Chapter 23

Both GAAP and IFRS allow noncash investing and financing activities to be included in a separate schedule as part of the statement of cash flows.

False

Depreciation expense is an adjustment to net income under the direct method.

False

The statement of cash flows is divided into four activities.

False; There are three activities comprising the statement of cash flows: operating, investing, and financing.

The investing activities section of a statement of cash flows would include cash received from dividends on long-term investments in stocks.

False; the operating activities section of a statement of cash flows would include cash received from dividends on stock.

The differences between the direct method and the indirect method only affect the operating activities section of the statement of cash flows.

True

The primary purpose of the statement of the cash flows is to provide information about the: reasons for the difference between net income and net cash flow from operating activities. entity's cash receipts and cash payments during a period. entity's ability to generate future cash flows. entity's ability to pay dividends and meet obligations.

entity's cash receipts and cash payments during a period.

The payment of a cash dividend would be classified as a(n): significant noncash transaction. operating activity. investing activity. financing activity.

financing activity

Net cash flows from operating activities under the indirect method is determined by eliminating: incurred expenses from net income. only noncash expenses from net income. noncash revenues and noncash expenses from net income. earned revenues from net income.

noncash revenues and noncash expenses from net income.

The information to prepare the statement of cash flows comes from all of the following sources except: retained earnings statement. comparative balance sheets. selected transaction data. current income statement.

retained earnings statement; Information to prepare the statement of cash flows comes from all of the options (comparative balance sheets, current income statement, and selected transaction data) except the retained earnings statement.