CHAPTER 23 STATEMENT OF CASH FLOWS TRUE-FALSE —Conceptual Answer No. Description F 1. Primary purpose of the statement of cash flows. 2. Information provided by statement of cash flows. 3. Classification of operating activities. 4. First step in cash flow statement preparation. 5. Reconciling beginning and ending cash balances. 6. Net income and net cash flow from operating activities. 7. Converting net income to net cash flow from operating activities. 8. Reporting cash receipts/disbursements in direct method. 9. Indirect method adjustments. 10. FASB’s recommended method. 11. Decrease in accounts receivable and cash-basis revenues. 12. Decrease in prepaid expenses. 13. Income from equity method investment. 14. Computing cash receipts from customers. 15. Computing cash payments for operating expenses. 16. Amortization of bond premium. 17. Purchases and sales of trading securities. 18. Disclosing noncash investing and financing activities. 19. Use of cash flow worksheet. 20. Reporting stock dividends on worksheet. MULTIPLE CHOICE —Conceptual 21. Objective of the statement of cash flows. 22. Primary purpose of the statement of cash flows. S23. Answers provided by the statement of cash flows. S24. First step in cash flow statement preparation. 25. Definition of cash equivalents. 26. Cash flow effect of a short-term nontrade note payable. S27. Reporting revenues and expenses on a cash basis. 28. The effect of an inventory increase on cash flows from operating activities. 29. Cash flow effects of a stock dividend. 30. Effect of a change in dividends payable. 31. Effect of cash dividend declaration on operating cash flows. c 32. Cash flow effects of major repairs on machinery. c P 33. Classifying items as investing activities. b P 34. Classification of a financing activity. b S 35. Reporting amortization of bond premium. c S 36. Converting accrual based expense to cash basis. b 37. Adjustment to income for inventory increase. c 38. Adjustment under the direct and indirect methods. c 39. Adjustment to cost of goods sold under the direct method.