91. The primary difference between a cash flow statement prepared using the indirect method and one prepared using the direct method is
A. the financing section is different.
B. the investing section is different.
C. the operating section is different.
D. all three sections of the cash flow statement are different.
E. the investing and financing sections are different.
92. If the balance sheet shows the same beginning and ending balance for depreciable assets, there
A. have been no financing activities during the year.
B. have been no investing activities during the year.
C. may have been investing activities.
D. may have been financing activities.
E. have been no investing and financing activities during the year.
93. Why is depreciation expense added back to net income in the operating section of the indirect cash flow statement?
A. Depreciation expense represents cash outflows for a firm.
B. Depreciation expense represents cash inflows for a firm.
C. Depreciation expense represents a noncash expense that must be moved to the investing section of the cash flow statement.
D. Depreciation expense represents a noncash expense that must be added to net income to cancel its affect within the net income calculation.
E. Depreciation expense represents a cash expense that must be added to net income to cancel its affect within the net income calculation.
94. If cash decreases by $10,000 during the year, liabilities decrease by $5,000, and shareholders' equity increases by $5,000, what is the total change in noncash assets for the year?
A. a decrease of $5,000
B. an increase of $10,000
C. a decrease of $10,000
D. an increase of $5,000
E. an increase of $15,000
95. The Farley Company had retained earnings at the beginning of the year totaling $100,000. At the end of the year retained earnings totaled $200,000. Depreciation was $50,000 for the year and the company paid dividends of $150,000. What is the amount recorded as Net Income in the operating activities section of the statement of cash flows prepared using the indirect method?
A. a net loss of $150,000
B. a net income of $150,000
C. a net income of $0
D. a net income of $250,000
E. a net loss of $50,000
96. Increased earnings
A. are reflected as an increase in cash flow.
B. do not always generate an increase in cash flow.
C. result in a decrease in cash flow only if dividends are paid.
D. are the starting point for the direct method cash flow statement.
E. include none of the above.
97. While the indirect method is prevalent in the construction of cash flow statements in the U.S., why might a firm choose to construct its cash flow statement using the direct method?
A. The direct method will always show a higher net change in cash.
B. The direct method is usually easier for users to understand.
C. The direct method is required by some industries.
D. The direct method will always make the firm's management look better.
E. None of the above answer choices is correct.
98. U.S. GAAP
A. permits firms to report cash flow from operations using the direct or indirect method.
B. requires firms to report cash flow from operations using the direct method.
C. requires firms to report cash flow from operations using the indirect method.
D. permits firms to use the cash receipts and disbursements statement.
E. permits firms to use the funds flow statement.
99. U.S. GAAP
A. permits firms to report cash flow from operations using the direct or indirect method.
B. prefers the direct method of reporting cash flow from operations over the indirect method.
C. states that the direct method must show 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.
D. includes all of the above.
E. includes none of the above.
100. Which of the following is the method of reporting amounts of cash received from customers less cash disbursed to various suppliers, employees, lenders for interest payments, and taxing authorities, allowed by U.S. GAAP?
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