Chapter 23 Multiple Choice

The reconciliation of net income to net cash flow from operating activities is reported under: A. the direct method only. B. the indirect method only. C. both the direct method and the indirect method. D. neither the direct nor the indirect method.

C. both the direct method and the indirect method.

All of the following adjustments would be deducted in determining net cash flow from operating activities using the indirect method except: A. gain on the sale of plant assets. B. increase in accrued liabilities. C. amortization of bond premium. D. decrease in deferred income tax liability.

C. increase in accrued liabilities.

Of the following questions, which one would not be answered by the statement of cash flows? a. What was the cash used for during the period? b. What was the change in the cash balance during the period? c. Were all the cash expenditures of benefit to the company during the period? d. Where did the cash come from during the period?

c. Were all the cash expenditures of benefit to the company during the period?

When preparing a statement of cash flows (indirect method), which of the following is not an adjustment to reconcile net income to net cash provided by operating activities? A. A change in interest payable. B. A change in dividends payable. C. A change in income taxes payable. D. All of these are answers are correct.

B. A change in dividends payable.

To arrive at net cash provided by operating activities using the indirect method, it is necessary to report revenues and expenses on a cash basis. This is done by A. estimating the percentage of income statement transactions that were originally reported on a cash basis and projecting this amount to the entire array of income statement transactions. B. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash. C. eliminating all transactions that have no current or future effect on cash, such as depreciation, from the net income computation. D. re-recording all income statement transactions that directly affect cash in a separate cash flow journal.

B. eliminating the effects of income statement transactions that did not result in a corresponding increase or decrease in cash.