101. Which of the following methods, allowed by U.S. GAAP, report(s) the net income for a period adjusted by revenues converted to cash received from customers and expenses converted to cash disbursed to various suppliers of goods and services?
A. the direct method
B. the indirect method
C. both the direct method and the indirect method
D. the schedule of cash receipts and cash disbursements
E. the funds flow statement
102. The method of reporting preferred by U.S. GAAP is/are
A. the direct method.
B. the indirect method.
C. both the direct method and the indirect method.
D. the schedule of cash receipts and cash disbursements.
E. the funds flow statement.
103. The direct method of reporting
A. is preferred by U.S. GAAP.
B. shows a reconciliation between net income and cash flow from operations either at the bottom of the statement of cash flows or in a separate note.
C. reports the amounts of cash received from customers less cash disbursed to various suppliers, employees, lenders for interest payments, and taxing authorities.
D. includes all of the above.
E. includes none of the above.
104. The indirect method of reporting
A. is preferred by the Financial Accounting Standards Board (FASB), Statement of Financial Accounting Standards No. 95, "Statement of Cash Flows."
B. shows a reconciliation between net income and cash flow from operations either at the bottom of the statement of cash flows or in a separate note.
C. reports the amounts of cash received from customers less cash disbursed to various suppliers, employees, lenders for interest payments, and taxing authorities.
D. reports the net income for a period and then adjusts the net income to convert revenues to cash received from customers and to convert expenses to cash disbursed to various suppliers of goods and services.
E. includes all of the above.
105. Given the large number of transactions affecting the Cash account during a period, most firms prefer to prepare the statement of cash flows after they have prepared
A. the funds flow statement and income statement.
B. the balance sheet and funds flow statement.
C. the income statement and the balance sheet.
D. the statement of cash receipts and disbursements.
E. none of the above.
106. Which of the following concerning the preparation of the statement of cash flows is correct?
A. The T-account work sheet for preparing the statement of cash flows provides built-in checks to ensure the full recognition of the effects of each transaction on various accounts.
B. The accountant often prepares a T-account work sheet at the end of the period after preparing the balance sheet and income statement. The work sheet provides the information for preparing the statement of cash flows.
C. The accountant often prepares a T-account work sheet during the period . The work sheet provides the information for preparing the statement of cash flows.
D. Both statement a and b are correct.
E. None of the above are correct.
107. One can prepare the statement of cash flows
A. by examining every transaction affecting the cash account, and classifying each one as an operating activity, investing activity, or financing activity.
B. using the T-account work sheet after the income statement and balance sheet have been prepared.
C. using the T-account work sheet before the income statement and balance sheet have been prepared.
D. by using both options a and b.
E. by none of the above.
108. Most firms prefer to prepare the statement of cash flows after they have prepared the income statement and the balance sheet. The amounts debited to various accounts on the T-account work sheet
A. do not equal amounts credited to various accounts.
B. must equal amounts credited to the liability accounts, only.
C. may or may not equal amounts credited to various accounts.
D. must equal amounts credited to various accounts.
E. must equal amounts credited to the shareholders’ equity accounts, only.
109. Most firms prefer to prepare the statement of cash flows after they have prepared the income statement and the balance sheet. In the preparation of the T-account work sheet, an error
A. often results from the partial recording of a transaction in which debits do not equal credits.
B. usually becomes evident only on completion of the work sheet.
C. requires the preparer to retrace each of the entries to discover the source of the error.
D. all of the above.
E. none of the above
110. The final step in preparing the statement of cash flows is to use the information provided in the master T-account for _____ to prepare the formal statement.
A. Cash
B. Funds
C. Operations
D. Changes in accounts
E. none of the above