Cash Flows

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STATEMENT OF CASH FLOWS TRUE-FALSE STATEMENTS 1. The statement of cash flows is a required statement that must be prepared along with an income statement, balance sheet, and retained earnings statement. 2. For external reporting, a company must prepare either an income statement or a statement of cash flows, but not both. 3. A primary objective of the statement of cash flows is to show the income or loss on investing and financing transactions. 4. A statement of cash flows indicates the sources and uses of cash during a period. 5. Operating activities include the cash effects of transactions that create revenues and expenses. 6. In preparing a statement of cash flows, the issuance of debt should be reported separately from the retirement of debt. 7. Noncash investing and financing activities must be reported in the body of a statement of cash flows. 8. The statement of cash flows classifies cash receipts and payments as operating, nonoperating, financial, and extraordinary activities. 9. The sale of land for cash would be classified as a cash inflow from an investing activity. 10. Cash flow from investing activities is considered the most important category on the statement of cash flows because it is considered the best measure of expected income. 11. The receipt of dividends from long-term investments in stock is classified as a cash inflow from investing activities. 12. The payment of interest on bonds payable is classified as a cash outflow from operating activities. 13. Any item that appears on the income statement would be considered as either a cash inflow or a cash outflow from operating activities. 14. The acquisition of a building by issuing bonds would be considered an investing and financing activity that did not affect cash. 15. The growth phase of the product life cycle occurs when the company is purchasing fixed assets and beginning to produce and sell. 16.
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