount of cash it uses to purchase inventory is computed as

Which of the following would appear on a statement of cash flows prepared using the direct method?

Using the direct method to prepare the statement of cash flows, how would the amount of cash payments to employees categorized on the statement of cash flows?

A company uses the direct method to prepare the statement of cash flow computes the amount of cash it receives from customers as

A company's income statement reports $30,000 depreciation expenses during the period. Using the direct method to prepare the statement of cash flows, how would the depreciation expense be reported on the statement of cash flows?

Which of the following would not appear on a statement of cash flows prepared using the direct method?

In a company that uses the direct method to prepare the statement of cash flows, the amount of cash it pays to employees is computed as

Using the direct method of cash flow, which of the following is a category in the statement of cash flows?

All of the following are categories in the operating activities section using the direct method in the statement of cash flows except

In a company that uses the direct method to prepare the statement of cash flows, the amount of cash it pays in interest expense is computed as

Under the direct method of cash flow, which of the following is not included in the statement of cash flows?