Chapter 23 - CHAPTER 23 STATEMENT OF CASH FLOWS REVIEW QUESTIONS 1 2 The primary purpose of the statement of cash flows is to report how cash was

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CHAPTER 23 STATEMENT OF CASH FLOWS REVIEW QUESTIONS 1. The primary purpose of the statement of cash flows is to report how cash was generated and used throughout the accounting period. 2. The four principal financial statements are: a. income statement. b. statement of retained earnings. c. balance sheet. d. statement of cash flows. 3. The three categories of cash flows are: a. operating activities. b. investing activities. c. financing activities. 4. The types of cash flows associated with financing activities are: a. proceeds from additional investments by the owners or the issuance of stock. b. proceeds from borrowing money through the signing of a mortgage, issuing a bond, or other long- or short-term loans. c. payments of dividends to stockholders or withdrawals by the owners. d. payments to purchase treasury stock. e. repayment of the principal on loans. 5. The types of cash flows associated with investing activities are: a. proceeds from collecting the principal amount of loans made to borrowers. b. proceeds from the sale of productive assets (property, plant, and equipment; intangible assets; etc.). c. proceeds from the sale of investments in debt and equity securities. d. proceeds from discounting notes receivable. e. loans made by the firm to other parties. f. payments to acquire productive assets (such as property, plant, and equipment; intangible assets; etc.). g. payments to acquire investments in debt and equity securities. 6. The types of cash flows associated with operating activities are: a. cash receipts from the sale of goods or services. b. interest received on loans made to outside entities. c. dividends received on investments made in the stock of other corporations. d. payments for the acquisition of inventory. e. payments to employees and the government. f. payments for interest on loans. g. payments to other suppliers and for other expenses. 7. The cash paid for dividends must be reported as a cash outflow under financing activities. 8. The cash received for interest must be reported as a cash inflow from operating activities.
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9. Balance sheets for the beginning and end of the period, an income statement for the period, and a statement of retained earnings for the period are needed to prepare the statement of cash flows. Also, information on major cash transactions is useful. 10. Under the direct method, revenues and expenses reported on the income statement are adjusted to reflect the amount of cash received or paid for each item. 11. Under the indirect method, net income is adjusted for the following types of transactions: a. Changes in current assets associated with operating activities. b. Changes in current liabilities associated with operating activities. c.
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This note was uploaded on 03/27/2012 for the course ACCOUNTING 301 taught by Professor Sullivan during the Spring '11 term at Liberty.

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Chapter 23 - CHAPTER 23 STATEMENT OF CASH FLOWS REVIEW QUESTIONS 1 2 The primary purpose of the statement of cash flows is to report how cash was

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