ch. 15

true

A change in deferred taxes is considered to be an operating activity on the statement of cash flows.

true

Accounts receivable is not considered to be a cash equivalent for purposes of preparing the statement of cash flows

true

The Financial Accounting Standards Board (FASB) recommends that companies use the direct method rather than the indirect method in preparing their statement of cash flows.

true

An increase in inventory is classified as a "use" of cash for purposes of constructing the statement of cash flows

true

In the statement of cash flows, dividend payments to the company's stockholders are treated as a "use" rather than as a "source" of cash

false

Interest paid on borrowed funds would be included as part of a company's financing activities on the statement of cash flows

false

Lending money to another company would be classified as a financing activity on the statement of cash flows.

false

The direct method of preparing the statement of cash flows will usually show a greater total increase in cash than the indirect method

false

The net cash provided by operating activities on the statement of cash flows would include interest paid to creditors and dividends paid to the company's own shareholders

true

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in inventory would be added to cost of goods sold to convert cost of goods sold to a cash basis

true

Under the direct method of determining the net cash provided by operating activities on the statement of cash flows, an increase in prepaid expenses would be added to selling and administrative expenses to convert selling and administrative expenses to a cash basis

true

Under the direct method of determining the net cash provided by operations on the statement of cash flows, the cost of goods sold is converted to a cash basis by adjusting it for changes in inventories and changes in accounts payable during the period.

false

Under the indirect method of determining the net cash flow from operating activities on the statement of cash flows, a gain on the sale of equipment would be added to net income.

false

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, dividends are added to net income

true

Under the indirect method of determining the net cash provided by operating activities on the statement of cash flows, increases in current liabilities such as accounts payable are added to net income