multiple choices accounting questions - Just for Accounting expert

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Question 1

When cash flow from operations is presented as net income adjusted for noncash changes and credits as well as changes in current assets and current liabilities, this is the

Direct method.

Indirect method.

Income method.

Accrual method.

Question 2

Under the direct method, what is the cash paid for goods held for resale?

Sales	$77,000
Cost of goods sold	46,000
Returns and allowances	6,000
Decrease in inventory	10,000
Increase in accounts receivables	11,000
Increase in accounts payable for
goods held for resale	5,000
Decrease in accounts payable for
for administrative services	4,000
Net income	26,000
Depreciation	3,000

$31,000

$35,000

$36,000

$41,000

Question 3

What is the cash provided by operations under the indirect method?

Sales	$77,000
Cost of goods sold	46,000
Returns and allowances	6,000
Decrease in inventory	10,000
Increase in accounts receivables	11,000
Increase in accounts payable for
goods held for resale	5,000
Decrease in accounts payable for
for overhead services	4,000
Net income	26,000
Depreciation	3,000

$23,000

$29,000

$31,000

$25,000

Question 4

An increase in inventory under the direct method

Acts to increase the cash paid to suppliers of goods held for resale.

Is treated as a decrease in cash provided by operations.

Is an investing activity.

Is a financing activity.

Question 5

An increase in inventory under the indirect method

Acts to increase the cash paid to suppliers of goods held for resale.

Is treated as a decrease in cash provided by operations.

Is an investing activity.

Is a financing activity.

Question 6

Under the indirect method, increases to all of the following accounts are added back to net income EXCEPT

Accounts Payable

Interest Payable

Accounts Receivable

Deferred Tax Liability

Question 7

Undistributed earnings of equity-method investments are ______ when using the indirect method.

Recorded in the supplementary section of noncash activities.

Added back in the financing section.

Subtracted from in the operating section.

Ignored when preparing the statement of cash flows.

Question 8

If the direct method is used,

The operating section of the indirect method must be provided in a separate schedule.

Gross cash receipts and payments from operating activities are presented.

Interest paid must be presented.

All of the above.

Question 9

The __________ will be the same regardless of using the indirect or direct method of preparation.

1. I. Net Cash Flow from operating activities.

2. II. Presentation of data gathered in the operating activities section.

3. III. Disclosure of noncash investing activities.

4. IV. Inclusion of a financing section

I, II & IV

I & II

I, III & IV

Question 10

When computing cash payments for operating activities, all of the following are considered except

Administrative expenses.

Decrease or increase in accrued liabilities.

Amortization of a bond.

Selling expenses.

Question 11

Under the direct method, what is the cash paid for goods held for resale?

Sales	$77,000
Cost of goods sold	46,000
Returns and allowances	6,000
Decrease in inventory	10,000
Increase in accounts receivables	11,000
Increase in accounts payable for
goods held for resale	5,000
Decrease in accounts payable for
for administrative services	4,000
Net income	26,000
Depreciation	3,000

$31,000

$35,000

$36,000

$41,000

Question 12

Which rule is incorrect regarding the indirect method?

An increase in current operating liabilities is subtracted from net income.

A decrease in current operating assets is added to net income.

An increase in current operating assets is subtracted from new income.

A decrease in current operating liabilities is subtracted from net income.

Question 13

The equation for figuring cash collected from sales when using the direct method is

Sales – Cost of Goods Sold + Decrease in Inventory.

Sales + Decrease (or – Increase) in Accounts Receivable.

Net Income – Cost of Goods Sold + Decrease (or – Increase) in Accounts Receivable.

Revenue – Dividends paid + Retained Earnings.