Cash Flow: Indirect and Direct Method Quiz
18 multiple-choice questions with answers and explanations · 3 easy, 8 medium, 7 hard
Preparing operating cash flows: adjusting profit for non-cash items and working capital under the indirect method, and cash receipts and payments under the direct method.
- 1What Counts as a Cash Equivalent?Under IAS 7, which of the following qualifies as a cash equivalent?easy
- 2Direct Method — What the Operating Section ShowsUnder the direct method, the operating activities section of the statement of cash flows reports:easy
- 3US GAAP: Where Dividends Paid Appear in the Cash Flow StatementUnder US GAAP, dividends PAID to shareholders are classified in the statement of cash flows as:easy
- 4IAS 7 — Cash Flow ClassificationUnder IAS 7, interest paid by a manufacturing company is MOST appropriately classified as:medium
- 5IAS 7 — Indirect MethodWhen preparing a cash flow statement using the indirect method, depreciation is:medium
- 6IAS 7 — Classifying Interest PaidUnder IAS 7, interest paid may be classified in the statement of cash flows as:medium
- 7IAS 7 — Bank OverdraftsUnder IAS 7, a bank overdraft that is repayable on demand and fluctuates from positive to negative as part of cash management is:medium
- 8Identifying an Investing ActivityWhich of the following is reported as an INVESTING activity in the statement of cash flows?medium
- 9Cash Paid for Operating Expenses (Direct Method)Operating expenses (excluding depreciation) on the income statement are $80,000. Prepaid expenses increased by $3,000 and accrued liabilities decreased by $2,000 during the year. Cash paid for operating expenses is:medium
- 10US GAAP: Classifying Interest Paid in the Cash Flow StatementUnder US GAAP, interest paid during the period is classified in the statement of cash flows as:medium
- 11US GAAP: Bank Overdrafts in the Cash Flow StatementA company has a bank overdraft at year end. Under US GAAP the overdraft is:medium
- 12IAS 7 — Gain on DisposalA machine with carrying amount $20,000 is sold for $28,000. Under the indirect method cash flow statement, how is this transaction treated in operating activities?hard
- 13Working Capital Changes — Cash FlowAccounts receivable increased by $15,000 during the year. Under the indirect method, this is shown as:hard
- 14IAS 7 — Dividends Received ClassificationUnder IAS 7, dividends received by a company may be classified as:hard
- 15Indirect Method — Gain on DisposalWhen preparing the operating section under the indirect method, a gain on the sale of equipment is:hard
- 16Indirect Method — Multiple AdjustmentsNet income $50,000; depreciation $8,000; gain on sale of equipment $3,000; accounts receivable decreased $4,000; inventory increased $6,000; accounts payable increased $2,000. Net cash from operating activities is:hard
- 17Direct Method — Cash Paid to SuppliersCost of goods sold is $150,000. During the year inventory increased by $10,000 and accounts payable increased by $4,000. Cash paid to suppliers is:hard
- 18Cash Received From Customers (Direct Method)Sales revenue for the year is $500,000, all on account. Accounts receivable increased from $60,000 to $90,000 during the year. Cash received from customers is:hard