Acc. - Ch. 23 (T/F)

A company should add back bond premium amortization to net income to arrive at net cash flow from operating activities.

False

The first step in the preparation of the statement of cash flows is to determine the net cash flow from operating activities.

False

The primary purpose of the statement of cash flows is to provide cash-basis information about the company's operating, investing, and financing activities.

False

Under the accrual basis of accounting, net income is usually the same as net cash flow from operating activities

False

When numerous adjustments are necessary, companies often use a cash flow worksheet instead of preparing a statement of cash flows.

False

When prepaid expenses decrease during a period, expenses on the accrual-basis are lower than they are on a cash-basis.

False

A company can convert net income to net cash flow from operating activities through either the direct method or the indirect method.

True

Cash receipts from customers are computed by adding a decrease in accounts receivable to revenue from sales.

True

The indirect method adjusts net income for items that affected reported net income but did not affect cash.

True

When accounts receivable decrease during a period, cash-basis revenues are higher than revenues reported on an accrual basis.

True

Cash payments for operating expenses are computed by subtracting an increase in prepaid expenses and a decrease in accrued expenses payable from operating expenses.

False

Income from an investment in common stock using the equity method is added to net income in computing net cash provided from operating activities.

False

The FASB encourages the use of the indirect method over the direct method.

False

The direct method, also called the reconciliation method, reports cash receipts and cash disbursements from operating activities.

False

Companies classify some cash flows relating to investing or financing activities as operating activities.

True

Companies report the cash flows from purchases and sales of trading securities as cash flows from operating activities

True

Noncash investing and financing activities are disclosed either in a separate schedule or in a separate note to the financial statements.

True

The issuance of stock dividends is entered on the cash flow worksheet, but is not reported in the statement of cash flows.

True

The net increase (decrease) in cash reported on the statement of cash flows should reconcile the beginning and ending cash balances reported in the comparative balance sheets.

True

The statement of cash flows provides information to help investors and creditors assess the cash and noncash investing and financing transactions during the period.

True