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     37.     When preparing a statement of cash flows (indirect method), an increase in ending inventory over beginning inventory will result in an adjustment to reported net earnings because
a.     cash was increased while cost of goods sold was decreased.
b.     cost of goods sold on an accrual basis is lower than on a cash basis.
c.     acquisition of inventory is an investment activity.
d.     inventory purchased during the period was less than inventory sold resulting in a net cash increase.

     38.     When preparing a statement of cash flows, a decrease in accounts receivable during a period would cause which one of the following adjustments in determining cash flow from operating activities?
     Direct Method     Indirect Method
a.     Increase     Decrease
b.     Decrease     Increase
c.     Increase     Increase
d.     Decrease     Decrease

     39.     In determining net cash flow from operating activities, a decrease in accounts payable during a period
a.     means that income on an accrual basis is less than income on a cash basis.
b.     requires an addition adjustment to net income under the indirect method.
c.     requires an increase adjustment to cost of goods sold under the direct method.
d.     requires a decrease adjustment to cost of goods sold under the direct method.

     40.     When preparing a statement of cash flows, an increase in accounts payable during a period would require which of the following adjustments in determining cash flows from operating activities?
     Indirect Method     Direct Method
a.     Increase     Decrease
b.     Decrease     Increase
c.     Increase     Increase
d.     Decrease     Decrease

     41.     When preparing a statement of cash flows, a decrease in prepaid insurance during a period would require which of the following adjustments in determining cash flows from operating activities?
     Indirect Method     Direct Method
a.     Increase     Decrease
b.     Decrease     Increase
c.     Increase     Increase
d.     Decrease     Decrease

     42.     When preparing a statement of cash flows, the following are used for which method in determining cash flows from operating activities?
     Gross Accounts Receivable     Net Accounts Receivable
a.     Indirect     Direct
b.     Direct     Indirect
c.     Direct     Direct
d.     Neither     Indirect

     43.     Which of the following statements is correct?
a.     The indirect method starts with income before extraordinary items.
b.     The direct method is known as the reconciliation method.
c.     The direct method is more consistent with the primary purpose of the statement of cash flows.
d.     All of these.

     44.     Riley Company reports its income from investments under the equity method and recognized income of $25,000 from its investment in Wood Co. during the current year, even though no dividends were declared or paid by Wood during the year. On Riley's statement of cash flows (indirect method), the $25,000 should
a.     not be shown.
b.     be shown as cash inflow from investing activities.
c.     be shown as cash outflow from financing activities.
d.     be shown as a deduction from net income in the cash flows from operating activities section.

     45.     In reporting extraordinary transactions on a statement of cash flows (indirect method), the
a.     gross amount of an extraordinary gain should be deducted from net income.
b.     net of tax amount of an extraordinary gain should be added to net income.
c.     net of tax amount of an extraordinary gain should be deducted from net income.
d.     gross amount of an extraordinary gain should be added to net income.

     46.     Which of the following is shown on a statement of cash flows?
a.     A stock dividend
b.     A stock split
c.     An appropriation of retained earnings
d.     None of these

     S47.     How should significant noncash transactions be reported in the statement of cash flows according to FASB Statement No. 95?
a.     They should be incorporated in the statement of cash flows in a section labeled, "Significant Noncash Transactions."
b.     Such transactions should be incorporated in the section (operating, financing, or investing) that is most representative of the major component of the transaction.
c.     These noncash transactions are not to be incorporated in the statement of cash flows. They may be summarized in a separate schedule at the bottom of the statement or appear in a separate supplementary schedule to the financials.
d.     They should be handled in a manner consistent with the transactions that affect cash flows.

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