FA lecture 11

*If the December 31, 20x6, balance of accounts receivable is lower than the January 1, 20x6, balance, then the amount of cash collections will be less than the sales on account for the year. False True

False

Depreciation is a noncash expense that is subtracted from net income in determining cash provided from operating activities under the indirect method. True False

False

If the December 31, 20x6, wages payable balance is lower than the January 1, 20x6 balance, it suggests that cash payments for the period is lower than the wages expense. False True

False

Depreciation is a noncash expense that is subtracted from net income in determining cash provided from operating activities under the indirect method. True False

False - added

A company reported a net loss of $30,000 for 20x6, yet its cash balance increased during the year. Which financial statement should management refer to for an explanation of this situation? Balance Sheet Income Statement Statement of Retained Earnings Statement of Cash Flows

Statement of Cash Flows

*If the December 31, 20x6, balance of accounts payable is lower than the January 1, 20x6, balance, then the amount of cash payments will exceed the purchases on account for the year. True False

True

Delaying payment of accounts payable results in a higher cash flow from operating activities. False True

True

**Which of the following statements is most likely to be right? a. The International Accounting Standard Board (IASB) prefers the indirect method of preparing the operating activities section of the statement of cash flows. b. Most companies use the indirect method of preparing the operating activities section of the statement of cash flows. c. The method of preparing the operating activities section of a statement of cash flows which adjusts net income to remove the effects of deferrals and accruals for revenues and expenses is the direct method. d. The method of preparing the operating activities section of a statement of cash flows which reports major classes of gross cash receipts and cash payments for revenues and expenses is the indirect method.

b Xa-how would we know Xc-?? Xd-direct

Which of the following is not an investing activity? a. Purchase of investments for cash. b. Purchase of equipment for cash. c. Sale of inventories for cash. d. Sale of land for cash

c. Sale of inventories for cash

The control activity "segregation of duties" is most effective in _______. a. increasing the likelihood of embezzlement b. assisting employees in performing risk assessment procedures c. increasing cost of sales d. preventing collusion

d. preventing collusion

Interest paid and dividends paid can be classified as cash flows under investing activities. False True

false - financing activities

Cash flows from borrowing and paying off a 90-day bank loan are classified as ___________. financing activities purchasing activities investing activities operating activities

financing activities